Salary Reduction Simplified Employee Pension Plan - SARSEP

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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.

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RELATED FAQS
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    There is an added incentive for adding to your retirement nest egg, if your income falls within certain limits. Under this ... Read Full Answer >>
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    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>
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    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>
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    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
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