What is a Simplified Employee Pension (SEP)?
by TurboTax • 
Updated December 11, 2025 5:39 AM
The Simplified Employee Pension (SEP), also known as SEP-IRA, offers business owners a streamlined approach to contributing toward their employees' retirement savings, as well as their own.
An employer’s contributions are made to an IRA set up for each plan participant and can't be more than the lesser of:
25% of compensation paid during the year
$70,000 for 2025 ($69,000 for 2024)
An employee doesn't contribute to a SEP. The employee can make investment decisions for their SEP, whereas the employer doesn't.
Investment, distribution, and rollover rules are the same as for traditional IRAs.
