How do you decide if you should establish a SEP or a Keogh? You must compare both types of plans and determine which retirement plan best fits your needs. Here is a chart summarizing the key features of SEPs and Keoghs:
Key Features of SEPs and Keoghs
Features / Provisions
SEP
Keogh
Plan document
One-page form can be used: IRS Form 5305-SEP
Full plan document
Maximum contribution
Maximum employer deduction
Lesser of $57,000 in 2020 ($56,000in 2019) or 100% of compensation per employee.
25% of total eligible compensation of employees covered by the plan.
Loan provisions
Cannot borrow against SEP account
Able to borrow against Keogh account
Eligibility
Less restrictive rules for employee eligibility
More restrictive rules for employee eligibility
When to establish
Have until due date of tax return to establish
Must be established by December 31
Annual reporting requirements
None
Annual reporting requirement on Form 5500
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