For a simplified employee pension plan, a SEP IRA account is an attractive choice for small businesses and also works efficiently for self-employed individuals . The SEP IRA account is set up for each individual employee, and each employee can designate the investments held within their account. Employers execute an agreement through IRS Form 5305-SEP to initiate the account. The employer agrees to provide the SEP IRA account for all eligible employees, and supply those workers with details of the program. The employer is allowed to set up and contribute to a SEP plan for an employee who is not able to contribute, but the employer contributions will not be considered taxable income to the employee. For 2009, employers were allowed to contribute up to 25% of the employee’s annual compensation, and could contribute a similar amount to their own SEP IRA account. Participation in a SEP IRA account does not restrict an individual from opening or funding to a Roth IRA. Employers do not have to contribute to their employee’s SEP every year. The flexibility of the account allows them to decide on a percentage to contribute on an annual basis, or suspend the plan if warranted by economic or business conditions. Start-up companies and businesses experiencing tough economic conditions could designate smaller contributions, or even no contributions for a certain amount of time. When profits improve , the company can reinstate the contributions at whatever level they choose . The requirement is that the company must offer the same benefit to all eligible employees. To qualify, the employee must be 21 years or older, have worked for the company 3 of the previous 5 years, earning a minimum $550 in wages. The SEP IRA account allows for higher maximum contribution limits, but no catch-up exemption for individuals over 50 years old. IRS rules do not authorize loans with a SEP IRA account. The SEP IRA account is beautifully simple…to set-up, administer, and use, and is worth a careful look by small business and the self-employed.