Deemed IRAs Provide New Retirement Saving Opportunity

Beginning January 1, 2003, employees will have a new saving option for retirement. The deemed IRA, created by the Economic Growth and Tax Relief Reconciliation Act of 2001, allows employees to contribute to IRA accounts as part of their overall investment in qualified employer plans, including 401(a), 401(k), ESOP, 403(a), 403(b), and 457(b) plans.

Plan sponsors welcome the new rules because more investment money will be added to the qualified plan pool. The deemed IRA rules allow for commingling of deemed IRA and qualified plan monies. Employees may find appeal in the ability to apply the same investment choices to all retirement funds.

Employers who agree to set up deemed IRAs for their employees must make participation voluntary, and both deductible and non-deductible contributions must be accepted. Also, deemed IRA contributions must be accounted for separately, and the account must meet all but the commingling requirements of a traditional or a Roth IRA.

Contributions rules for traditional and Roth IRAs apply to all contributions to deemed IRAs, so income thresholds and phase-outs must be taken into consideration when making contributions. The distribution rules for the deemed IRAs are the same as for normal traditional and Roth IRAs.

Interested employers should check with their plan sponsors to make sure the deemed IRA program is being offered and to acquire information that can be made available to employees.

You may like these other stories...

Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.