What type of retirement plan is an SEP and how does it work for a small business?

Asked by Steffanie

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Simplified Employee Pension (SEP) plans. That can be use by self-employed person but sometimes big companies use it too. Self-employed use this products for tax advantage that it give. Money will not be tax now but later or tax deferred. Is like 401(k) but to better structure this plan, please consult your trusted expert. | 11.25.15 @ 07:26
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
Answered by Michael Hoffman, RFC, CLU, ChFCPRO+ in Grass Valley, CA
Hi Steffanie, a SEP is an employer sponsored retirement plan. It is called "Simplified" because it uses a plan document that provides for limited options in terms of eligibility, contribution formula (same % for each eligible employee, no vesting and usually no separate administration costs. If you are self employed, or have a relatively small number of employees this plan can be cost effective. You may also choose from a wide variety of funding vehicles for your plan. | 12.01.15 @ 20:11
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:33
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