9.7.3 Salary Reduction SEP Plans (SARSEP)
Even though tax legislation prohibited any new Salary Reduction SEP Plans (SARSEP) in 1997, they still need to be mentioned because many of those plans established before 1997 are still allowed to operate. This variation of the SEP is reserved for small businesses with 25 or fewer employees and incorporates a deferral/salary reduction method. The employee can elect to have employer contributions added to their SEP or paid to them as wages, limited to $17,000 (2012) - the same as a 401(k).
