Which plan is characterized by employer contributions to an employee's IRA?

The correct answer is the Simplified Employee Pension Plan (SEP). A SEP allows employers to make contributions to traditional IRAs set up for their employees. It is specifically designed for small businesses and self-employed individuals, making it a valuable tool for providing retirement benefits without the complexities of traditional pension plans.

In a SEP, the employer funds the account and can make contributions up to a certain limit, which is generally a percentage of the employee's compensation. This makes it an attractive option for businesses that want to offer retirement benefits while keeping administrative costs low. Each employee maintains their own traditional IRA, but the contributions made by the employer are deposited directly into these accounts.

The other options are distinct in that, while they may allow for individual contributions or have different rules surrounding who can contribute, they do not primarily involve employer-funded contributions in the same way a SEP does. For instance, a traditional IRA and a Roth IRA primarily focus on individual contributions rather than employer contributions. A Simple IRA does allow for some employer contributions, but it is structured differently, with specific rules on matching contributions and participation from both employers and employees.