SEP

Simplified Employee Pension Plan

Also called a SEP IRA. A retirement plan designed for persons with self-employed income and their employees. It operates like an IRA: it has contribution limits and may be invested in securities. When an employer sets up an SEP, he/she creates a different account for each employee and puts a certain percentage of each person's income into these accounts. The percentage must be the same for the employer and all employees (although the dollar amounts will differ because of different levels of compensation). The employer makes all contributions, which are tax deductible for him/her; when the employee makes withdrawals upon retirement, the withdrawals are tax-free. SEPs may exist side-by-side with 401(k)s.

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SEP

See simplified employee pension plan.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Simplified employee pension plan (SEP).

An SEP is a qualified retirement plan set up as an individual retirement arrangement (IRA) in an employee's name.

You can establish an SEP for yourself if you own a small business, or you may participate as an employee if you work for a company that sponsors such a plan.

The federal government sets the requirements for participation, the maximum annual contribution limits, and the rules governing withdrawals.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

SEP

See Simplified Employee Pension

Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary