Sensible solution for sole-proprietorship & family owned businesses
A Simplified Employee Pension (SEP) IRA– is an affordable, IRA-based retirement savings program designed to emulate pensions. SEP IRA contributions can only be made by the employer and have higher limits than a SIMPLE IRA, making them a good option family- or employee-owned businesses.
Should your business start a SEP?
SEP’s are typically offered by family-owned businesses because they are generally less expensive than profit sharing or 401(k) plans, and have higher contribution limits relative to IRAs and SIMPLE plans. SEP is most often used as a low-cost alternative to profit sharing plans.
Since SEPs do not allow employees to contribute, and require employer contributions generally at the same percentage for each employee, they are most commonly used in businesses where all employees have ownership of some kind. SEPs are also used where the business wants to offer a strong retirement benefit to employees, but does not want to contend with the complexity of processing contributions by the employees.