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How is a SEP IRA different from a 401(k) plan?
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SEP IRA |
401(k) |
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Designed for self-employed individuals and small business owners. |
Available to all types of employers, including large companies. |
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Only employers contribute to the plan; employees cannot contribute. |
Both employees and employers can contribute. |
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Contribution limits are high but only based on the employer’s income. |
Contribution limits are high and allow for employee deferrals and employer matching. |
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No filing requirements with the IRS for small businesses. |
Requires filing with the IRS and annual compliance reporting. |
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Low cost to set up and manage. |
Higher cost to set up and manage compared to SEP IRA. |
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