As an employer, you may want to consider offering your employees a Payroll Deduction IRA. Under a Payroll Deduction IRA, your employee establishes an IRA (either a Traditional IRA or a Roth IRA) with a financial institution. The employee then authorizes a payroll deduction amount for the IRA.
This is probably the simplest retirement arrangement that a business can have. It is so easy that, in fact, no plan document is needed under this arrangement.
To establish a Payroll Deduction IRA, you:
Advantages:
-
Easy to set up and operate.
-
Administrative costs are low.
-
Only your employees make contributions.
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.
How does a Payroll Deduction IRA work?
Rebecca, age 45, works for the Pasco Collection Company, which does not have an employer-sponsored pension plan. However, Pasco has offered its employees the opportunity to have deductions taken from their salaries (which are paid using electronic deposit) to contribute to IRAs that these employees have set up for themselves. Rebecca signs up for the program and has $100 per bi-weekly paycheck deposited into her IRA for a yearly total of $2,600 (which is below the $4,000 limit in 2007).
A Payroll Deduction IRA has a life cycle, with four distinct stages. Click on the below links to review additional information on each of the life stages of a Payroll Deduction IRA.
See Resources - IRA-Based Plans for forms, publications, frequently asked questions, etc.
|