What is a SEP?
A SEP stands for “Special Election Period”. This can happen at any time during the year. There are multiple types of SEP’s but two of the most common are ‘moving out of a plans service area’ or ‘loss of coverage’ due to the company filing bankruptcy or ceasing to sell the Part C and/or Part D plans.
A SEP is a simplified employee pension plan. A SEP plan provides employers with a simplified method to make contributions toward their employees’ retirement and, if self-employed, their own retirement. Contributions are made directly to an Individual Retirement Account or Annuity (IRA) set up for each employee (a SEP-IRA). See Publication 560 for detailed SEP information for employers and employees. Note: The IRS has a system of correction programs for sponsors of retirement plans, including SEPs, which are intended to satisfy Internal Revenue Code requirements but have not met the requirements for a period of time. This system, the Employee Plans Compliance Resolution System (EPCRS), permits employers to correct plan failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.
