A SEP IRA (or Simplified Employee Pension plan) is a profit sharing type of plan that allows for a contribution of up to 25% of each employee’s compensation. A SIMPLE IRA (or Savings Incentive Match Plan for Employees) is an employer retirement plan that has similar characteristics to a 401(k). The difference is the plan is not subject to the additional yearly mandatory compliance test that typical 401(k) plans are subject to as well as the maximum contributions are lower. Lastly, an Individual 401(k), is designed for employers who only employ owners and their spouses.