Customer AccountsQuestion 83 of 110
A key characteristic of a SEP IRA is that:
a.Only employees may contribute, through salary reduction
b.Contributions are made after tax and grow tax free
c.The plan requires annual actuarial certification
d.Contributions are made by the employer into IRAs established for eligible employees
Explanation
A simplified employee pension is funded by employer contributions deposited into each eligible employee's own IRA, which keeps administration light. Salary deferral is the mechanism in 401(k) and SIMPLE plans. SEP contributions are deductible to the employer and grow tax deferred, and no actuary is needed because it is a defined contribution arrangement.
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