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. Employee Contribution Plan

    An employee contribution plan is an employer-sponsored savings ...

    A SIMPLE IRA is a retirement savings plan that can be used by ...
  3. Qualified Retirement Plan

    A qualified retirement plan meets the requirements of Internal ...
  4. Defined-Benefit Plan

    A defined-benefit plan is an employer-sponsored retirement plan ...
  5. Unit Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
  6. Key Employee

    A staffer who is a stakeholder and in a decision-making role ...
Related Articles
  1. Small Business

    Deferred Compensation Plans for Small Business Owners

    Find out the best tax-qualified options business owners can use to defer their compensation and accumulate capital for their retirement.
  2. Small Business

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  3. Financial Advisor

    Understanding Rules on Defined Benefit Pension Plans

    Defined benefit plans offer advantages to both employers and employees. Employers must understand the federal tax rules when establishing these plans.
  4. Retirement

    Hey Self-Employed, Are You Making The Most Of Your Retirement Options?

    Even if you own your own business, it is still very important to save for retirement, and to understand your options for doing so.
  5. Retirement

    SIMPLE IRA Tutorial

    This comprehensive guide goes through what a SIMPLE IRA is: how to set one up, contribute to it and withdraw from it.
  6. Retirement

    Retirement Savings Tools I: Employer Savings Plans

    There are a variety of employer savings plans that can offer multiple routes to saving for retirement.
  7. Personal Finance

    Job Hunting: Higher Pay vs. Better Benefits

    Focusing only on pay when job hunting may be a mistake. Find out which benefits have the highest payoff in the long run.
  1. How can an entrepreneur save for retirement?

    Learn about the retirement savings plan options for entrepreneurs and small business owners, including administration and ... Read Answer >>
  2. 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 >>
  3. Are SIMPLE IRA plans subject to ERISA?

    Learn how the Employee Retirement Investment Security Act, or ERISA, guides the administration of Savings Incentive Match ... Read Answer >>
Hot Definitions
  1. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  3. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  4. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
Trading Center