A more thorough explanation:

A Simplified Employee Pension Plan (SEP) is a type of retirement savings plan that allows employers to contribute to their employees' retirement accounts. SEP-IRA is another name for this type of plan. It is more flexible than a traditional IRA account because employers have the option to limit contributions when business is bad. Only employers can establish and contribute to a SEP-IRA, and they must do so at the same rate for all employees.

For example, if an employer decides to contribute 10% of an employee's salary to their SEP-IRA, they must contribute the same percentage to all employees who are eligible for the plan. An employer's contributions to a SEP-IRA remain tax-deductible like other IRAs, and the plan has low maintenance costs.

The annual contribution limits for a SEP-IRA are much higher than other IRAs. An employer can contribute up to the lesser of 25% of the employee's wages or the annual cap, which is $58,000 as of 2021. This means that if an employee earns $100,000 per year, their employer can contribute up to $25,000 to their SEP-IRA.

Overall, a SEP-IRA is a great option for employers who want to provide retirement benefits to their employees while maintaining flexibility in their contributions.