Employees cannot contribute to a SEP IRA. The plan is funded entirely by the employer, so there is no salary deferral, no employee match, and no way to add your own money to the SEP side of the account. You can still save on your own through a separate traditional or Roth IRA, and if your employer allows it, you can elect to have their SEP contributions treated as Roth under a recent change in the law.
Why the Account Is Employer-Funded Only
Under 26 U.S.C. ยง 408(k), the employer establishes the SEP, decides each year how much to put in, and makes every contribution. Employees have no mechanism to elect deferrals into the SEP itself.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
This surprises a lot of people because the account is held in your name at a financial institution you often pick yourself. It looks like your IRA, and legally it is your IRA. But only the employer can deposit SEP contributions into it. Any money you personally transfer in gets classified as a regular traditional IRA contribution, not a SEP contribution, and it counts against the much lower traditional IRA limit rather than the SEP limit.
Contributing to Your Own IRA on the Side
Nothing stops you from opening and funding a separate traditional or Roth IRA while your employer contributes to your SEP. For 2026, the combined limit across all your traditional and Roth IRAs is $7,500, or $8,600 if you are 50 or older.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits
Watch the phase-outs. Because you are considered an active participant in an employer retirement plan (your SEP counts), your ability to deduct traditional IRA contributions phases out above certain income thresholds. Roth IRA eligibility phases out at higher income levels too. Before you send money to a personal IRA, check the current phase-out tables in IRS Publication 590-A so you know whether the contribution will be deductible or allowable in the first place.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits
Your employer will not list SEP contributions on your W-2, but they will check the “Retirement Plan” box in box 13. That checkbox is what triggers the phase-out rules for your personal IRA deduction.3Internal Revenue Service. Simplified Employee Pension Plan (SEP)
The One Narrow Exception: SARSEPs
There is one type of SEP where employees can defer their own salary into the account. It is called a Salary Reduction SEP, or SARSEP, and it functions somewhat like a simplified 401(k). Congress stopped allowing new SARSEPs after 1996. Employers that already had one in place before that date can keep it running, and employees hired later can still participate in the existing plan.4Internal Revenue Service. Salary Reduction Simplified Employee Pension Plan (SARSEP)
SARSEPs come with conditions a regular SEP does not have. The employer must have had no more than 25 eligible employees in the preceding year, and at least 50% of eligible employees must elect to defer each year. If participation drops below that threshold, all employee deferrals for the year must be pulled back out of the accounts. For 2026, the elective deferral limit for a SARSEP is $24,500.4Internal Revenue Service. Salary Reduction Simplified Employee Pension Plan (SARSEP)
If your employer maintains one of these legacy plans, this is essentially the only situation where an employee can put personal money directly into a SEP-type arrangement. Ask your plan administrator whether the plan is a SARSEP or a standard SEP; the two look similar from the outside but work very differently for the employee.
Roth SEP Elections Under SECURE 2.0
Starting with plan years after December 31, 2022, SECURE Act 2.0 gave employers the option to let employees elect Roth treatment for SEP contributions. This does not change who funds the account. The employer still puts the money in. What changes is that you can choose to have that contribution treated as after-tax Roth money rather than pretax.5Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2
The trade-off is standard Roth logic. You pay income tax on the contribution now, and qualified withdrawals in retirement come out tax-free. Employer Roth contributions to your SEP are reported on Form 1099-R in the year they land in your account and count toward your gross income for that year. The employer does not withhold income tax or FICA on these amounts, so you may need to adjust your estimated payments or withholding elsewhere to avoid a shortfall at filing time.5Internal Revenue Service. SECURE 2.0 Act Changes Affect How Businesses Complete Forms W-2
Not every employer has amended their plan to offer this election. Confirm with your plan administrator before assuming Roth treatment is available.
What Your Employer Must Contribute If You Are Eligible
To receive employer contributions under a SEP, you must be at least 21 years old, have worked for the employer in at least three of the last five years, and have earned at least $800 in compensation from that employer during 2026.3Internal Revenue Service. Simplified Employee Pension Plan (SEP)6Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs An employer can loosen these requirements but cannot tighten them.
Two categories of workers can be excluded even if they meet those baselines: employees covered by a collective bargaining agreement that addresses retirement benefits, and nonresident aliens with no U.S.-source income from the employer. Part-time and seasonal workers cannot be excluded on those grounds alone as long as they clear the three baseline requirements.7Internal Revenue Service. SEP Plan Fix-It Guide – Eligible Employees Were Excluded From Participating
When the employer does contribute, they have to give every eligible employee the same percentage of compensation. If the owner gets 10% of their pay, every qualifying worker gets 10% too.8Internal Revenue Service. SEP Plan Fix-It Guide – Contributions to Each Participants SEP-IRA Werent a Uniform Percentage of the Participants Compensation For 2026, the maximum employer contribution per employee is the lesser of 25% of compensation or $72,000, with compensation itself capped at $360,000 for this calculation.6Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs
Traditional (non-Roth) SEP contributions from your employer are not included in your taxable wages and are not subject to Social Security or Medicare withholding.9Internal Revenue Service. Retirement Plan FAQs Regarding Contributions – Are Retirement Plan Contributions Subject to Withholding for FICA, Medicare or Federal Income Tax Every dollar deposited is yours immediately; SEP contributions have no vesting schedule.3Internal Revenue Service. Simplified Employee Pension Plan (SEP)