Skip to main content
 

Individual 401(k)

Reduce your personal and business taxes while having access to your money through loansFootnote 2 with this affordable plan for self-employed business owners and their spouses.

SEP IRA

Benefit from the flexibility to contribute as your cash flow allows, the potential for tax-deferred growth and contribution limits nearly 10 times higher than a Traditional IRA.
 

Plan features

  Individual 401(k) SEP IRA
Employer contributions generally tax deductible by business
Individual 401(k)
Yes, employer contributions are generally tax deductible.
SEP IRA
Yes, employer contributions are generally tax deductible.
Plan expenses generally tax deductible by business
Individual 401(k)
Yes, plan expenses are generally tax deductible. If this is your first 401(k) plan and you have 100 or fewer employees, you may also benefit from a tax credit of up to $5000 for the first 3 years. Footnote 1
SEP IRA
Yes, plan expenses are generally tax deductible. Merrill does not charge setup or administrative fees for SEP IRAs. You may also benefit from a tax credit of up to $5000 for the first 3 years. Footnote 1
Employer contributions are flexible
Individual 401(k)
Yes. Contributions by the business are optional in any given year.
SEP IRA
Yes. Employers have the flexibility to decide whether or not to contribute in any given year as well as contribution amount.
Business owners contribute as employees  
Individual 401(k)
Yes, business owners and their spouses fund their accounts through employee salary deferrals.
SEP IRA
No, contributions are made only by the business.
Roth (after-tax salary deferrals) option  
Individual 401(k)
Yes, a Roth option is available for employee contributions.
SEP IRA
No, a Roth option is not available.
Loans and withdrawals are available  
Individual 401(k)
Yes, loans and withdrawals are available if you choose these features in your plan. Participants may incur tax penalties if certain conditions aren't met. Footnote 2
SEP IRA
No, loans are not available. Withdrawals taken before age 59½ — with certain exceptions — are subject to an additional 10% early withdrawal penalty.
Investment choices Menu of funds and model portfolios Full range of invest­ments
Individual 401(k)
Funds and model portfolios — selected and managed by Morningstar Investment Management LLC — help take the guesswork out of investing. Footnote 3
SEP IRA
You and your employees can access a full range of investment choices, including stocks, bonds, options, ETFs and well-known mutual funds.
Additional IRS filing required Some­times  
Individual 401(k)
IRS filing is required only when plan assets are greater than $250,000. When that threshold is met, a signature-ready Form 5500 will be prepared for employer review, at no additional cost.
SEP IRA
No. IRS reporting is not required.
Contribution limits for employees under age 50 Footnote 4 $57,000 $57,000
Individual 401(k)
The maximum combined business and employee annual contribution is the lesser of 100% of compensation or $57,000 for 2020 per participating employee.
SEP IRA
For all participating employees, contributions are limited to the lesser of $57,000 for 2020 or 25% of eligible compensation (20% of self-employed net earnings).
Contribution limits for employees age 50 or older Footnote 4 $63,500 $57,000
Individual 401(k)
For employees age 50 and older, the maximum combined business and employee annual contribution is the lesser of 100% of compensation or $63,500 for 2020 per participating employee.
SEP IRA
For all participating employees, employer contributions are limited to the lesser of $57,000 for 2020 or 25% of eligible compensation (20% of self-employed net earnings). Catch-up contributions are not permitted.

Need help or have questions?

Call 855.667.9451855.667.9451
Mon-Fri 9 a.m. - 8 p.m. ET to speak with a Financial Solutions Advisor

Important disclosures

Footnote 2 Please consider the advantages and disadvantages of taking a loan before initiating one. For more information, read "Know the facts about loans and withdrawals" (PDF).
Footnote 3 Morningstar Investment Management LLC selects the investments and is responsible for the ongoing monitoring and maintenance of the investments and model portfolios. Merrill Lynch is responsible for ongoing product management and vendor oversight, as well as trading and custodial services of plan assets and monthly transaction statements.
Footnote 
Contribution and compensation limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution and compensation limits for subsequent years may vary.
3083405
Connect with us:
LinkenIn
Twitter
YouTube
Connect with us:
LinkenIn
Twitter
YouTube
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, a registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").
Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
Are Not Deposits Are Not Insured by Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity


Privacy & Security | Advertising practicesAdvertising Practices

© 2020 Bank of America Corporation. All rights reserved.

3258567