Insurance Licensing Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Virginia-Life-Annuities-and-Health-Insurance Question # 38 Topic 4 Discussion
Insurance Licensing Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Virginia-Life-Annuities-and-Health-Insurance Question # 38 Topic 4 Discussion
(In accordance with IRS regulations, which of the following is the MAXIMUM percentage of an employee’s pay that is allowed through a simplified employee pension (SEP) plan?)
A simplified employee pension (SEP) plan is a retirement plan that allows employers to make tax-deductible contributions to individual retirement accounts established for employees. Under IRS regulations, employer contributions to a SEP plan are limited to a maximum of 25% of an employee’s compensation, subject to an overall annual dollar limit. SEP plans are popular among small businesses because they are easy to establish and administer and have minimal reporting requirements. Contributions are made solely by the employer, not the employee, and must be allocated using the same percentage of compensation for all eligible employees. The exam tests the maximum allowable percentage of pay, which is 25%.
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