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Salary Reduction Simplified Employee Pension Plan (SARSEP)

What is '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.

Explaining '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.


Further Reading


401 (k) or SARSEP-Which Salary Reduction Plan Best Suits Your Needs?
search.proquest.com [PDF]
… time employees and/or with part-time employ- ees who earn relatively large salaries may end … pay forbenefits for rank and file employ- ees, it may be reluctant to pay for benefits … 4 Endnotes 1 . In a salary-reduction-only plan that contains neither base employer contributions nor …

A Critique of SIMPLE-Yet Another Tax-Favored Retirement PlanA Critique of SIMPLE-Yet Another Tax-Favored Retirement Plan
heinonline.org [PDF]
… time employees and/or with part-time employ- ees who earn relatively large salaries may end … pay forbenefits for rank and file employ- ees, it may be reluctant to pay for benefits … 4 Endnotes 1 . In a salary-reduction-only plan that contains neither base employer contributions nor …

CHOOSING THE RIGHT RETIREMENT PLAN: 401 (k) VS. SARSEP.CHOOSING THE RIGHT RETIREMENT PLAN: 401 (k) VS. SARSEP.
search.ebscohost.com [PDF]
… time employees and/or with part-time employ- ees who earn relatively large salaries may end … pay forbenefits for rank and file employ- ees, it may be reluctant to pay for benefits … 4 Endnotes 1 . In a salary-reduction-only plan that contains neither base employer contributions nor …

The Role and Importance of Individual Retirement AccountsThe Role and Importance of Individual Retirement Accounts
journals.sagepub.com [PDF]
… time employees and/or with part-time employ- ees who earn relatively large salaries may end … pay forbenefits for rank and file employ- ees, it may be reluctant to pay for benefits … 4 Endnotes 1 . In a salary-reduction-only plan that contains neither base employer contributions nor …

The Economic Growth and Tax Relief Reconciliation Act of 2001 and Private Pension System ReformThe Economic Growth and Tax Relief Reconciliation Act of 2001 and Private Pension System Reform
heinonline.org [PDF]
… time employees and/or with part-time employ- ees who earn relatively large salaries may end … pay forbenefits for rank and file employ- ees, it may be reluctant to pay for benefits … 4 Endnotes 1 . In a salary-reduction-only plan that contains neither base employer contributions nor …



Q&A About Salary Reduction Simplified Employee Pension Plan (SARSEP)


What is a SARSEP?

A Salary Reduction Simplified Employee Pension Plan (SARSEP) is a plan offered by small companies that allows employees to make pretax contributions to their Individual Retirement Accounts (IRAs) through salary reduction.

How many employees does the business have to have in order for an employee to be eligible for a SARSEP?

The business must have fewer than 25 employees.

Are SARSEPs only available for small businesses?

No, they are not.

When were these plans created and when did they become popular?

These plans became popular in the 1980s and 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 ones could be created.

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