It is a Simplified Employee Pension plan that allows employees and small business owners the ability to save for their retirement. It allows employers to contribute into each employee’s SEP IRA account up to 25% of the employee’s annual earnings. The employee may also contribute to this account, and all contributions are tax deductible. Sole proprietors, partnerships, and corporations, including S corporations, can set up SEPs for their employees. You cannot take loans out against your balance. If you withdraw money from the account prior to retirement as income, you will pay a penalty of 10% additional tax on this money. When you retire, you may make withdrawals from the account, and pay tax on this amount as ordinary income at that time. You may move a SEP into another IRA anytime you like.