How to Set Up an SEP IRA

An SEP IRA helps you save money for retirement.
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Traditional IRAs are a great way to save for retirement, but they're not right for everybody. Small businesses and the self-employed can't always take advantage of traditional IRAs because of eligibility requirements, and even when they can, the IRAs aren't always cost-effective. SEP (Simplified Employee Pension) IRAs are designed with these people in mind, as they are only available to the self-employed, partnerships, and unincorporated small businesses. They are easy to establish, don't require yearly contributions like some other IRAs, and don't require a waiting period before money contributed to the plan can be invested.

Step 1

Check with your boss to see if they have an SEP IRA agreement in place. If they don't have one in place, ask if they would establish one according to IRS form 5305-SEP. If you're self-employed, or running your own business, use form 5305-SEP to establish the guidelines for your SEP IRA.

Step 2

Let your boss know that you're interested in participating in the SEP IRA plan. You'll be given a copy of the SEP agreement used by the company, so that you know exactly what the limitations of the plan are. If you're the one in charge, then you will need to keep copies of the agreement on hand, and make enrollment available to all of your eligible employees.

Step 3

Give your boss any information she might need to set up the SEP IRA at the bank or brokerage she uses for employee SEPs. If you are self-employed, shop around at different banks and financial institutions in your area to find the best SEP offerings for you and your employees.

Step 4

Authorize your employer to make monthly contributions in your name to your SEP. You will receive updates on the status of your SEP IRA and will also be notified at least 30 days before your employer makes any changes to the plan (provided that you aren't self-employed, or running the business yourself.)

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