Simplified employee pension IRAs (commonly referred to as SEPs) allow employers to establish and fund the plan after the employer’s tax year ends. They are the only employer sponsored retirement plan that does not have to be established prior to the end of the tax year. Like profit-sharing plans, only employers contribute to a SEP. A SEP is simple; plan administrators, plan trusts and trustees are not needed. An IRA is used to hold the employer contributions and the employee controls the IRA from day one. SEPs are also subject to simpler employee eligibility requirements, vesting rules, and non-discrimination rules than profit-sharing plans. SEP contributions do not have to be made every year, giving the employer flexibility not seen in other employer sponsored retirement plans.
