Life · Chapter 11 · Small Employer Plans
Simplified Employee Pension (SEP)
Definition
The EMPLOYER contributes to IRAs that employees establish and maintain. Created (1978) to spare small businesses the cost/compliance burden of full qualified plans. Employer contributions are excluded from the employee's gross income; contribution limits are much higher than a regular IRA's; nondiscrimination rules still apply.
Exam tip
SEP vs IRA in one line: same account type, but the EMPLOYER funds it and far more can go in each year.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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