There are specific tax rules that govern contributions made to simplified employee pension plans (SEPs) after age 70.5 or 72, depending on the year. Find out details below.

SEPs are IRAs, rather than defined contribution plans, and thus Code Sec. 411(b)(2)(A)'s requirement that benefits continue to accrue to an employee's account regardless of the employee's age does not apply. The general rule for IRAs prior to 2020 was that no deduction for an IRA contribution was allowed for a beneficiary who had reached age 70-1/2. However, for an employer contribution to a SEP, this rule did not apply (Code Sec. 219(b)(2)) and employers had to make contributions to the account of employees who were 70-1/2 or older, even though these employees were receiving required minimum distributions from the SEP.

The SECURE Act eliminated the age cap for making contributions to IRAs. Thus, employers sponsoring a SEP are required to make contributions to the SEP accounts of their employees regardless of their age. Employees turning age 72 in 2020 or a later year and those who turned 70-1/2 prior to 2020 will be required to receive required minimum distributions from the SEP. A self-employed individual age 72 (70-1/2 if that age was attained before 2020) or over can also make SEP contributions for himself or herself but must take required minimum distributions. (2020 Pub 560, Chp 2, Pg 6)