IRA-Based Plans for Small Businesses

An IRA can be a great way to plan for the future. Whether you're looking to supplement another retirement plan or want to start investing for retirement, COUNTRY Trust Bank® is here to help you understand your options and make smart decisions.

Or call us at 855-535-PLAN (855-535-7526) to find a plan that meets your needs.

SEP IRA

A SEP can help your business stand out with an easy retirement plan you can offer your employees.

What is it?

Easy is a word that can be used to describe the Simplified Employee Pension, commonly known as, “SEP.” Basically, it’s a plan that allows your business to make tax-deductible contributions to SEP IRAs set up for you and your qualifying employees.

A SEP has a lot of the same tax advantages as other retirement plans for businesses, but it frees your business from many of the administrative requirements. 

SEPs may be easy, but picking the right plan for your business isn’t. Let us help you determine which plan is right for your business. Then we can help you set up the plan and give you guidance in the years to come. Find a COUNTRY Financial representative to get started.

Who's it for?

You might consider a SEP if you own a small business and want a retirement plan that’s easy to start and maintain. You can set up a SEP if you’re a sole proprietor, partnership or corporation.

How does it work?

The simplicity of a SEP is attractive to many business owners, but like most decisions, it pays to have all the facts. Here are some of the big ones to consider.

Can I set participation rules?

All eligible employees – including part-timers, seasonal and those who terminate employment during the year – must be included in the plan. However, you may restrict eligibility by requiring employees to meet all of the following:

  • Be at least 21
  • Been employed or performed services for you in at least three of the last five years
  • Received at least $650 in compensation within the year the contribution is made (subject to cost-of-living adjustments)

Withdrawals

While the employer makes all the contributions to the employee accounts, employees can withdraw the money at any time. They will, of course, have to pay applicable taxes and penalties.

How do contributions work?

SEP IRA limits on contributions are set by the IRS and periodically adjusted. Contributions an employer can make to an employee's SEP-IRA are:

  • 25% of eligible compensation to a maximum of $61,000 (indexed)

If you’re self-employed, there are special SEP IRA rules that apply to you, and your maximum contribution is effectively reduced to 20 percent of your net earnings to a maximum of $61,000 (indexed).

You must contribute the same percentage of compensation to each eligible employees’ SEP-IRA.

Your contributions are tax deductible.

Because the contributions are tax-deductible, they aren’t included in your employees’ W-2.

Of course, this information has to be shared with the IRS and your employees. COUNTRY Trust Bank can take care of that with an annual statement of contribution and fair market value information.

You don’t have to contribute every year, and the amounts can vary in the years you do contribute. But it must be based on a formula that may not discriminate in favor of highly compensated employees (HCEs).

SIMPLE IRA

The most complicated part of the Savings Incentive Match Plan for Employees (SIMPLE) of Small Employers may be the name. That’s probably why everyone calls it a “SIMPLE IRA.” 

What is it?

These plans were designed with small businesses in mind. True to their name, SIMPLE IRA plans are easy to set up, and employee notices and disclosure requirements are minimal.

The two big perks to SIMPLE IRA plans are that they have a low start-up and annual cost and they’re just simpler to operate than most other plans.

The ease of set-up and low compliance demands make a SIMPLE IRA plan appealing. Deciding if a SIMPLE is a good move for your business should be based on your specific circumstances and needs. Here at COUNTRY Trust Bank, we'd be happy to help you determine which type of plan is right for you.

Who's it for?

You have two basic requirements to qualify to have this type of plan:

  1. You can’t have more than 100 employees who earned $5,000 or more during the preceding calendar year.
  2. You can’t have another active retirement plan during the current calendar year.

That’s it! You might consider a SIMPLE if you’re a business with fewer than 100 employees, not-for-profit organization, sole proprietor, independent contractor or freelancer.

How does it work?

Employee contributions

Building a nest egg for retirement starts with contributing to the plan.

  • Unlike most other retirement plans, with a SIMPLE IRA, contributions of highly compensated employees or owners aren’t limited by contributions of non-highly compensated employees.
  • In 2022, each participant can contribute $14,000 (indexed) or 100% of compensation, whichever is less.
  • Employees aged 50 and older may contribute an additional $3,000 as a catch-up contribution.

Am I required to contribute?

As an employer, you’re required to make contributions. You do, though, have a choice between two contribution formulas:

  1. 2% of eligible compensation for nonelective contributions or,
  2. Match the contributions of only the employees who participate. The match is dollar-for-dollar up to 3% of the participant’s pay.

Both employer and employee contributions are tax deductible, and earnings are tax deferred.

Who can participate?

Participation rules are fairly flexible.

  • You can exclude employees covered by a collective bargaining agreement and those who are not U.S. citizens.
  • You aren’t required to impose any service or age requirements. However, you must open up participation to employees who earned $5,000/year from you in any two prior years (preceding the current calendar year), and are reasonably expected to earn $5,000 in the coming year

You can be less restrictive than these two requirements, but not more.

Withdrawals

SIMPLE plans don’t have provisions for loans or hardship withdrawals. Participants can, though, withdraw any or all their money at any time. They will, of course, be subject to applicable taxes and penalties, including an increased 25% penalty for early distributions within the first two years after an employee begins participating. 

Choosing an IRA

Next steps

You should participate in your workplace 401(k) if you have one. But you also have additional ways to prepare for retirement, and a favorite is the tax-advantaged Individual Retirement Account, commonly known as an IRA. Even if you participate in a retirement plan at work, you can probably start an IRA, and you might be able to contribute to an IRA for a non-working spouse, too.

"Goodbye tension, hello pension."

That certainly captures the feeling of freedom that comes with the idea of what retirement may be like. There's only one problem. Defined benefit pension plans – those are the ones that guarantee a monthly benefit at retirement, mostly all on the employer’s dime – are going the way of the dinosaur.

Leave it to the pros

We’ve made the simplicity of a SIMPLE IRA even simpler.

That’s because these types of IRA accounts enjoy the benefit of having our team of investment professionals invest the money for your employees' accounts. The people who select investments for your plan all hold, or are working to obtain, the Chartered Financial Analyst (CFA®) designation – considered the pinnacle of investment educational attainment – and/or have advanced business degrees. 

Or call us at 855-535-PLAN (855-535-7526) to find a plan that meets your needs.

COUNTRY Financial® is the marketing name for the COUNTRY Financial family of affiliated companies (collectively, COUNTRY), which include COUNTRY Life Insurance Company®, COUNTRY Mutual Insurance Company®, and their respective subsidiaries, located in Bloomington, Illinois.

NOT FDIC-INSURED

May lose value

No bank guarantee

Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. 

Registered broker/dealer offering securities products: COUNTRY® Capital Management Company, 1705 Towanda Ave, PO Box 2222, Bloomington, IL 61702-2222, 1-866-551-0060. Member FINRA.  Read our full Customer Relationship Summary and Investor Handbook.

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