Substantially Equal Periodic Payment
Substantially Equal Periodic Payment (SEPP) is a method of distributing funds from an individual retirement account (IRA) or other qualified retirement plans (unless you still work for your employer) prior to the age of 59½ that avoids incurring IRS penalties for the withdrawals. Typically, an individual who removes assets from a plan prior to that age will pay an early withdrawal penalty of 10% of the distributed amount.Funds in SEPP plans are withdrawn penalty-free through specified annual distributions for a period of five years or until the account holder turns 59½, whichever comes later. Income tax must still be paid on the withdrawals.