A SEP traditional IRA is a plandesigned to let employers contribute to the retirement accounts of their employees through a pre-tax salary reduction. The SEP traditional IRA account is set up for each qualified employee, and each employee maintains control of their own account. Self-employed people can establish a SEP account for themselves. The SEP traditional IRA makes it possible for small businesses to offer retirement benefits withreduced costs and less reporting requirements than most other qualified retirement accounts . The SEP has attractive benefits to offer both the employer and employees. To be qualified for the plan, the employee must be at least 21 years old , have worked for the business for three of the past five years and received compensation of a minimum of $550. Contributions are required to be consistent for all eligible employees, so a 10% contribution to one employee’s SEP traditional IRA requires a like 10% contribution to the accounts of all eligible employees. The employer can contribute up to 25% of yearly compensation, and is allowed to modify the sum and frequency of the contributions, or even hiatus them. Frequently businesses decide on a mutual fundsfirm to manage the account, which gives the employees the chance to make their own investment decisions for their individual accounts. Once contributed, the funds arefully vested and could be rolled over into a different individual retirement account, or for employees who change jobs can be transferred to a new employer’s sponsored retirement plan. Distributions from the SEP traditional IRA canstart as soon as age 59 ½ years old. Earlier withdrawal triggers a 10% penalty on top of the normal tax responsibility. Mandatory distributions must start when the account owner is 70 ½ years old . Employersfavor the SEP traditional IRA for the simple set-up and minimal administrative expenses. Employees particularly appreciate the larger contribution limit allowed in the SEP traditional IRA.