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 $500 for the first 3 years.Footnote 1
SEP IRA
Yes, plan expenses are generally tax deductible. Merrill Edge does not charge setup or administrative fees for SEP IRAs. You may also benefit from a tax credit of up to $500 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.
Preferred Rewards benefits  
Individual 401(k)
No, 401(k) accounts are not currently included in the Preferred Rewards program.
SEP IRA
Yes. If you are a sole proprietor, your SEP IRA balances count toward your Preferred Rewards status.
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 50Footnote 4 $54,000 $54,000
Individual 401(k)
The maximum combined business and employee annual contribution is the lesser of 100% of compensation or $54,000 for 2017 ($53,000 for 2016) per participating employee.
SEP IRA
For all participating employees, contributions are limited to the lesser of $54,000 for 2017 ($53,000 for 2016) or 25% of eligible compensation (20% of self-employed net earnings).
Contribution limits for employees age 50 or olderFootnote 4 $60,000 $54,000
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 $60,000 for 2017 ($59,000 for 2016) per participating employee.
SEP IRA
For all participating employees, employer contributions are limited to the lesser of $54,000 for 2017 ($53,000 for 2016) 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 4 Contribution limits are subject to a cost-of-living adjustment annually pursuant to the Internal Revenue Code. Contribution limits for subsequent years may vary.
You maintain your Preferred rewards status if you have an active, eligible Bank of America personal checking account and maintain a three month average combined balance in your qualifying Bank of America deposit accounts and/or your qualifying Merrill Edge and Merrill Lynch investment accounts of at least $20,000 for the Gold tier, $50,000 for the Platinum tier, or $100,000 for the Platinum Honors tier. SafeBalance Banking accounts do not count towards the account or balance requirements, and do not receive the fee waivers and other benefits of the program. Certain benefits are also available without enrolling in Preferred Rewards if you satisfy balance and other requirements. For details on Employee qualification requirements, please visit the Employee Banking & Investments website. The Preferred Rewards Gold tier does not include the $0 online equity and ETF trades via Merrill EdgeFootnote ®, a benefit that is currently available at the Platinum and Platinum Honors tiers of Preferred Rewards. Merrill Lynch Wealth Management clients with greater than $250,000 in assets with Bank of America and Merrill Lynch are eligible for additional banking benefits. Please speak with your Merrill Lynch financial advisor for details.
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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Merrill Edge is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of the Merrill Edge Advisory Center (investment guidance) and self-directed online investing.

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:
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