What compensation is included in determining SEP contributions for an employee?
For an individual who is not self-employed, compensation included in determining SEP contributions includes:
- wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a),
- amounts described in Internal Revenue Code Section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and
- compensation deferred under a 457 plan.
Compensation doesn’t include amounts deferred under a Section 125 cafeteria plan. Compensation is limited to $280,000 in 2019 and $275,000 in 2018.
What compensation is included in determining SEP contributions for a self-employed individual?
For purposes of the SEP plan rules, a self-employed individual’s compensation means net earnings from self-employment determined under Internal Revenue Code section 1402(a).