Compare IRAs


SEP IRA	SIMPLE IRA
Advantages
Simple to establish and maintain No annual IRS Form 5500 filing requirements as with a profit sharing plan (often called a Keogh plan)—if for a sole proprietor Contributions deductible by employer	Simple to establish and maintain No annual IRS Form 5500 filing requirements as with a 401(k) plan Contributions deductible by employer No discrimination testing or top-heavy rules as in a 401(k) Some funding responsibility with employees (match or 2% contribution) Deferral reduces taxable income of employee
Who Can Establish?
Corporations, sub-chapter S, self-employed, sole proprietorships, partnerships, non-profit (not eligible for salary deferral)	Employers with no more than 100 employees who earned $5,000 or more during preceding calendar year (cannot maintain another retirement plan)
Who Can Contribute?
Employer contributes to employee IRA accounts established under the SEP The employee/employer may also make their traditional IRA contributions to the same IRA account	Employer sends salary deferral contributions as directed by the employee to the employee’s IRA account established under the SIMPLE plan Employer either matches the employee’s salary deferral up to the first 3% OR makes a 2% employer contribution to all eligible employees
Maximum Eligibility Requirements
Worked for employer during any period of three of the last immediately preceding five years, however short At least 21 years of age $550 annual compensation	$5,000 in compensation for any two preceding years and is expected to earn $5,000 in current years
Withdrawals
Required minimum distributions as late as April 1 following the year in which the individual reaches age 70½ Withdrawals prior to age 59½ are subject to a 10% premature withdrawal additional tax	Required minimum distributions as late as April 1 following the year in which the individual reaches age 70½ Withdrawals taken within two years of joining the plan will result in a 25% premature withdrawal additional tax