30. 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 contribute to traditional IRAs set up for their employees. It is specifically designed for small businesses and self-employed individuals, making it a qualified plan under the Employer-Sponsored IRA category.
A) Simple Employee Pension Plan (SEP).
Option A is correct because a SEP allows employers to make contributions to individual retirement accounts (IRAs) for their employees, effectively functioning as an employer-sponsored IRA. This plan is advantageous for both employers and employees, as it provides a simpler and more flexible approach to retirement savings.
B) Key-employee plan.
Option B is incorrect as a key-employee plan typically refers to plans that provide additional benefits to a select group of key employees, rather than functioning as an employer-sponsored IRA. These plans are not designed to offer the same tax advantages or structure as a traditional IRA.
C) Tax-Sheltered Annuities.
Option C is incorrect because tax-sheltered annuities, also known as 403(b) plans, are primarily offered to employees of public schools and certain tax-exempt organizations. While they serve as retirement savings vehicles, they do not classify as employer-sponsored IRAs.
D) Deferred Compensation.
Option D is also incorrect as deferred compensation plans are agreements to pay an employee at a later date, generally used as a retention tool for key employees. These plans do not function as IRAs and do not offer the same tax benefits associated with employer-sponsored retirement plans.
Conclusion
The Simple Employee Pension Plan (SEP) stands out as the only option that qualifies as an employer-sponsored IRA, providing a structured way for employers to contribute to their employees' retirement savings. Other options, while they may relate to employee benefits or retirement, do not fulfill the IRA criteria or offer the same tax advantages, thereby making them unsuitable as answers to the question.