Simplified Employee Pension plans (SEPs) are pension plans designed for self-employed individuals and small businesses. With these plans, there are few requirements to file with the IRS. SEPs allow an employer to make sizable contributions to employees that are tax deductible to the employer and can be excluded an from employee’s gross income.

The 2016 maximum contribution level is $53,000 or 25% of income (20% for self-employed income). Full contributions can be made in profitable years, and cut back in others.