Type of Defined Contibution Plan that takes the form of an IRA for all eligible employees. Employer contributions only. (Simplified Employee Pension Plans IRA)
A type of retirement plan with individual IRA accounts for each participant. The employer funds the retirement benefit by making contributions that are remitted directly to the IRA accounts. Employers must contribute a uniform percentage of pay for each employee. Employer contributions are limited to the lesser of 25% of an employee's annual salary, or an annually adjusted maximum ($40,000 in year 2003). All contributions are immediately 100% vested.
A Simplified Employee Pension (SEP) is essentially a group of IRAs paid for by the employer. This pension plan allows employers to contribute to SEP-IRA plans, on behalf of their employees, an amount greater than the Traditional IRA limitations. The main advantage of the SEP-IRA to the employer is that the administrative burdens are few and the plan is simple to install.