What is a SEP Plan? - JPMC Blog

https://www.chase.com/personal/investments/learning-and-insights/article/what-is-a-sep-plan

If you're a millennial, your parents or older relatives may have a pension, or you may have heard the term thrown around. A SEP (Simplified Employee Pension) Plan is just that, a pension: it's a IRA-based retirement package for self-employed individuals and small-to-midsize businesses designed to make retirement contributions as easy as possible.

Copied from the JPMC blog post:post:

SEP	401(k)
Who can contribute
Employer	Employee and employer
Contribution limits (2025)
Up to 25% of compensation (max $70,000 in 2025)	$23,500 employee deferral ($31,000 for those 50 and older, $34,750 for those aged 60-63); up to $70,000 total with employer match
Tax treatment
Tax-deductible contributions for employer	Tax deductible contributions for employer and salary deferral (pre and post-tax) for employees
Withdrawals
Taxed as ordinary income	Taxed as ordinary income (unless Roth 401(k), in which case all qualified distributions are tax exempt)

Pensions are good at being simple and straightforward:

• they have high contribution limits which makes it easy to just slap money in one thoughtlessly
• your employer (you if self-employed) doesn't need to annually file contribution reports to the IRS
• there's no compulsory contribution; for the self-employed, they can choose not to contribute if an emergency comes up
• small businesses can write off the contributions they make to employee pensions as tax deductions

Pensions are bad at empowering employees:

• if a small business provides a pension, the employee cannot decide how they invest in it because their boss at the small business decides how much is contribute
• the small business must contribute to all employee's pensions proportionally; the contribution value may be fair and equal across the board, but a certain value may be fair for a young employee but not for an older employee
• they don't provide "catch-up" functionality for older employees, where 401(k)s do

Pensions are most beneficial for the self-employed, as they're both employer and employee and the taxation red tape is minimal.