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SIMPLE IRA and SEP IRA 2026: limits for small businesses
2026 IRS figures for SIMPLE IRAs and SEP IRAs, plus related plan limits from Notice 2025-67.
Sourced from official pages · Updated September 30, 2026🧓
Retirement6 sections
2 official sources linked💡 Key takeaways
- 2026 SIMPLE IRA employee deferral is $17,000 with a $4,000 catch-up at 50 or older.
- SEP IRA employer contributions are funded by the employer and popular with self-employed people.
- Compensation counted for plans is capped at $360,000.
- Compare with the individual 401(k) and IRA limits.
2026 limits
| Item | 2026 figure |
|---|---|
| SIMPLE IRA employee deferral | $17,000 |
| SIMPLE IRA catch-up (age 50+) | $4,000 |
| SEP IRA minimum compensation for coverage | $800 |
| Maximum compensation counted for plans (401(a)(17)) | $360,000 |
| Highly compensated employee threshold | $160,000 |
| Roth catch-up wage threshold (prior-year FICA wages above) | $150,000 |
Who uses them
- SIMPLE IRA: small employers; employees defer salary and the employer contributes.
- SEP IRA: employer-funded, popular with self-employed people.
Roth catch-up rule
Under the SECURE 2.0 rules reflected in the 2026 notice, the $150,000 threshold refers to prior-year Social Security (FICA) wages; higher earners make 401(k) catch-up contributions as Roth. Check with your plan administrator.
SIMPLE vs SEP at a glance
| SIMPLE IRA | SEP IRA | |
|---|---|---|
| Who contributes | Employee deferrals plus employer contributions | Employer only |
| Typical user | Small employers | Self-employed and small businesses |
| Setup | Employer adopts a plan and employees defer | Employer opens IRAs and contributes |
How to choose
- Decide whether you want employees to contribute.
- Compare cost and administration.
- Check the IRS limits and rules for your situation.
- Talk with a tax professional or plan provider.
🔤 Key terms
| Term | Meaning |
|---|---|
| SIMPLE IRA | Savings Incentive Match Plan for Employees, for small employers |
| SEP IRA | Simplified Employee Pension, funded by the employer |
| Compensation limit | The maximum pay counted for plan contributions ($360,000) |
| Catch-up | Extra contribution at age 50 or older |
⚠️ Common mistakes to avoid
- Confusing SEP and SIMPLE rules.
- Exceeding the annual limits.
- Forgetting employee notice deadlines for SIMPLE plans.
- Not comparing with other plan types.
🛠️ Try it yourself
❓ Frequently asked questions
Can I have a SEP and a 401(k)?
Contribution limits and rules interact; check IRS guidance.
Are catch-ups allowed?
Yes for SIMPLE plans at 50 or older, as shown.
Who sets up the plan?
The employer, through a financial institution.
📚 Sources
This guide is general information, not financial, tax or legal advice. Rules and limits change; confirm with the sources above or a licensed professional.