Salary Reduction Simplified Employee Pension Plan

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Salary Reduction Simplified Employee Pension Plan (SARSEP)

A low-cost, no-frills version of a 401(k) employee savings plan available to companies with 25 or fewer employees. It allows employees to make pretax contributions to their IRAs through salary reduction each year. The Small Business Job Protection Act of 1996 replaced SARSEPs with SIMPLE (Savings Incentive Match Plan for Employees) plans. Existing SARSEPs were allowed to add new participants, but new plans could not be formed after December 31, 1996.

Salary Reduction Simplified Employee Pension Plan

A former 401(k) for small businesses, defined as those with fewer than 25 employees. This plan minimized costs for the employer, and employees could make contributions through paycheck deductions. It was replaced by the SIMPLE plan in 1996.
References in periodicals archive ?
Commending the ERSA, he said, "The original proposal would have consolidated 401(k), thrift, 403(b) and governmental 457 plans, as well as Salary Reduction Simplified Employee Pension Plans [SARSEPs] and Savings Incentive Match Plans for Employees [SIMPLE] IRAs into one simple account, which could be sponsored by any employer.
An IRS review of salary reduction simplified employee pension (SARSEP) plans has uncovered errors that could affect plan sponsors and employees.
A variation that employers can offer their workers is a SAR SEP IRA, or Salary Reduction Simplified Employee Pension.