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]
- A Critique of SIMPLE-Yet Another Tax-Favored Retirement Plan – heinonline.org [PDF]
- CHOOSING THE RIGHT RETIREMENT PLAN: 401 (k) VS. SARSEP. – search.ebscohost.com [PDF]
- The Role and Importance of Individual Retirement Accounts – journals.sagepub.com [PDF]
- The Economic Growth and Tax Relief Reconciliation Act of 2001 and Private Pension System Reform – heinonline.org [PDF]
