Investor Glossary-simplified employee pensionInvestor Glossary-simplified employee pensionInvestor Glossary-simplified employee pensionInvestor Glossary-simplified employee pensionInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Simplified Employee Pension

The HTML to link to this page

A Simplified Employee Pension, or SEP, is a retirement plan often used by small businesses due to its simplicity and low start-up and administration costs. Sole proprietors, partnerships, corporations, and S corps can all set up a Simplified Employee Pension. Simplified Employee Pension accounts can also be set up by the self-employed for their own retirement savings. Simplified Employee Pension accounts allow for tax deferred growth on retirement savings and function much like a traditional IRA. Employers making contributions to employee Simplified Employee Pension accounts can claim a tax deduction on these contributions. Decisions regarding employer contributions to Simplified Employee Pension accounts can be made each year (subject to IRS limits); employers are not locked in to a contribution schedule.

An employer wishing to establish a Simplified Employee Pension plan must follow three steps. First, they must execute an Simplified Employee Pension agreement (e.g. a SEP IRS model - Form 5305-SEP, a IRS approved prototype SEP, or an individually designed SEP). Second, they must provide information about the Simplified Employee Pension plan to employees. And last, employers must ensure that a Simplified Employee Pension IRA account is set up for each eligible employee. Simplified Employee Pension IRA accounts are typically set up by the employee.

Employees are considered eligible for participation in a Simplified Employee Pension plan if they are at least 21 years of age and have performed services for the employer in at least 3 of the last 5 years. All employees considered eligible in a Simplified Employee Pension must participate. Discretion over the investments in employee accounts is retained by the employees themselves. Employees are 100% vested in all contributions into their Simplified Employee Pension accounts immediately.

For more information on Simplified Employee Pension plans please see IRS publication 560.

Rate this Simplified Employee Pension definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: reverse mortgage, required rate of return, per diem, debt service coverage, phantom income, open position, labor relations, covered put, APR, deferred revenue, annual return, balance sheet, ex-dividend, FICO score, implied volatility, irrevocable trust, 144a, dividends payable, LIBOR, real GDP, current ratio, VIX, quality assurance, Zero Cost Collar, option premium, class C shares, wholly-owned subsidiary, EBITDA, command economy, deferred tax, 1031 exchange, FTSE, stock split, 1035 exchange, ex-dividend date, inflation, retained earnings, minority interest, stock market close, Key Rate Duration, average price per share, cancelled check, risk management, diluted share, margin rate, limit order, 401a, liquidity ratio, in escrow

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use