Salary Reduction Simplified Employee Pension Plan - SARSEP


DEFINITION of 'Salary Reduction Simplified Employee Pension Plan - SARSEP'

A plan offered by small companies - typically those with fewer than 25 employees - that allows employees to make pretax contributions to their Individual Retirement Accounts (IRAs) through salary reduction.

BREAKING DOWN 'Salary Reduction Simplified Employee Pension Plan - SARSEP'

Prior to the widespread use of 401(k)s, these plans were seen as a valuable benefit of employment, particularly for employees of small businesses. SARSEPs, as they have affectionately become known, were replaced by another plan (known as "SIMPLE") under the Small Business Job Protection Act of 1996. After 1996, existing plans were allowed to remain in existence, but no new plans were to be created.

  1. Salary Reduction Contribution

    A cash- or deferred-contribution arrangement of an employer-sponsored ...
  2. Plan Sponsor

    A designated party, usually a company or employer, that sets ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. Savings Incentive Match Plan For ...

    A retirement plan that may be established by employers, including ...
  6. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
Related Articles
  1. Retirement

    Money Can't Buy Retirement Bliss

    Emotional snags can ruin your future happiness. Learn how you can avoid them.
  2. Retirement

    Pension Protection Act Of 2006 Becomes Law

    Learn how the passed bill can help you save more for retirement.
  3. Retirement

    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.
  4. Fundamental Analysis

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  5. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  6. Professionals

    How to Protect Retirement and Help Adult Kids

    Parents can both protect their retirement money and help their adult kids. Here's how.
  7. Retirement

    10 Ways to Save Your Retirement: It's Not Too Late

    It's not too late to start saving for your retirement, even if you took longer to start thinking about it and doing something about it.
  8. Investing

    Why Is Financial Literacy and Education so Important?

    Financial literacy is the confluence of financial, credit and debt knowledge that is necessary to make the financial decisions that are integral to our everyday lives.
  9. Investing

    10 Ways to Effectively Save for the Future

    Savings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
  10. Professionals

    What Accounts for One-Third of the Wage Gap

    Women who work full time still make less than men who have the same qualifications. One third of the pay gap may be due to gender bias and discrimination.
  1. How do I get credit for my retirement plan contributions?

    There is an added incentive for adding to your retirement nest egg, if your income falls within certain limits. Under this ... Read Full Answer >>
  2. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  3. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  4. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  5. Do financial advisors need to meet quotas?

    Most financial advisors are required to meet quotas, particularly if they work for firms that pay base salaries or draws ... Read Full Answer >>
  6. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!