Which of the following describes a Simplified Employee Pension Plan (SEP)?

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A Simplified Employee Pension Plan (SEP) is best characterized by the immediate vesting of contributions. Once contributions are made to the SEP IRA, they belong to the employee right away, which means they have full ownership without any waiting period. This feature makes SEPs appealing for both employers and employees because it simplifies the vesting process and enhances the attractiveness of the retirement plan.

In contrast, other options describe features that do not align with how a SEP functions. An individual retirement plan for corporate employees does not accurately represent a SEP, as it is designed for self-employed individuals or small business owners and their employees. The idea of a mandatory retirement plan for all employees does not apply here, as SEPs are typically optional plans that businesses can adopt. Lastly, describing a SEP as a taxable account for employees is misleading, since contributions to a SEP are tax-deferred, allowing employees to grow their savings without immediate tax implications.

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