Payroll Deduction Progams for IRA's

[Guest mmacer]

Has anyone had experience with offering employees a payroll deduction progam for an IRA not sponsored by the company? What issues are there -such as who is the IRA sponsor, what licensing

issues are there,etc?:confused:

[John G]

Since, individuals can sign up for automatic deposits to an IRA from a checking account, why would a company want to insert itself into the process? You could not force employees to participate. I am not sure why a company would want to get involved. The individual automatic deposit is very straight forward, so you could hardly argue that the firm would be simpifying things. You are dealing with after tax dollars, so there is no pre-tax advantage that some other corporate linked investment options would have.

[Kirk Maldonado]

Would you have an issue about the employer sponsoring a pension plan (for purposes of ERISA) if you start down the path of the employer being involved in the arrangement?

[John G]

If the last question is directed to me.... no. There are lots of good systems for rewarding employees, building up nest eggs, providing an incentive for folks to stay, etc. Like 403b, 402k, pension/profit sharing and "thrift" savings. IRA seems like a very akward approach to me.

[mbozek]

I thought that the payroll deduction IRA is a no cost way for employers to offer an opportunity for employees to save for their retirement wihout becoming a plan sponsor since these arrangements are exempt from ERISA. The employee makes payments ($3,000/$3500) to the IRA and claims a deduction/credit from income tax. IRA deduction will increase to $5000 (+over 50 contributions). Employer is not subject to fiduciary provisions of ERISA since employees control investment. The 403(B)/401(k)/ps options all require employer involvement/risk/cost which is what is avoided in payroll deduction IRA.

[John G]

Are you on the owner side of the equation?

As an employee, I would hardly be impressed with this arrangement. I can do it myself, why do I need the employer knowing my personal financial actions? Where is the matching provisions like my buddy gets at Company Z?

Hey, that company Z looks like a nice place to work! My company keeps trying to sell me stuff that is supposed to be great for me and its just smoke and mirrors, I get this stuff right now without them. Maybe I should take my buddy up and get him a resume.

Just my idea above about how employees might react to your plan. There are plenty of simple arrangements that employers can support using third party plans. Ask your accountant to go over the options.