Savings and Investments

Individual Retirement Accounts

What is a SAR-SEP IRA?

This is a Salary Reduction Simplified Employee pension, which is used in companies with fewer than 25 employees. In order to set up such an account, the employer must have 50% of the eligible employees contribute to this plan. Employees may make contributions in pre-tax dollars and deduct this amount from their current income, through salary reduction, thus reducing their current tax burden while saving for their retirement. After 1996, these plans were replaced by Simple IRAs, although plans set up before 1996 are still used by some employers.


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