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

Curated by: Rubric Advisors

Retirement Planning

SEP IRA and SIMPLE IRA, Retirement Plans for Small Businesses

SEP IRAs and SIMPLE IRAs offer small businesses straightforward retirement plan options with different contribution structures, limits, and administrative requirements.

1 / 7

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

Retirement Planning Public Markets Our Approach

Try Our Free Tools

Retirement Calculator Withdrawal Simulator Inflation Calculator

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

SIMPLE IRA Basics

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

← Browse All Topics

Need Personalized Guidance?

Talk to a Wealth Advisor

These highlights cover the essentials. For advice tailored to your specific situation, schedule a complimentary consultation with our team.

Talk to an Advisor100% Fiduciary · Fee-Only · No Commissions

The information above is for educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Any historical figures are for illustration only, and past performance does not guarantee future results. Tax laws, regulations, and contribution limits change frequently, the details here may become outdated. Individual circumstances vary. Consult a qualified financial advisor, CPA, or attorney for guidance specific to your situation. Rubric Advisors is registered with the California DFPI; registration does not imply a certain level of skill or training.

SEP IRA and SIMPLE IRA, Retirement Plans for Small Businesses

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

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 and SIMPLE IRA, Retirement Plans for Small Businesses

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

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)