A:

Generally, a leased employee is the employee of an outside organization from which you lease the employee's services. For instance, you may use the services of a payroll clerk who is really employed by another organization; the other organization (the leasing organization) leases the services of its employee, the payroll clerk, to your business. Leased employees are not usually thought to include independent contractors.

If your business uses the services of leased employees and you want to adopt a simplified employee pension (SEP) for your business, you may use a prototype SEP or an individually designed SEP. Most financial institutions (and perhaps all brokerage firms) offer their own prototype SEP - one designed and customized according to their specifications and approved by the IRS. These prototype SEPs can be used by any employer.

For further reading, see Establishing An SEP IRA, SEP IRAs Tutorial and Plans The Small Employer Can Establish.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. Is an employee eligible for an SEP if the plan has already been set up for other ...

    It depends. The employee should meet not only the service requirements, but the age and compensation requirements as well. ... Read Answer >>
  2. Is a Simplified Employee Pension (SEP) IRA tax deductible?

    Learn everything you need to know about your SEP IRA, including the benefits to employers and whether or not a SEP IRA is ... Read Answer >>
  3. How does a Simplified Employee Pension (SEP) plan work?

    Learn how small businesses and their employees benefit from a Simplified Employee Pension, or SEP, IRA, and discover how ... Read Answer >>
  4. Why might a bond agreement limit the amount of assets that the firm can lease?

    Bond covenants can limit the amount of leases a company can have because leasing contracts are a form of debt. Taking on ... Read Answer >>
  5. How does a Simplified Employee Pension (SEP) IRA work?

    Learn about a Simplified Employer Pension, or SEP, IRA and how it works, who participates and what advantages it has over ... Read Answer >>
  6. What will happen to my SEP IRA if I leave my current employer?

    Because the funding vehicle for the SEP is a Traditional IRA, the same transfer and rollover rules that apply to a Traditional ... Read Answer >>
Related Articles
  1. Retirement

    SEP IRA Limits in 2016

    Discover the SEP IRA limits for 2016. Included is a summary, plans that would be ideal candidates for SEP IRAs, and contribution and distribution rules.
  2. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  3. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.
  4. Savings

    Is There a Way to Get Out of Your Car Lease Early?

    For those who no longer want their car for whatever reason, transferring the lease to an interested party can be a particularly appealing choice.
  5. Savings

    When Is Leasing A Car Your Best Bet?

    Leasing a car isn't right for everyone. But it's attractive for those who want low initial payments and the ability to get a new vehicle every few years.
  6. Mutual Funds & ETFs

    Is a Vanguard SEP IRA Account Right for You?

    Learn about the SEP IRA offered by Vanguard and why it is one of the best SEP products available, including why it's a good fit for small business owners.
  7. Home & Auto

    When Is Buying A Car Better Than Leasing?

    People who lease a car are often more concerned with the short-term picture.
  8. Savings

    Why You Should Buy A Car Instead Of Leasing

    While leasing has certain advantages, buying a car tends to save you money in the long run and offers greater flexibility.
  9. Retirement

    Retirement Planning For The Self-Employed

    Recent studies show that most self-employed Americans are saving little, if anything, for retirement. But making an investment in yourself is worth it.
  10. Credit & Loans

    4 Ways to Get the Best Deal on a Car Lease

    Car buyers typically negotiate when purchasing a vehicle, but many don't negotiate when leasing a car. There are several ways to save if you ask.
RELATED TERMS
  1. Capital Lease

    A lease considered to have the economic characteristics of asset ...
  2. Simplified Employee Pension - SEP (Simplified Employee Pension IRA)

    A retirement plan that an employer or self-employed individuals ...
  3. Closed-End Lease

    A rental agreement that puts no obligation on the lessee (the ...
  4. Leasehold

    An accounting term used to classify an asset on a company's balance ...
  5. Lease Utilization

    A financial ratio that measures how much a company uses leasing ...
  6. Operating Lease

    A contract that allows for the use of an asset, but does not ...
Trading Center