Which type of retirement plan is characterized by employer contributions to individual accounts?

Simplified Employee Pension Plans (SEP) are specifically designed to allow employers to make contributions to individual retirement accounts (IRAs) set up for their employees. This type of plan provides a straightforward and flexible way for employers, particularly small businesses or self-employed individuals, to contribute toward their employees' retirement savings.

In a SEP, the employer makes contributions that are tax-deductible up to a certain limit, and those contributions are made directly into the employees' IRAs. This structure allows for easy administration and compliance with IRS regulations, making it an attractive option for employers. The individual accounts created through SEPs grow tax-deferred until the employee withdraws the funds during retirement.

On the other hand, HR-10 plans, often known as Keogh plans, are typically more complex and primarily designed for self-employed individuals or unincorporated businesses. SIMPLE Plans are also employer-sponsored but have different contribution structures and limits compared to SEPs. Traditional 401(k) plans involve employee contributions with potential employer matching, but they do not focus solely on employer contributions to individual accounts in the same way that SEPs do.