28. Which of the following qualified plans is an employer-sponsored IRA?
Answer: A
Simple Employee Pension Plan (SEP) is an employer-sponsored IRA.
A Simple Employee Pension Plan (SEP) is a type of retirement plan that allows employers to make contributions to their employees' individual retirement accounts (IRAs). This plan is specifically designed for small businesses and self-employed individuals.
A) Simple Employee Pension Plan (SEP)
This option is correct because a SEP is indeed an employer-sponsored retirement plan that allows employers to contribute to traditional IRAs set up for their employees. It provides a straightforward way for employers to provide retirement benefits and has lower administrative costs compared to other retirement plans.
B) Key-employee plan
A key-employee plan is not an employer-sponsored IRA; instead, it is a non-qualified plan that provides additional retirement benefits to select key employees. This type of plan does not qualify under the same tax advantages as an IRA and is primarily used to incentivize and retain important employees.
C) Tax-Sheltered Annuities
Tax-sheltered annuities, also known as 403(b) plans, are retirement plans for certain employees of public schools and other tax-exempt organizations. While they are employer-sponsored, they are not classified as IRAs and work differently than SEPs, which are specifically IRAs for employees.
D) Deferred Compensation
Deferred compensation plans are agreements between an employer and employee to pay a portion of an employee's income at a later date, typically to reduce immediate tax liability. These plans do not qualify as employer-sponsored IRAs and are not designed to provide retirement savings in the same manner as a SEP.
Conclusion
The Simple Employee Pension Plan (SEP) is definitively the correct answer as it directly qualifies as an employer-sponsored IRA, allowing for contributions made by the employer to employees' IRAs. Other options fail to meet the criteria of being an IRA, as they either pertain to different types of compensation or retirement plans that do not offer the same tax benefits associated with IRAs.