Company-sponsored retirement plans are becoming an increasingly popular method of bridging the gap between Social Security benefits and retirement income needs. According to the Wall Street Journal, more than 80 percent of all major corporations offer employee retirement savings plans, and the number of small businesses offering such plans has quadrupled since 1984. Because they have minimal filing requirements and do not require employers to make investment decisions, SEPs are quick and easy to install. In addition, they are economical to administer. SEPs can help small companies compete with the employee benefits of large companies, and they can be powerful in helping business owners and employees achieve financial security in retirement.
All contributions are tax-deductible to the company.
Each employee decides how to invest his or her IRA, so the company has no responsibility for what happens to the money. When employees leave the company, they take their IRAs with them. Also, a SEP avoids most of the complex administration and reporting requirements of other retirement plans and costs very little to set up and maintain. You may establish a SEP for a part-time business or moonlighting income. You may have a SEP even if you are covered under a pension plan in your full-time job.