A Simplified Employee Pension Plan, commonly known
as a SEP-IRA, is a retirement plan specifically designed
for self-employed people and small-business owners.
A simplified employee pension (SEP) is a written
arrangement (a plan) that allows an employer to make
deductible contributions for the benefit of
participating employees. The contributions are made to
individual retirement arrangements (IRAs) set up for
participants in the plan.
Self-employed individuals, as well as other employers,
can set up simplified employee pension (SEP) plans. A
SEP plan allows an employer to make contributions toward
employees' retirement, and, if self-employed, his or her
own retirement, without becoming involved in more
complex retirement plans.
A self-employed individual is an employee for SEP
purposes. He or she is also the employer. Even if the
self-employed individual is the only qualifying
employee, he or she can have a SEP-IRA.
