Question

A smaller business with variable cash flow is looking to establish a pension plan for its 50 employees. It wants a plan that allows it to contribute the largest possible amount for its employees, but wants the flexibility to reduce contributions in lean years. The BEST recommendation is a:________

A. 401(k) plan
B. 403(b) plan
C. SEP IRA
D. SIMPLE IRA

Answer 1

C. SEP IRA

Step-by-step explanation:

Simplified Employee Pension (SEP) Individual Retirement Account (IRA) is a pension plan that has the advantages of easy set up and administration in comparison to other plans. The SEP IRA most crucially allows an employer to contribute a larger amount for its employees than the SIMPLE IRA. A key feature of SEP IRA over other plans which is the flexibility needed by the employer is that it allows the varying of the percentage an employer wants to contribute on a yearly basis

SIMPLE IRA is simple to start but it won't allow the employer contribute a large amount compared to the SEP IRA

401(k) contribution allowance for employers is also limited and the 403 (b) plan is not available to profit making businesses.