Payroll Deduction IRA's

My employer doesn't offer a 401K plan or any other company retirement plan, but I have a personal IRA account.  Can I direct a portion of my paycheck into my personal IRA account?

Yes, if your employer approves or wishes to establish something called a Payroll Deduction IRA this would be allowed.

However, the employer's responsibility and involvement would be limited.  Under this program an employer would simply be passing through the funds for the employee much like they would if they were funding a savings account via direct deposit.  It is important to note: none of the money would be deducted pretax regardless of the plan type the employee establishes (traditional or Roth).  Pretax deductions from paychecks are only allowed under group sponsored plans such as 401K's and Simple IRA's.  In addition, each employee would be responsible for tracking their annual limits and for providing the proper funding instructions like they would with a direct deposit (routing number & bank account number needed).  Truly the employer is just facilitating.  An employee could accomplish essentially the same goal by setting up a reoccurring auto-draft from their checking accounts instead of this Payroll Deduction IRA through their employer.  In addition, an employer also may terminate this arrangement at any time rather easily with no paperwork required to be filed with the IRS and little to no warning provided to the employees.

Follow this link to learn more about the Payroll Deduction IRA option or download this PDF brochure on the program.

If you are interested in setting this up for your company, please contact your account manager to begin the process.  In addition, please have any employee complete a new direct deposit authorization form, listing out how much to withhold each paycheck into their IRA account and/or any other accounts such as a checking or savings account.  They will need to contact their bank and IRA provider to locate the proper routing & account numbers for each account.

Please keep in mind because the funding would occur via a direct deposit; an employer would need to agree to and be approved for direct deposit services.   Direct deposit services may not be feasible for all employers as pay period & check date schedules may restrict it due to the requirement by NACHA that processing of direct deposits occur up to 3 days in advance of the payroll effective payment date.

If you are interested in setting up a Simple IRA or 401K, please let us know.  We can direct you to one of our partners in the industry who are licensed Certified Financial Planners and who would be properly equipped to help you determine which plan fits your needs best.  Once your plan is established our partners will coordinate the plan details with us and we will work with you to help organize & process the benefit properly to keep you in compliance.
If you are eligible for a retirement plan at work, but wish to contribute to your personal IRA instead be cautious.  You should reach out to your tax preparer, personal IRA provider and/or your employer's benefit plan provider to discuss the finer points on this arrangement.  Here is more from the IRS regarding eligibility limitations for this scenario for example that could trip you up.

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