Simplified Employee Pension plans, or SEPs, are an increasingly used and well-liked plan available to small businesses , the self-employed, and suitable for use by S and C corporations, LLCs, sole proprietorships, and partnerships. Contributions to the SEP are typically 100% tax deductible and the investment earnings in a SEP IRA grow tax-deferred. There are quite a few benefits to the SEP , but the best advantage may be the higher SEP IRA maximum contribution level. Annual contributions to an employee’s SEP IRA cannot exceed the lower of 25% of yearly salary , or $49,000 annually. The rules require the contributions must be uniform , so a 20% contribution to one eligible employee’s account triggers a requirement for a similar 20% contribution to each qualified employee account. These contributions must be made in cash, rather than in stock. The SEP IRA maximum limit for self-employed people is calculated differently, since the self-employed do not receive wages. A self-employed individual may contribute 20% of net profits from their business enterprise up to $44,000 annually . Similar to other types of traditional IRAs, distributions from the SEP account can start as early as age 59 ½ without incurring tax penalty, although regular taxes will apply. The withdrawals must start by age 70 ½ years old. Employers are not required to contribute to employee accounts every year. They frequently will review the plan and make the contribution choice based on current economicfactors and the company’s net profit picture . The SEP plan is affordable to establish and simple to manage , requiring only minimal paperwork. Because of the higher SEP IRA maximum contribution limits participants have a great opportunity to save a greater amount of retirement money in an accelerated manner. This is particularly beneficial for those individuals who may have gotten a late start in preparing for their retirements. While there is no accomodation in the SEP for a catch-up contribution for older workers, the generous SEP IRA maximum contribution amounts can offset that and allow more funding every year.