Simplified Employee Pension Plan

Posted in Human Resource Terms, Total Reads: 819

Definition: Simplified Employee Pension Plan

Simplified Employee Pension Plan is a kind of a retirement plan that an employer or a self-employed individual can establish. The employer or the self-employed individual sets aside a sum of money in the retirement account.

Under the SEP the money is contributed directly to the traditional individual account. It varies from the traditional plan as this plan does not require any start-up and operating cost like the traditional pension plan. A maximum of 25% of the employees pay can be contributed to this plan.

An advantage of the SEP is that the contributions are tax deductible and you are not forced to make contributions every year rather you can plan on your own how much and when to contribute.

No filing of documents with the government is needed and the overall administration costs are also low. However the employee should be 21 years of age and should have performed service for 3-5 years with the company. When the SEP no longer suits the purpose of the company one can even terminate it.


Hence, this concludes the definition of Simplified Employee Pension Plan along with its overview.


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