For example, if an employee earns $40,000 in wages, the employer could contribute up to $10,000 to the SEP-IRA account. SEP IRA for Employees. If you’re a high-income professional, such as a physician with your practice or a highly-paid consultant, or firm with critical employees, SEP IRA may not serve the purpose. SEP IRAs are suitable for employers or self-employed professionals who intend to make low to moderate contributions ($10,000 to $50,000) to their retirement plan. The tax-deferral benefits for an employee's SEP-IRA are similar to those of traditional IRAs: Contributions to the account are made with pre-tax earnings, and all … For employees, the employer may contribute up to 25% of the employee's wages to the employee's SEP-IRA account. All SEP-IRA contributions are considered employer contributions on behalf of employees. Can vary each year between 0% and 25% of compensation (maximum $56,000 for 2019 and $57,000 for 2020), and each eligible employee must receive the same percentage. Employer contribution limits. Establishment deadline SEP-IRA Contribution Limits . Employers are generally the sole contributors, but employees may be able to make traditional IRA contributions to the SEP-IRA. Contribution limits. Calculate how much you can contribute using our SEP IRA Contribution Worksheet (PDF). Simplified Employee Pension (SEP) plans are a type of tax-deferred retirement savings plan for the self-employed and small business owners. That's up from a limit of $57,000 in 2020. An eligible employee (including the business owner) who participates in their employer’s SEP plan must establish a traditional IRA to which the employer will deposit SEP contributions. With a SEP IRA, in 2021, an employer can contribute as much as 25% of an employee's gross annual salary or $58,000, whichever is less. A SEP IRA is … Only an employer can contribute to a SEP IRA, and they are required to make proportional contributions to all full-time employees. You may contribute up to 25% of the employee's total compensation or a maximum of $57,000 for the 2020 tax year and $58,000 for the 2021 tax year, whichever is less. Since employers make the contributions, not employees, catch-up contributions for retirement savers 50 and over are not permitted in SEP IRAs. Contributions to an employee’s SEP IRA cannot exceed the lesser of either 25% of their compensation or $57,000 in 2020 or $58,000 in 2021. A SEP IRA (Simplified Employee Pension) is a retirement plan that is popular with many small business owners and self employed individuals. With a simplified employee pension plan, a business can make tax-free contributions to an individual retirement account for each of its employees. 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