Which retirement plan is designed for any size company and is funded by employer contributions?

Which retirement plan is designed for any size company and is funded by employer contributions?

• A. Simple Plans
• B. SEP Plans
• C. 403(b) Plans
• D. Traditional IRA

Answer: (B)

A Simplified Employee Pension (SEP) is an employer-funded retirement arrangement that can be used by businesses of any size. The key feature is that the employer makes contributions to employees’ SEP-IRAs, and these contributions are discretionary each year. There are no employee salary deferrals in a SEP, which keeps administration simple, and the contributions are deductible to the business while growing tax-deferred for employees. This combination—employer-funded contributions and applicability to firms of any size—fits the description perfectly. Other plans differ in who funds them or in who participates: Simple Plans rely on employee deferrals with employer matches for small employers; 403(b) plans are typically for nonprofits; a Traditional IRA is an individual retirement account not tied to an employer’s plan.

A Simplified Employee Pension (SEP) is an employer-funded retirement arrangement that can be used by businesses of any size. The key feature is that the employer makes contributions to employees’ SEP-IRAs, and these contributions are discretionary each year. There are no employee salary deferrals in a SEP, which keeps administration simple, and the contributions are deductible to the business while growing tax-deferred for employees.

This combination—employer-funded contributions and applicability to firms of any size—fits the description perfectly. Other plans differ in who funds them or in who participates: Simple Plans rely on employee deferrals with employer matches for small employers; 403(b) plans are typically for nonprofits; a Traditional IRA is an individual retirement account not tied to an employer’s plan.