Simplified Employee Pension
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Simplified Employee Pension (SEP) plan
A pension plan in which both the employee and the employer contribute to an individual retirement account. Also available to the self-employed.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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 (SEP)
An arrangement under which an employer makes contributions to an employee's individual retirement account (IRA), or a self-employed person contributes to his own plan.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary