SEP/SIMPLE Comparison Chart
| SEP IRA | SIMPLE IRA | |
| Eligible Employers | All taxable businesses, including small business owners with limited number of employees and independent contractors Government entities Tax-exempt organizations |
Has no more than 100 employees who earned at least $5,000 in previous year All taxable businesses, including small business owners with limited number of employees and independent contractors Government entities Tax-exempt organizations |
| Eligible Employees | Employees who performed service for the employer in three of the past five years and are age 21 or older may be eligible if they earn $750 (indexed) in the plan year. Certain employees may be excluded. | Any employee earning at least $5,000 during any two preceding years and who is expected to earn $5,000 in the current year is eligible. Certain employees may be excluded. |
| Required Employer Contribution | None, unless plan is Top Heavy (see Top Heavy Plans below) | Each year, employer must select either: Match – Dollar-for-dollar match of first 3% of compensation contributed by employees (3% may be lowered to 2% or 1% in any two of five years). Non-Elective – 2% of compensation for all eligible employees. Employer has the option to make an additional 10% nonelective contribution to each eligible employee up to $5,100. |
| Maximum Deductible Contribution | The lesser of: 25% of employee’s compensation (self-employed Schedule C filer uses modified net business income) or $70,000. Compensation is capped at $350,000. | Combined employer/employee contributions generally cannot exceed1: $33,000 for participants under age 50 $40,000 for participants aged 50-59 or 64+ $43,500 for participants aged 60-63 |
| Maximum Employee Deferral | No deferrals allowed | $16,5002 plus: Catch up age 50-59 and 64+: $3,5002 Catch up age 60-63: $5,250 |
| Vesting | 100% immediate | 100% immediate |
| Advantages | Minimal paperwork Minimal administration expenses No annual 5500 reports Employer contributions are discretionary each year $7,000 ($8,000 if age 50 or older) traditional IRA contributions for 2025 can be deposited in SEP IRA No formal termination required |
Minimal paperwork Minimal administration expenses No annual 5500 reports Owners can maximize deferrals regardless of employee participation Deferrals may reduce participant’s taxable income No formal termination required |
| Top Heavy Plans | Employers must make a minimum contribution of 3% of compensation to Non-Key employees for the years a plan is Top Heavy (total value of Key Employees’ accounts is > 60% of value of all accounts).** | Not applicable |
| Establishment Deadline | Tax filing deadline (plus extension) | October 1, 2025 |
1 Employees may be able to defer a total of $17,600 plus an additional 10% of the catch-up limits (maximum $3,850 for ages 50-59 or 64+) if the employer has 25 or fewer employees or has 26 or more employees and agrees to a 4% matching or 3% non-elective contribution, subject to plan provisions. As an additional non-elective, employers may contribute the lesser of 10% of compensation or $5,100 to all eligible employees.
2 In order to receive a full $16,500 match, compensastion must exceed $550,000. In order to receive a full $20,000 match (for individuals 50-59 and 64+), compensation must exceed $666,667. This is based on a 3% of compensastion employer match.
** Key Employees include: 1) a 5% or greater owner of the company, 2) a 1% owner having annual compensation >$150,000, or 3) an officer with compensation >$215,000.
Stifel does not provide tax advice. You should consult with your professional tax advisor regarding your particular situation.
1124.7382443.1