Updated October 29, 2026. Quick answer: The SEP IRA compensation threshold for 2026 is $800, up from $750 in 2025, per IRS Notice 2025-67. It is the minimum yearly pay that makes an employee eligible for employer contributions under a simplified employee pension. The 2027 version has its own page, the SEP IRA pay threshold for 2027.
The 2026 threshold
The IRS Notice states it this way: “The compensation threshold under section 408(k)(2)(C) regarding simplified employee pensions is increased from $750 to $800.”
| Year | SEP pay threshold | Change from prior year | Source |
|---|---|---|---|
| 2025 | $750 | Prior-year figure in IRS Notice 2025-67 | |
| 2026 | $800 | +$50 (computed) | IRS Notice 2025-67 |
What the statute says
A SEP must cover each employee who meets three tests. Section 408(k)(2) lists them: “(A) has attained age 21, (B) has performed service for the employer during at least 3 of the immediately preceding 5 years, and (C) received at least $450 in compensation (within the meaning of section 414(q)(4)) from the employer for the year.” The $450 in test (C) is the statute’s base amount, and it is indexed. The statute says the Treasury shall adjust it “at the same time and in the same manner as under section 415(d)”, with this rounding: “any increase in the $450 amount which is not a multiple of $50 shall be rounded to the next lowest multiple of $50.”
In practice, an employee who earned at least the threshold from you for the year, and meets the age and service tests, must receive the same-percentage contribution as everyone else. The contribution caps are separate and are on the SEP IRA contribution limit for 2026.
Check of the 2026 figure
Using public inflation data: the BLS CPI-W averaged 174.133 for July to September 2001 and 317.265 for July to September 2025, a ratio of 1.82197. $450 times 1.82197 is $819.89 (computed), which rounds down to a multiple of $50, or $800. That matches the Notice. This is our arithmetic on public data, shown to explain the 2026 figure.
Common mistakes
- Mixing this threshold up with the SEP contribution limit. This is the pay an employee must have earned to be covered, not the amount that can be contributed.
- Using last year’s $750 for the 2026 plan year. The IRS Notice sets $800 for 2026.
- Ignoring the age and service tests. Pay at or above the threshold is only one of the three.
Related: the SEP IRA contribution limit for 2026, the solo 401(k) limit for 2026, the SIMPLE IRA limit for 2026, and the SEP IRA pay threshold for 2027.
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Answer againSources
- Internal Revenue Service, Notice 2025-67, 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living: www.irs.gov
- 26 U.S.C. 408, Individual retirement accounts (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
- Bureau of Labor Statistics, CPI for Urban Wage Earners and Clerical Workers (CPI-W), U.S. city average, all items, series CWUR0000SA0 (public data API): api.bls.gov
Read from the primary documents linked above on October 29, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.