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 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.