SEP (Simplified Employee Pension Plan)
What is a SEP?
A SEP is a pension plan for owners of small companies in which the employer contributes to an Individual Retirement Account (IRA) on behalf of the employee. Employees do not benefit from making pretax contributions
A SEP offers many of the tax benefits of the qualified plans, but it has fewer of the administrative expenses associated with them.
Who makes the contributions?
SEP contributions – made by the employer – are discretionary and can be up to 25% of pay for each eligible employee. Except for grandfathered SARSEPs, employee pretax contributions are not allowed. All contributions are made to IRAs for the benefit of the eligible employees and are 100% immediately vested. Contributions and earnings grow tax-deferred until the money is withdrawn by the employee.
For more information about retirement plans, contact us.
