Contributions to a SEP IRA are generally 100% tax deductible and the investment profits in a SEP IRA grow tax deferred. Any employer canestablish a SEP, and the plan is particularly appealing for smaller companies and the self-employed. Benefits of the plan include the low cost of establishing and managing it, themodest amount of documentation required, the ease of qualifying employees for eligibility , and the higher allowed SEP IRA contribution limit. An employee is defined as someone at least 21 years old who has worked for the employer for three of the past five years and received a minimum of $550 in compensation. The employer can contribute up to 25% of the employee’s annual compensation , or $49,000 per year on the employee’s behalf. Contribution levels must be uniform for all eligible employees, and the percentage and frequency of contributions is determined by the employer, who is permitted to review and make adjustments for the plan. There is no provision in the SEP plan for the catch-up contribution for older employees, however the greater SEP IRA contribution limit provides an opportunity toquickly build retirement savings within the plan . Contributions are made in cash, not stock. Usually the SEP must be funded by the tax filing deadline. The plan works well for the self-employed, who are allowed an annual contribution of 20% of their net profit, up to $44,000. It is suitable for S and C corporations, sole proprietorships, partnerships, and LLCs. Similar to other forms of the traditional IRA,  distributions from the account can start as soon as age 59 ½ years old without incurring tax penalty, and must start no later than age 70 ½ years of age . The SEP is transportable, so able to be rolled into a different IRA or transferred to   a new employer’s qualified retirement plan in the event of a change in employment. The generous SEP IRA contribution limit is a powerful incentive to discover more about the plan.