SEP IRAs are an easy, low-cost way for small business owners, including sole proprietors, to save for retirement.



Unrestricted access
Although available to businesses with any number of employees, SEP IRAs often appeal to small businesses with few or no employees.

Flexible employer contributions

  • Employers have complete discretion about whether to make contributions or not. Contributions are immediately vested.
  • Annual contributions can be up to 25% of compensation or $69,000,* whichever is lower.
  • Contributions must be the same percentage of compensation for every eligible employee. See Contributions section below for more details.

Easy plan setup and administration
A third-party recordkeeper, third-party administrator, and annual 5500 and discrimination testing are not required.

Lower cost
Plan setup and annual fees are typically lower than those of 401(k) plans.

Tax benefits
For employers, contributions are tax deductible. For participants, contributions and earnings are not taxed until withdrawn. New plans may be eligible for an annual tax break of $500 to $5,000 for three years.



Contributions at employer’s discretion; no participant contributions

Plan service model
Financial professional provides individual and investment advice to each participant.

Participants choose from a wide range of American Funds®, including the American Funds Target Date Retirement Series®.


  • Contributions are optional and may vary at the employer’s discretion; participants cannot make contributions.
  • In general, maximum annual contributions are 25% of the participant’s compensation or $69,000 whichever is lower.*
  • Contributions must be the same percentage of compensation for all eligible employees. Contributions are immediately vested.

Top-heavy and 415 testing are required. A plan is top heavy if the combined value of key employee accounts is more than 60% of the total of all accounts. The 415 test ensures that employees are not exceeding certain contribution limits. IRS Form 5500 and DOL filings are not required.



Eligible employers — Businesses of any size, including sole proprietors, for-profit and nonprofit companies, and government entities.

Eligible employees — Any employee who is 21 or older and has worked for the employer at least three of the last five years must be included in the plan. Certain employees can be excluded, including:

  • Workers with annual earnings under $750 in 2024.
  • Union members covered by a collective bargaining agreement.
  • Nonresident aliens with no source of U.S. income.


  • Participant contributions are not allowed.
  • Employer contributions can vary or not be made at all, at the employer’s discretion. Factors may include the company’s profitability, cash flow, etc.
  • With the exception of self-employed individuals, the maximum annual contribution is 25% of a participant’s compensation or $69,000* whichever is lower. The $69,000 limit is for 2024 and is subject to cost-of-living adjustments for future years.
  • For self-employed individuals, compensation is based on self-employment income minus deductible plan contributions and 50% of self-employment taxes paid.
  • Contributions must be the same percentage of compensation for all eligible employees, up to the stated maximums. For example, if an employer decides to make contributions of 5% of compensation, every participant — including business owners — will get a 5% contribution, up to $69,000.
  • Contributions are immediately vested.

Plan administration


Limited fiduciary responsibility — Fiduciary liability is limited because IRAs are set up for each eligible employee and participants make their own investment choices.

Plan establishment and funding deadlines — For contributions to be made for a tax year, the plan must be established and contributions must be funded by the employer’s tax filing deadline, plus extensions.

Easy SEP IRA administration at Capital Group

Employer contributions — To simplify and expedite the contribution process, employers submit contributions through the Online Group Investments website. The secure site makes it easy for employers to create payroll rosters, contribute directly from bank accounts, access transaction history and update participant information.

Participant investments — Because participants control their accounts, they can monitor their investments and make exchanges and other transactions at any time, online or by phone.

Aggregating accounts for a lower Class A share sales charge — American Funds Class A shares are sold with an upfront sales charge. If account assets reach certain levels (breakpoints), a lower or no sales charge may apply. Aggregation of participant accounts in a SEP IRA plan depends on the plan agreement selected by the plan sponsor:

  • Capital Group prototype agreement: Because all contributions come to Capital Group, all accounts in the plan can be aggregated when determining sales charges. If the grouped assets reach a breakpoint, all participants benefit from the reduced sales charge. Participant accounts in the plan cannot be aggregated with personal accounts.
  • Any other plan agreement: Because contributions may or may not come to Capital Group, accounts in the plan are not aggregated. Instead, a participant’s account may be linked with his or her other personal Capital Group accounts.

* Contribution limits for 2024. For self-employed individuals, compensation is based on self-employment income minus deductible plan contributions and 50% of self-employment taxes paid.

Set up an account

If you are an employee, reach out to your employer for more information.

If you are an employer, you can invest in American Funds through most online brokers or by working with your financial professional. Don't have a financial professional?

Investment options

American Funds Target Date Retirement Series®

Select a target date fund that is based on your nearest anticipated retirement date. A single investment provides a fund-of-funds portfolio of actively managed American Funds aligned with an investor’s time horizon.

American Funds Portfolio SeriesSM

With objectives like growth, income and preservation, these funds of funds offer diversification and control in a single investment.

Individual mutual funds

Investors can build an investment portfolio of American Funds to meet their specific preferences and needs.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Although the target date portfolios are managed for investors on a projected retirement date time frame, the allocation strategy does not guarantee that investors' retirement goals will be met. Investment professionals manage the portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the target date gets closer. The target date is the year that corresponds roughly to the year in which an investor is assumed to retire and begin taking withdrawals. Investment professionals continue to manage each portfolio for approximately 30 years after it reaches its target date.
This material does not constitute legal or tax advice. Investors should consult with their legal or tax advisors.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
Effective July 1, 2024, American Funds Distributors, Inc. was renamed Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Allocations may not achieve investment objectives. The portfolios' risks are directly related to the risks of the underlying funds.