Which of the Following Is True Regarding an SEP

question 119

Multiple Choice

Which of the following is true regarding an SEP?

• A) Cannot discriminate in favor of highly compensated employees.
• B) Deductible contributions cannot exceed the lower of 15% of the employee's compensation or $53,000.
• C) Self-employed individuals cannot create and contribute to an SEP.
• D)The plan must cover all employees who have reached the age of 18, who have worked for the employer for at least two of the preceding five years, and who received at least $600 in compensation.

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Definitions:

Annuities

Financial products sold by financial institutions designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time, typically during retirement.

Cash Flows

The aggregate of cash inflows and outflows within a corporation, impacting its liquid assets.

Ordinary Annuity

A series of equal payments made at equal intervals over a period of time.

Compounding Periods

The frequency with which interest is added to the principal balance of an investment, affecting the total interest earned.