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)

  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. Investing

    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.
  2. Retirement

    Business Owners: How To Set Up An SEP IRA

    SEP IRAs are simple to set up and run, making them a popular choice for business owners.
  3. 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.
  4. Managing Wealth

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.
  5. Personal Finance

    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.
  6. Managing Wealth

    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.
  7. Financial Advisor

    SEP IRAs Tutorial

    Learn about the set-up, the contributions to and the distributions from this IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees.
  8. Retirement

    Retirees: Should You Buy or Lease Your Car?

    To buy or lease – that is the question. For retirees, access to safer cars, comprehensive warranties and tax deductions may drive up leasing's appeal.
  9. Personal Finance

    When Is Buying A Car Better Than Leasing?

    People who lease a car are often more concerned with the short-term picture.
  10. Managing Wealth

    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.
  1. Capitalized Lease Method

    An accounting approach that identifies a company's lease obligation ...
  2. Closed-End Lease

    A rental agreement that puts no obligation on the lessee (the ...
  3. Capital Lease

    A lease considered to have the economic characteristics of asset ...
  4. Operating Lease

    A contract that allows for the use of an asset, but does not ...
  5. Leasehold

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

    A financial ratio that measures how much a company uses leasing ...
Hot Definitions
  1. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  4. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  5. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center