Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Series 6 Test. Use quizzes, flashcards, and multiple choice questions, all with hints and explanations. Ace your exam confidently!

Start Multiple Choice Practice Test
Start Flash Cards

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What type of plan allows employers to contribute a maximum of 25% of employee income?

  1. 401(k)

  2. SEP IRA

  3. Roth IRA

  4. 403(b)

The correct answer is: SEP IRA

The option regarding the SEP IRA is indeed the correct choice, as this type of plan is designed specifically for self-employed individuals and small businesses. Under a Simplified Employee Pension (SEP) IRA, employers have the ability to contribute a significant portion of their employees’ incomes as part of their retirement savings strategy. The maximum contribution allowed by the employer is the lesser of 25% of the employee’s compensation or a specified dollar limit, which is set annually by the IRS. This structure encourages businesses to contribute to their employees' retirement accounts, particularly benefiting small enterprises and self-employed individuals, as it offers a straightforward and flexible way to save for retirement. While other options mentioned have different characteristics and rules surrounding contributions—like 401(k) plans, which have their own contribution limits set by the IRS, and Roth IRAs, which are primarily funded by individual contributions—only the SEP IRA fits the criteria of allowing employer contributions up to 25% of employee income.

More Questions Like This