The Payroll Deduction IRA is probably the
simplest retirement arrangement that a
business can do. In fact, no plan
document need be adopted under this
arrangement.
-
The employer has no filing
requirements.
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Only employees make the
contributions.
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Any size business can provide this.
Under a Payroll Deduction IRA, an
employee establishes an IRA (either a
Traditional IRA or a Roth IRA) with a
financial institution. The employee
then authorizes a payroll deduction for
the IRA.
Your responsibility as an employer is
simply to transmit the employee’s
authorized deduction to the financial
institution. In general, if you offer
this arrangement to any employee then
you should offer it to all employees.
The Payroll Deduction IRA is
essentially a “no fuss, no muss”
situation.
Information List:
Pros and Cons:
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Easy to set up and operate.
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Little administrative cost or
requirements.
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As the employer, you receive
little credit for this service from
your employees.
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No deductions for your business.
Who Contributes: Only the
employees. The employees control where
their money is invested.
Contribution Limits: $5,000 for 2009. A
special “catch-up” contribution is
permitted if the employee is aged 50 or
over. This additional contribution
is $1,000 per year for 2006 and beyond.
Filing Requirements: Employer
has no filing requirements.
Participant Loans: Not
permitted. Also, the assets may not be
used as collateral.
In-Service Withdrawals: Yes,
but subject to income taxes and 10%
penalty if under age 59-1/2.
Information courtesy of www.irs.gov
For more information, contact us at 512-462-3704 or
info@bluepacificwealth.com .
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