A more thorough explanation:

SEP-IRA stands for simplified employee pension individual retirement account. It is a type of IRA plan that allows employers to contribute to their employees' retirement savings while also receiving tax benefits.

• Employers can establish and contribute to a SEP-IRA
• Employers have the flexibility to limit contributions when business is bad
• Employer contributions are tax-deductible
• Annual contribution limits are higher than other IRAs
• Employees cannot contribute to a SEP-IRA

Let's say that John owns a small business and wants to provide retirement benefits to his employees. He decides to establish a SEP-IRA plan and contributes 10% of each employee's salary to their SEP-IRA account. If an employee earns $50,000 per year, John would contribute $5,000 to their SEP-IRA account. The contributions are tax-deductible for John, and the employees can benefit from the tax-deferred growth of their retirement savings.

Another example is if an employee earns $100,000 per year, the employer can contribute up to $25,000 (25% of the employee's salary) to their SEP-IRA account. This allows for higher contribution limits than other IRA plans, making it a popular choice for small business owners.

These examples illustrate how SEP-IRA works and how it can benefit both employers and employees in saving for retirement.