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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
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.
References in periodicals archive ?
* For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner's taxable year in which the charitable contributions would be made.
(A SEP IRA is described in Section 408(k), and a SIMPE IRA is described in Section 408(p).)
The rules for post-70 1/2 IRA contributions depend upon whether the account is a traditional IRA, Roth IRA or SEP IRA. Direct contributions to a traditional IRA are not permitted after the client reaches age 70 1/2, although the client may roll funds from another type of retirement account into his or her traditional IRA.
To qualify for the bonus, the deposit can be in the form of rollovers, trustee-to-trustee transfers and individual contributions (up to annual contribution limits), and may be met with multiple deposits across traditional, Roth, SEP IRA plans and IRA accounts.
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.
Some business owner clients can take this a step further, by establishing and contributing to a SEP IRA, which in some cases can be done as late as October 15, 2014 for 2013.
Last day to establish a qualified retirement plan for 2012 SEP IRA plans may be established until the tax-filing deadline (generally April 15) plus extension
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. This threshold in many cases makes a SIMPLE IRA attractive to early-stage start-ups and part-time businesses.
Make contributions to an SEP IRA: If your client has retired from a company but continues to work as a consultant, he or she might have unneeded income in early retirement years that can be used to fund an SEP--Simplified Employee Pension--IRA.
George, says SEP IRA's and SIMPLE IRA's are two of the most popular and feasible retirement plans for small business owners and their employees.