Employer-Sponsored IRAs
Chapters in this video
- 0:00 The SEP-IRA $72,000 contribution ceiling
- 1:20 Three eligibility tests for employees
- 2:28 Exam trap: employer-only contributions and immediate vesting
- 3:48 The magic number 100: pivoting to SIMPLE IRA
- 4:15 Employee deferrals and mandatory employer match
- 5:12 The 25% early withdrawal penalty trap
- 6:29 Side-by-side SEP vs. SIMPLE comparison table
- 7:02 Rapid-fire exam recap
What this video covers
- The SEP-IRA contribution formula: lesser of $72,000 or 25% of compensation, with the $360,000 compensation cap
- Why SEP-IRA contributions come from the employer only, and the three eligibility tests (age 21, 3 of 5 years, $800 compensation)
- Immediate 100% vesting for both SEP and SIMPLE IRAs, and why no vesting schedule applies
- The 100-employee threshold and mandatory employer contribution that define a SIMPLE IRA (Savings Incentive Match Plan for Employees)
- SIMPLE IRA employee deferral limits ($17,000), catch-up amounts ($4,000 age 50+, $5,250 age 60-63), and the employer's two contribution choices
- The 25% early withdrawal penalty during the first 2 years of SIMPLE IRA participation, and why rollovers during this period are restricted to another SIMPLE IRA
- How to distinguish SEP vs. SIMPLE in side-by-side comparison questions on exam day
Read the full lesson, free
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