simplified employee pension plan

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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.

simplified employee pension plan (SEP)

A special type of joint Keogh plan-individual retirement account that is created for employees by employers and that permits contributions from each party. The SEP was developed to give small businesses a retirement plan easier to establish and administer than an ordinary pension plan.

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.

References in periodicals archive ?
Your main options are the SEP IRA, the SIMPLE IRA and the solo 401(k) plan, which allow you to deduct your contributions, let your earnings grow tax-deferred and get taxed on withdrawals in retirement.
A SEP IRA (or simplified employee pension individual retirement account), allows you to contribute up to 25% of your annual income, with a cap of $49,000.
Under current tax rules, a self-employed person earning less than $46,000 from his or her business could make a greater contribution to a SIMPLE IRA than to a SEP IRA.
provides gold for direct delivery to the client, as well as Precious Metals IRAs in which the accountholder may directly own Proof American Eagles, gold bullion, or other precious metals in their Traditional, Roth, or SEP IRA.
So, an SEP IRA can be used to shelter a fair amount of income from tax, and these contributions will grow on a tax-favored basis until distributions begin at age 70 1/2.
A SEP IRA is available to employees age 21 and older, with the employer making the contributions.
Fidelity did report that Foss had assets worth approximately $224,000 in a SEP IRA and $835,000 in a traditional IRA, but Foss's attorneys have argued that IRA assets are exempt.
As an example, Mark Smith is a small business owner who has $500,000 invested in a SEP IRA established by his company.
2002) (state statute that exempts garnishment of SEP IRA plan was preempted by ERISA, which allows such garnishment).
A SEP IRA merges the employer-provided pension plan with the benefits of an individual IRA.
He converts $150,000 of his SEP IRA to a Roth IRA and offsets that income with the business' NOL, so he pays no taxes.
McGee also wanted Williams to establish a SEP IRA because it "works the same way a 401(k) does and it's a solid way to put away money for retirement without paying a lot of taxes.