Self-Directed Retirement Plans for You and Your Employees
Do you own a small business? Are you thinking about offering a retirement plan as part of your benefits package? A Self-Directed Retirement Plan can offer many advantages!
FOR EMPLOYERS
FOR EMPLOYEES
HOW IRA CLUB CAN HELP
IRA Club can assist in selecting the ideal plan (e.g., SIMPLE IRA, SEP IRA, Solo 401(k), Safe Harbor 401(k) and we simplify the administrative process, allowing you to concentrate on your team’s needs.
Invest in your team’s future with a retirement plan that offers flexibility, control, and potential for growth. Give your employees the gift of a secure future. Let our services take the worry out of saving.
Key Steps to Launch Your Plan
Establishing a Self-Directed Retirement Plan for Your Business
- Determine Your Plan Type
- For self-employed individuals, consider Solo 401(k) or SEP IRA.
- For businesses with employees, Safe Harbor 401(k) or SIMPLE IRA are suitable options.
- Choose Your Administrator
- DIY management requires in-depth knowledge of regulations.
- IRA Club/Proxy Financial offers comprehensive support, easing your administrative load.
- Establish the Plan's Foundation
- Draft a written plan document and trust agreement. Set up a recordkeeping system and inform employees about the plan and make sure they understand their rights and responsibilities.
Solo 401(k) vs. SEP IRA: High Limit Retirement Plans Designed for the Self-Employed
Ideal for high earners, allowing substantial contributions for you and your spouse. Offers investment flexibility and potential for tax-deductible and tax-deferred growth. Loan options and a Roth feature are available.
Easy to manage with minimal paperwork. Allows for employer contributions with a lower maximum limit than Solo 401(k)s. The SECURE Act 2.0 introduced the Roth SEP IRA for tax-free retirement withdrawals.
Small Business Retirement Plans (5-199 employees)
Simplifies retirement savings, ensuring compliance with nondiscrimination tests. Offers guaranteed employer contributions and tax advantages.
Suitable for businesses with up to 100 employees, offering a straightforward retirement savings mechanism with employer and employee contributions.
Best for very small businesses (up to 12 employees), facilitating employee contributions through payroll deductions.
Administration Services Offered by IRA Club and Proxy Financial
Once the small business retirement plan is confirmed, IRA Club will assume certain responsibilities on behalf of the plan.
IRA Club manages recordkeeping, filings, and provides a Summary Plan Description (SPD) to participants, highlighting benefits like tax-advantaged contributions, optional employer contributions, and compounding tax-deferred earnings.
This guide simplifies the process of choosing and setting up a self-directed retirement plan, tailored to different business sizes and types, ensuring a secure financial future for you and your employees.Not every employee may be eligible for retirement plan participation due to factors like age, length of service, union agreements, or residency status. IRA Club/Proxy Financial ensures those eligible are well-informed and supported, streamlining the participation process.
Contribution Limits and Information
Self Employed
Solo 401(k)
Self and Spouse
Up to $23,000 + $7,500 Catch-up (age 50+)
Up to 25% of employee compensation
SEP IRA
Self and Employees
N/A (employer contributions only)
Up to 25% of employee compensation or $66,000 (whichever is less)
Small Business Owners
(2-199 employees)
Safe Harbor 401(k)
All eligible employees
Up to $23,000 + $7,500 Catch-up (age 50+)
100% match up to 3% + 50% match up to 5% of employee compensation (Basic) or custom match (Enhanced)
SIMPLE IRA
All eligible employees
Up to $16,000 + $3,500 Catch-up (age 50+)
Required: Match employee contributions up to 3% or contribute 2% of employee compensation
Any Business Size
Payroll Deduction IRA
Any employee with earned income
Up to $7,000 + $1,000 Catch-up (age 50+)
N/A (employee contributions only)
Notes
- Self-employed contributions depend on net earnings.
- SEP IRA contributions must be uniform for all eligible employees.
- Contribution limits are subject to annual adjustments.
Plan Essentials
Typically, a plan includes a mix of rank-and-file employees and owners/managers. However, a SD retirement plan may exclude some employees if they:
- Vesting: Owning Your Contributions - Contributions are immediately vested after reaching a $500 minimum, securing employees' savings.
- Nondiscrimination: Sharing the Benefits - Ensures equal benefits for all eligible employees, adhering to rules that prevent favoritism towards higher-earning employees.
- Investment for Your Future - Offers a range of investment options, ensuring equal access for all participants.
- Staying Informed: Disclosure Documents - IRA Club, as the administrator, will provide up-to-date information about your plan, including changes, decisions, and actions you can take regarding your account.
Summary Plan Description
IRA Club provides essential documents like the Summary Plan Description (SPD), that include rights, responsibilities, and plan features. The SPD must include eligibility criteria, contribution details, vesting schedules, benefits access, and the process for claiming benefits, ensuring the transparency and compliance.
Stay Compliant, Stay Focused
IRA Club/Proxy Financial handles the plan reporting to the IRS, including the filing of forms:
Form 5500 Annual Return/Report of Employee Benefit Plans
Depending on the plan size, type and participant numbers, we will file the appropriate form:
- Form 5500: Used for most plans.
- Form 5500-SF: Shorter form for plans with fewer participants.
- Form 5500-EZ: For one-participant plans owned by entrepreneurs and spouses.
This service ensures compliance with federal regulations, allowing business owners to focus on their core operations. Forms are filed either electronically through EFAST2 or by paper.
Plans file the Form 5500 of Form 5500-SF electronically through a web-based system called EFAST2. These returns/reports are made available to the public. One-participant plans or foreign plans may file Form 5500-EZ Electronically on EFAST2 or on paper with the IRS. Form 5500-EZ returns are not made available to the public.
One participant plans (which cover only sole proprietors – whether incorporated or not — partners, and spouses, with total assets of $250,000 or less at the end of the plan year are exempt from the annual filing requirement. However, you must file a final return/report if you terminate the plan, regardless of the value of the plans’s assets.
Additional notes:
One-participant plans with assets under $250,000 at year-end are exempt from annual filing, but a final return is required in the event of a plan termination.
By partnering with IRA Club/Proxy Financial, businesses can confidently offer retirement plans, knowing the administrative and compliance aspects are in expert hands, fostering a secure financial future for both owners and employees.
