Simplified Employee Pension — employer-only contributions, no employee deferrals Contribution limit is 25% of compensation or $70,000 in 2025, whichever is less Self-employed individuals use net self-employment income for the calculation Contributions are tax-deductible, discretionary, and can change year to year

Savings Incentive Match Plan — both employee and employer contribute Employee deferral limit is $16,500 in 2025, with a $3,500 age-50 catch-up Employer must either match up to 3% of comp or contribute 2% for all eligible staff Available to businesses with 100 or fewer employees

SEP IRA vs SIMPLE IRA — Key Differences

SEP allows much higher total contributions than SIMPLE SIMPLE enables employee salary deferrals — SEP does not SEP contributions are discretionary; SIMPLE employer contributions are mandatory SEP has no age-50 catch-up provision; SIMPLE does

How They Compare to a Solo 401(k)

Solo 401(k) allows both employee deferrals and employer profit-sharing contributions Solo 401(k) total limit ($70,000 in 2025) matches SEP but adds deferral flexibility Solo 401(k) offers a Roth deferral option — traditional SEP and SIMPLE do not Solo 401(k) has more administrative requirements and annual filing above $250K

Who Each Plan Suits Best

SEP IRA: solo practitioners wanting large, flexible employer contributions SIMPLE IRA: small employers who want employees to participate in saving SEP works well when income varies — contributions can change year to year SIMPLE suits businesses seeking a low-cost plan with predictable employer costs

Setup, Deadlines, and Roth Options

SEP can be established and funded up to the tax filing deadline (with extensions) SIMPLE must be set up by October 1 of the year it takes effect Both require minimal paperwork and no annual Form 5500 filing SECURE Act 2.0 authorized Roth SEP and SIMPLE contributions starting in 2023

Important Rules and Restrictions

SEP contributions must be the same percentage for all eligible employees SIMPLE IRA early withdrawals within the first 2 years face a 25% penalty You generally cannot maintain a SIMPLE and another employer plan simultaneously Growing headcount may make transitioning to a 401(k) more advantageous

SEP IRA and SIMPLE IRA — Retirement Plans for Small Businesses

Curated by: Rubric Advisors

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SEP IRA Basics

Simplified Employee Pension — employer-only contributions, no employee deferrals
Contribution limit is 25% of compensation or $70,000 in 2025, whichever is less
Self-employed individuals use net self-employment income for the calculation
Contributions are tax-deductible, discretionary, and can change year to year

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SEP IRA Basics

SIMPLE IRA Basics

SEP IRA vs SIMPLE IRA — Key Differences

How They Compare to a Solo 401(k)

Who Each Plan Suits Best

Setup, Deadlines, and Roth Options

Important Rules and Restrictions

Related Topics

Solo 401(k) & Self-Employed Retirement Plans

Maximizing Your 401(k) Contributions

Required Minimum Distributions (RMDs)

SEP IRA Basics

SIMPLE IRA Basics

SEP IRA vs SIMPLE IRA — Key Differences

How They Compare to a Solo 401(k)

Who Each Plan Suits Best

Setup, Deadlines, and Roth Options

Important Rules and Restrictions

Related Topics

Solo 401(k) & Self-Employed Retirement Plans

Maximizing Your 401(k) Contributions

Required Minimum Distributions (RMDs)