Non-ERISA Retirement Plans

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Industry Analysis: Non-ERISA Retirement Plans

With Non-ERISA Retirement Plans, the employer is typically not involved in the planning decision, outside of compliance activities. The employee is tasked with managing deposits and choosing the investments. Some examples of Non-ERISA plans include Traditional IRA, Roth IRA, and Church Retirement or 403(b)(9) Plans. Though Traditional and Roth IRAs are very popular, Church Retirement Plans are only prevalent among church organizations.

OVERVIEW OF NON-ERISA RETIREMENT PLANS

Except for compliance activities, the employer generally is not included or involved in the planning process with a Non-ERISA plan. The individual that directs the deposit and selects the investments is the employee. They also determine fund withdrawal and the eligibility criteria. Non-ERISA qualified plans typically contain tax-deferred compensation, along with bonus plans usually reserved for employees at non-profits, public schools, hospitals, and churches. Moreover, the individual plan holder controls their Non-ERISA plan instead of their employer. In addition, a plan that is not ERISA qualified is unable to obtain contributions from the employer.

EXAMPLES OF OFFERINGS AVAILABLE IN THE INDUSTRY

CHURCH RETIREMENT PLAN OR 403(B)
Employers do not contribute to Non-ERISA plans, and any church plan is deemed to be Non-ERISA. With Church Retirement Plans, however, churches are permitted to select which group of employees, or individuals, can be granted employer retirement plan contributions. Either the employee or the church can determine the amount each individual, or category of people, will collect in contributions. The employer can have various contribution amounts for every individual. Church Retirement Plans provide tax benefits such as Pre-SECA Tax and the Housing Allowance. The Pre-SECA Tax grants 15.2% in tax savings. A specific product incorporating the plan include the Church Retirement Plan or 403(b)(9) Plan.

TRADITIONAL AND ROTH IRA
Both plans are regulated by the holder of the policy, rather than their employer. Therefore, they are not ERISA qualified. A specific product incorporating this plan is Ally Invest, which has trade costs of $4.95. It also does not have annual fees and has discounts available for high volume accounts.

ARE THESE PLANS POPULAR/IN DEMAND

CHURCH PLANS
Church plans are only prevalent among church organizations. They satisfy the unprecedented demands of a church, as well as establishments with 501(c)(3) church status.

TRADITIONAL AND ROTH IRA
Among individual retirement plans, Traditional and Roth IRAs are the most common/popular. Traditional IRA plans are capable of developing a modern tax deduction and accommodates tax-deferred growth. On the other hand, long term savings from Roth IRA plans are able to deliver superior after-tax returns. Traditional IRAs are generally liked because the serve as an exceptional alternative for those qualified for a specific tax deduction. As reported by The Balance, both Traditional and Roth IRAs are the most common form of IRA or Free Retirement Plan. More than one-third (35%) of households in the United States contributed to Traditional IRAs, while around 36% committed to Roth IRAs. Only about 9% did the same for a SEP or Simple IRA (ERISA qualified). On the other hand, approximately 32% of people in the United States were saving for a 401(k) retirement plan in 2017, according to The Motley Fool.

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Quotes
  • "In a non-ERISA plan, an employer is not involved except in compliance activities. The employee chooses the investments and controls the deposit and, following determination of eligibility, the withdrawal of funds."
Quotes
  • "Individual retirement accounts, such as an IRA, are not ERISA qualified unless they are employer-sponsored. Starting to see a trend? Traditional and Roth IRAs are not ERISA qualified because these plans are managed by the individual plan holder, not his or her employer."
Quotes
  • "Since these plans are initiated and governed by the individual and not his employer, these traditional and Roth IRAs are not ERISA qualified. Roth IRAs provide individuals with the opportunity to contribute post-tax income to an account which will allow tax-free withdrawal as soon as the account holder reaches the age of 59 1/2."
Quotes
  • "Self-employed workers have some additional options, such as a Simplified Employee Pension (SEP) IRA. But as traditional and Roth IRAs are most popular, that’s the focus here."