Question

An employer who wants to share the responsibility of retirement plan funding should establish a SIMPLE rather than a SEP.

a.) True
b.) False

Answer 1

The statement is true as SIMPLE plans involve both employer and employee contributions, while SEPs are funded solely by the employer.

Step-by-step explanation:

The statement suggesting an employer who wants to share the responsibility of retirement plan funding should establish a SIMPLE (Savings Incentive Match Plan for Employees) rather than a SEP (Simplified Employee Pension) is true. SIMPLE plans require the employer to either match employee contributions up to 3% of their compensation or contribute 2% of each eligible employee's compensation, whether the employee contributes or not. In contrast, SEP plans are funded entirely by employer contributions, and employees are not allowed to make contributions themselves.