In the case of SEP IRAs, employees do not contribute to this kind of plan, instead, the employer makes contributions to the employees’ accounts and all the employer’s contributions are tax deductible and not included in the business’s payroll taxes. This can be a very helpful benefit, especially for self-employed individuals.
Even better, SEP IRAs offer flexibility on amounts contributed by the employer, with annual limits higher than those for traditional IRAs. For example, the contribution limit for a SEP IRA in 2025 is $70,000 or 25% of an employee’s compensation, whichever is less. Whereas the contribution limit for a traditional IRA in 2025 is $7,000, plus an additional $1,000 catch-up contribution for those aged 50 and older. In addition, with a SEP IRA, the employer’s contributions to the employee vest immediately.
At OlyFed, the employers’ contributions are held in certificates of deposit accounts, which provide security and predictability. “A SEP IRA CD with OlyFed can come in handy because your savings are FDIC insured and you’re guaranteed to earn a rate of return, while not having to worry about paying any annual or administrative fees,” says OlyFed Assistant Branch Manager Angelina Contreras-Duran, who also works with customers on savings and retirement accounts. “With an OlyFed IRA your retirement savings are protected from the unpredictable stock market, and you know your dollars are there when you need them.”
“Locally, not a lot of businesses know this is an option for them,” Angelina continues.
“OlyFed is a great resource for small businesses, nonprofits, limited liability companies (LLCs) and sole practitioners and we can provide them with the financial information, tools and options so they can make the best decisions for both their benefit and the benefit of their employees.”
For employees, their earnings in a SEP-IRA are tax deferred until they are withdrawn; however, withdrawals before age 59½ may be subject to a 10% federal tax penalty. That said, individuals do have the option to take a loan from their SEP-IRA and in some cases, there are penalty-free withdrawals available for certain college expenses and qualifying first-time home purchases. Required minimum distributions for SEP-IRAs begin at the age of 73.
Angelina says it’s always the right time for an employer or self-employed individual to open a SEP IRA even if employees are in the middle of or are nearing the end of their careers because it’s never too late to save for retirement. “Every dollar counts,” she says.
It’s Easy to Open a Simplified Employee Pension IRA at OlyFed
Angelina says several Olympia-area sole proprietors and small businesses opened Simplified Employee Pension IRAs at OlyFed. As this IRA’s name indicates, it’s simple and easy to set up. “It’s very minimal paperwork,” she explains. The main steps include completing an IRS contribution agreement form for each eligible employee, providing employees the information about the IRA, and establishing an account for each employee at a qualified financial institution like OlyFed. More details on employee eligibility and other information are available on the IRS website.
At OlyFed, it’s even easier to create these retirement accounts because some of the employer’s set-up work is already done. OlyFed has filled in all of its required information, so the employer opening a SEP IRA only needs to complete their section. The forms are not filed with any state or federal agency but are kept with the employer’s business records.
Finally, employers do not have to contribute every year; however, when they do, they must contribute to the SEP IRAs of all qualified participants who performed personal services during the year for which the contributions are made. Angelina says if an employer needs to adjust the amount contributed in a particular year, they can do so and notify their employees.
Contact OlyFed to Get Started
If you are a small business, nonprofit organization, LLC or sole practitioner and you want to learn more about SEP-IRAs, contact Angelina Contreras-Duran at (360)754-3400.
Article Disclosure: Please consult your tax and/or legal advisor for more details about SEP-IRA’s to determine if they are right for you and your employees.