Who is eligible for a Simplified Employee Pension (SEP) Plan?

A Simplified Employee Pension Plan, also known as a SEP IRA, is a qualified retirement account offered to employees by their respective employers.

sep ira eligibility requirements Employer SEP IRA Eligibility Requirements

Any legitimate employer is eligible to start a Simplified Employee Pension Plan for its employees, including:

  • C-Corporations
  • LLCs
  • S-Corporations
  • Non-Profit Organizations
  • Partnerships
  • Sole Proprietorships

Employees of a business, who are not also owners of the business, are not eligible to start their own Simplified Employee Pension, but they can establish a Traditional IRA, to which employers can make SEP contributions.

Employee SEP IRA Eligibility Requirements

Employee SEP IRA eligibility can be determined by a few simple questions:

  1. Is the employee aged 21 or more?
  2. Has the employee worked for the business in at least 3 of the previous 5 years?
  3. Did the employee receive at least $600 in compensation this year?

Employers may elect to make eligibility requirements more lenient, but not more strict. If an employer offers a SEP to one employee, then it must offer it to all employees based on the same requirements.

Exceptions & Addendums

Employers have the option of excluding union employees and non-resident aliens with no U.S.-based compensation.

Employees are not allowed to calculate more than $255,000 in income when determining their SEP IRA contribution.

If an employee doesn’t want to establish an IRA, the employer may make contributions on the employee’s behalf.


If you would like to know more about  for your company, or opening a SEP IRA as an employee, call 800.571.6341 now to get started.