3702 / What are the limits with respect to employee contributions to a simplified employee pension (SEP)?

While elective deferrals are not permitted to an SEP, an employee may make deductible or nondeductible contributions directly to the SEP-IRA account subject to the same general IRA rules described in Q 3654 to Q 3682.However, any dollars contributed to the SEP will reduce the amount the individual employee can contribute to other IRAs, including Roth IRAs, for the year.

Example 1: Example 1: Nancy's employer, JJ Handyman, contributes $5,000 to Nancy's SEP-IRA at ABC Investment Co. based on the terms of the JJ Handyman SEP plan. Nancy, age 45, is permitted to make traditional IRA contributions to her SEP-IRA account at ABC Investment Co., and she contributes $3,000 in 2026. If Nancy also wants to contribute to her Roth IRA at XYZ Investment Co. for 2026, she can contribute $4,500 ($7,500 maximum contribution less the $3,000 already contributed to her SEP-IRA) by April 15, 2027.

Salary deferrals are only allowed to Salary Deferral SEPs, known as SAR-SEP, and no new SAR-SEPs are permitted as of 1997 ( Q 3705).