What Are Simplified Employee Pension (SEP) IRA’s

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What are SEP IRA’s?

A Simplified Employee Pension (SEP) plan provides a mechanism for the employees to save for their financial needs after the retirement. It also provides the employers with a simplified means of contributing towards the post-retirement financial needs of their employees, and their own, if they are self-employed. In case of a SEP, the contributions are made directly to an Individual Retirement Account (IRA) or an annuity that is created for every individual employee. When the SEP contributions are made into an Individual Retirement Account (IRA), it is collectively referred to as a SEP-IRA. The two terms SEP and SEP-IRA are commonly used interchangeably to denote the same account held by the employee. A Simplified Employee Pension (SEP) plan is a variation of the Individual Retirement Account (IRA). The SEP-IRA is famous because of its simplicity that is also reflected in its name. All employees of an organization are entitled to equal benefits under a SEP plan. SEP accounts are treated as being equivalent to IRA accounts and funds can be invested in a SEP account in the same way as in the case of an IRA. The administration costs of SEP accounts...

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