Dictionary of Business Terms: Simplified Employee Pension Plan (SEP-IRA)
Simplified Employee Pension Plan (SEP-IRA)
retirement plan specifically designed for self-employed people and small business owners. The owner and any eligible employees establish their own separate SEP-IRAs; employer contributions are then made into each eligible employee's SEP-IRA. The plan is available to sole proprietors, partners in a partnership, or owners of businesses (either unincorporated or incorporated, including S Corporations) and to self-employed persons who earn income by providing a service, either full time or part time, even those already covered by a retirement plan at their full-time job. Those eligible may contribute up to 25% of compensation (as much as $44,000 for 2006), and any investment earnings are tax-deferred until withdrawn.
