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

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Do SEPs require employees to immediately vest in the full amount contributed?

True
False
Only if agreed upon
It depends on state laws

The correct answer is: False

The correct response highlights that Simplified Employee Pensions (SEPs) do not require employees to immediately vest in the full amount contributed. In the context of SEPs, vesting refers to an employee's right to keep employer contributions after leaving the company. Under the rules governing SEPs, contributions made by the employer generally become fully vested after a certain period. While SEPs themselves do not impose an immediate vesting requirement, employers have the flexibility to set their own vesting schedules, which could allow for gradual vesting over a specified time frame. This means that SEPs can allow for a situation where employees do not have full ownership of the contributions until they meet those specified conditions. Hence, the correct answer underscores the important distinction regarding the vesting rules applicable to SEPs.