IRA Plans Basics

Know IRA plans basics to accommodate the retirement needs of your employees

Set up individual retirement accounts (IRAs) to lure and retain quality employees. This provides you with a successful business tool as providing an IRA retirement plan to employees demonstrates your business's financial security as well as a sense of individual security to employees and their families. In most cases, offering an adequate IRA leads to satisfied employees.

Some IRA plans are easier for businesses to manage and contribute to than others, so become informed about IRA plans basics to make sure you are getting the most out of your time and resources. You may, however, want to obtain the services of IRA providers that specialize in IRA distribution. Consider the following IRA-funded retirement options for your employees:

1. SEP IRA: Easy to set up and maintain; does not require annual tax return.

2. SIMPLE IRA: Requires little documentation and no annual tax filing.

3. Payroll Deduction IRA: Simplest of all retirement options; employee authorizes payroll deductions for contributions.

 

Gain a better understanding of SEP IRA plans

Providing employees with SEP individual retirement accounts is beneficial for businesses with a small staff that have the ability to wholly fund IRA accounts. Employer contributions are optional, however, so an employee's IRA investments are dependent upon the financial abilities of their employer. While this may not be satisfactory to staff, it enables employers to have some leeway when facing cash flow problems.
Try: Obtain a CD-ROM with SEP IRA information and background on other IRA plans from the Internal Revenue Service to learn about the ins and outs of offering this easy and low-cost retirement plan. Beacon Capital Management provides business owners with answers to important SEP IRA plan questions.

Learn about SIMPLE individual retirement accounts

Offering employees SIMPLE individual investment accounts is best for businesses that have reliable and positive earnings. Both employers and their employees contribute to simple IRA accounts so decreases in cash flow can be problematic. An employer may decrease their contributions if necessary, but cannot stop investing in an employee's IRA account.
Try: Visit the Department of Labor resources page and scroll down to the For Small Employers section to download resources on IRAs, including a guide to SIMPLE IRA plans. Access planning tools and view examples of SIMPLE IRAs at the CCH Financial Planning Toolkit.

Understand how employees can benefit from payroll deduction IRA plans

Allowing employees to choose payroll deduction IRA investment accounts is beneficial to businesses that do not want to contribute to an employee's retirement. A payroll deduction IRA is a an employee self-directed IRA and is based solely on an employee's designated contributions. An employer is not required to provide additional contributions in this situation.
Try: Visit Associated Industries of Vermont and scroll down to the Human Resources and Workplace Safety section to download a concise guide to setting up and implementing payroll deduction IRAs from Carney Antell. Read a USA Today article highlighting business owners' increasing preference for offering these retirement plans.

 

• Always check with the Internal Revenue Service or your tax advisor for information about a rollover IRA and your options when hiring or firing employees who wish to retain their current retirement plan.

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