Trends in Retirement Plans

Simplified Employee Pension (SEP)

A Simplified Employee Pension (SEP) is a relatively uncomplicated retirement savings vehicle intended for self-employed individuals, small-business owners, or partners in a partnership. A SEP allows an employer to make contributions on a tax-favored basis to an individual retirement account (SEP-IRA) owned by an employee. Employees are not permitted to make contributions on their own behalf. If a business owner sets up a SEP-IRA for their own benefit, one must also be available for each eligible employee that must be funded at the same percentage of salary as the employer funds theirs in any given year. SEP-IRAs are subject to minimal reporting and disclosure requirements.

Employee Stock Ownership Plan (ESOP)

An Employee Stock Ownership Plan (ESOP) is an IRC Section 401(a) qualified defined contribution plan that is a stock bonus plan or a stock bonus/money purchase plan. The IRS and Department of Labor share jurisdiction over key features of the ESOP. An ESOP must be designed to invest primarily in qualifying securities (employer stock) and meet certain requirements of the code and regulations.