General Question

LuckyGuy's avatar

Where should a U.S. business owner open a Simplified Employee Pension account?

Asked by LuckyGuy (34875points) March 5th, 2014

I am self-employed and own a business with a few employees. We are doing reasonably well. I want to open a SEP account but every investment house I consider is “clearly the best”, just ask them. Fidelity, Vanguard, Chase, etc. – they all sound the same. They all follow the same IRS rules for investing income. They all have a multitude of funds with low expense ratios around 0.10%. They all have web access. They all say they don’t charge fees. So what is the difference? They are bankers so, frankly, I don’t trust any of them. Does anyone have any experience with this? Who do you like?

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8 Answers

Cruiser's avatar

FWIW I use SEBS. The old owner did the homework on them and he was always pretty thorough. I have a 401 safe harbor account and the money is invested in TRS products. Easy to make transactions in my own fund and pretty diverse fund choices.

LuckyGuy's avatar

I wonder why he didn’t go with one of the big boys. I will look into SEBS. They are “local”. If you are willing can you can PM me with a name? Not yours, of course. ;-)

LuckyGuy's avatar

I called SEBS and have phone meeting tomorrow. They only offer 401k, not SEP. I will hear the benefits of each tomorrow. Thanks!
I love this place.

SadieMartinPaul's avatar

SEPs don’t lie when they say that they’re “simplified.” They really are very easy and straightforward.

To establish a SEP plan, all you need to do is complete an IRS Form 5305-SEP. You can find the form at I also recommend clicking on the hotlinks at the following webpage, just so that you’re comfortable with the SEP requirements:

As for where you deposit the money, any (reasonably) trusted IRA provider will do. This can be your bank, your investment firm, etc.

zenvelo's avatar

While they may seem to be there simply to take custody of your money, there is a difference in customer care. I went to open an IRA so I could transfer a 401k at Charles Schwab back in 2006. The people at the local Schwab office gave me so little help and so little guidance on what to do that I left the half filled out forms on the counter and walked down the street to Fidelity. Fidelity took the time to help me fill out the forms and tell me how and when the transfer would take place. I highly recommend them.

So really, since you observed that they are all the same as far as cost and products, how you are treated becomes the reason for placing your account at one place or another.

Wealthadvisor's avatar

SEP’s are much simpler to set up than a 401(k). But they do have rules you have to follow, especially if you have employees.

SEP’s can be established with sole proprietorships, partnerships, or corporations. Generally all employees must be included in a SEP except for:

1. Employees who have not worked for the employer in three out of the last five years.
2. Employees who earn less than $550
3. Employees who have not reached the age of 21.
4. Employees covered by collective bargaining.
5. Non-resident aliens.

The SEP is most attractive for the individual who has no other employees.

What brokerage house you use is just a matter of preference. Usually, if you set the program up using a Certified Financial Planner, he or she will do all the work for you. Or you can just pick the brokerage house that is willing to work with you. You need to ask if all employees must use the same investment allocation, or are they allowed to control their own accounts.

The brokerage house makes it’s money on the buying and selling of the equities inside the SEP as well as the loads. Most do not charge to set up the account.

LuckyGuy's avatar

Thanks for your input. I went with a SEP from Fidelity. It took them only a few minutes and they helped with the form. Perfect.

Cruiser's avatar

Chalk one up for the Little Guy Lucky Guy! ;)

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