These plans are defined contribution retirement plans sponsored by the employer but funded using individual IRAs. SEP plans are often sponsored by sole proprietors or small businesses and corporations that have no other retirement plan.
The employer makes contributions to an employee's SEP IRA account but the employee controls how the funds are invested. Employers may make contributions of up to 25% of each employee's annual compensation to a maximum of $45,000 in 2007 into each employee's IRA each year.
Because you control how funds are invested, most SEPs allow you to change investments to help improve performance and better accommodate your retirement needs.
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