Question

In which of the following IRAs does the employer make tax-deductible contributions?

a. Roth IRA
b. Savings Incentives Match Plans for Employees (SIMPLE)
c. Simplified Employee Pension Plan (SEP)
d. Traditional IRA

Answer 1

Tax-deductible contributions by the employer are made in the Savings Incentives Match Plans for Employees (SIMPLE) and the Simplified Employee Pension Plan (SEP) IRAs, not in Traditional or Roth IRAs.

Step-by-step explanation:

The employer makes tax-deductible contributions in the Savings Incentives Match Plans for Employees (SIMPLE) and Simplified Employee Pension Plan (SEP) IRAs. Both SIMPLE IRAs and SEPs are employer-sponsored plans that allow tax-deferred contributions from the employer, which can help lower the employer's taxable income.

On the other hand, contributions to a Traditional IRA may be made by individuals with the potential for tax deductibility depending on their income and whether they or their spouse have a retirement plan at work. Contributions to a Roth IRA are made with after-tax dollars and do not provide tax-deductible contributions for the employer. Therefore, the correct answers are options (b) SIMPLE and (c) SEP in terms of employer contributions.