How to open a SEP-IRA

How to open a SEP-IRA

simplified employee pension plan (SEP-IRA) is a retirement plan for small businesses with any number of employees, but typically opened by sole proprietors with no employees. A SEP-IRA is available to sole proprietors, partnerships, corporations including sub-chapter S corporations, non-profits, and government agencies.

A separate SEP-IRA account must be opened for the employer and each eligible employee. You can open a SEP-IRA account using DocuSign® or paper forms.

All accounts
  • Your firm name, master account number, and contact information.
  • If the trustee or participant is affiliated with a member firm of an exchange or FINRA and Rule 3210 applies, a FINRA Rule 3210 Consent Letter.
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website).
In addition to the information above, the following account specific information may be required:
Employer's plan

A completed and signed:

Participant accounts  (employer and employees)
  • Photocopies of the completed and signed:
  • A completed IRA Account Application (use the application instructions for more information)
    • Information for the account holder (employer or participant), including name, known by name, home and business addresses (no P.O. boxes or advisor addresses), mailing address (if different from home or business address), home or business phone number, birth date, country of legal residence, all countries of citizenship, identification number, employment status, employer name.
    • Information for the beneficiary(ies) (recommended).
    • Business and employer information is not required if the client is retired or non-employed.
  • SEP-IRA Employee Outline
    • Advise the employer to complete and provide to eligible employees. This form does not need to be returned to Schwab.
Additional features

For additional features requested by the client:

Account opening method

If using DocuSign to submit forms:

  • For existing Schwab clients, a complete Schwab Advisor Center® profile with the account holder's current email address and mobile phone number.
  • For new-to-Schwab clients, an email address and a mobile phone number.
  • All clients must use either Alliance Authentication (only available when starting the envelope within Schwab Advisor Center), or, both text message (SMS) authentication and Knowledge Based Authentication (KBA) for DocuSign (available in both Schwab Advisor Center and the DocuSign Console).
If submitting via DocuSign

For details, see:

  1. Go to the Forms library on Schwab Advisor Center and select the applicable form for your situation.
  2. Complete all applicable sections.
If submitting via Service Request
  1. Print the form(s) and obtain the appropriate account holder signature(s).
  2. Send the signed form(s) to your Schwab service team via a Schwab Advisor Center service request.

For an employer SEP-IRA plan, once the plan-level information is completed, you can submit the participant applications immediately or later as needed.

  1. Select the appropriate form below to open the Forms library page on Schwab Advisor Center. Click Select and select Open PDF.

    Employer SEP-IRA PlanSEP-IRA Basic Plan Document
    Print the document and provide to the employer; this document governs the plan. Advise the employer to review the document and keep it for future reference.
    Participant SEP-IRASEP-IRA Employee Outline
    Advise the employer to complete and provide to eligible employees. This form does not need to be returned to Schwab.
  2. Search the forms within the Forms library on Schwab Advisor Center. Click Select and select Open PDF.

    Employer SEP-IRA Plan
    Participant SEP-IRA
  3. Complete all necessary fields and ensure all additional features the client requests are added.
  4. Print the form(s) and obtain signatures from the account holder(s). Send the signed form(s), along with the below additional required documents to your Schwab service team via a Schwab Advisor Center service request.

    Employer SEP-IRA PlanA copy of IRS Form 5305 (if applicable)
    Participant SEP-IRASEP-IRA Adoption Agreement or IRS Form 5305 and the SEP-IRA Employer's Agreement with Schwab
  5. An employer SEP-IRA plan, may submit the paperwork, including the participant applications, at the same time or submit participant applications later as needed.

Once you submit your request:

  • If the forms were submitted using DocuSign, see the What's next? section of How to use DocuSign.
  • If any paperwork authorizing an advisor to manage an account is incomplete or missing, Schwab temporarily sets up the account with a special Schwab Advisor Services master account but not a firm's master account. Advisors have 90 days to provide missing paperwork or signatures. After 90 days, the account is no longer considered a Schwab Advisor Services account and is transferred to the Individual Investor Division.
  • Once the employer establishes a SEP-IRA plan and participants enroll, employers can begin making contributions Tooltip . To fund the plan, they need to print and complete a SEP-IRA Transmittal Form.
  • The account holder or participants are advised to consult with their tax advisor with any questions about tax implications.
  • Schwab sends your clients standard communications about their SEP-IRA once it's opened.
  • If you have questions about opening SEP-IRA accounts, call your service team.

To select a form, go to the Forms library on Schwab Advisor Center.

Form: IRA Account Application
Form: Options Trading and Margin Application
Form: Power of Attorney (Individual POA)
Form: SEP-IRA Adoption Agreement
Form: SEP-IRA Basic Plan Document
Form: SEP-IRA Employee Outline
Form: SEP-IRA Employer's Agreement with Schwab
Form: SEP-IRA Transmittal Form
Resource: irs.gov

Who is a SEP-IRA for?
A SEP-IRA is appropriate for virtually all types of self-employed individuals and small business owners with or without employees including sole proprietors, independent contractors, S and C corporations, and limited liability companies. If your clients are self-employed and have few employees, and they want flexibility in the amount they contribute annually—particularly if they want to make high contributions—a SEP-IRA might be right for them.

What is a 5305-SEP and why is it needed?
Form 5305-SEP is a standardized SEP-IRA plan from the IRS. To establish a SEP-IRA at Schwab, the employer must complete either the SEP-IRA Adoption Agreement or the IRS Form 5305-SEP. The Schwab Adoption Agreement can be found within the Forms library on Schwab Advisor Center. The IRS form must be obtained from the IRS or the IRS Web site, irs.gov.

Can my client transfer a salary reduction simplified employee pension plan (SARSEP IRA) to Schwab?
This option is available only if your client established the SARSEP-IRA plan before January 1, 1997. Follow the standard processes to complete the transfer.

How is a SEP-IRA funded?
A SEP-IRA is funded with employer contributions only; however, it does not need to be funded annually. If your client contributes toward their own SEP-IRA, they must contribute for all eligible employees, including those who have terminated employment during the year. Full vesting is immediate.

What are the tax advantages of a SEP-IRA?
Employer contributions are tax-deductible. Earnings grow tax-deferred and are not taxed until they are withdrawn.

What does my client need to know about administering a SEP-IRA plan?
SEP-IRAs are easy to set up and maintain, and no IRS filing, tax reporting, or compliance testing is required. Schwab reports all contributions and end-of-year fair market value, on the year that they are made, on IRS Form 5498 by May 31 each year.

Can my clients add additional features to their SEP-IRA?
SEP-IRA accounts are eligible for the following options:

  • Withdrawal power financial advisor (WPFA) and limited power financial advisor.
  • Covered and long options Tooltip  only. Schwab accepts paper and online applications.
  • Outbound ACH (MoneyLink®) features.

SEP-IRA accounts are not eligible for margin loans or inbound ACH (MoneyLink).

Are there any fees or minimums to open a SEP-IRA?
There are no fees or minimums to open or maintain a SEP-IRA.

When should my clients establish and fund their SEP-IRA?
Your clients must establish their plan by the tax-filing deadline of the business (generally April 15, plus extensions) to contribute for that tax year. This is also a deadline for annual contributions.

How to add features to an account
How to add a power of attorney to an account
How to use DocuSign
Introduction to options trading
Introduction to SEP-IRAs