Simple Ira Custodial Agreement

If you are an employer who wants to provide a retirement plan option for your employees, a Simple IRA (Savings Incentive Match Plan for Employees) is an excellent choice. It is straightforward to set up and maintain, and it allows both you and your employees to contribute to their retirement savings.

To get started with a Simple IRA, you need to get a Simple IRA custodial agreement. This agreement is a legal document that outlines the terms and conditions of the Simple IRA plan. It is a critical document that you need to review carefully.

The Simple IRA custodial agreement is an agreement between the employer, the custodian, and the employee. The custodian is the company that holds and manages the funds in the Simple IRA. They are responsible for ensuring that the funds are invested in a way that meets the plan`s objectives and that the account balances are accurate.

The agreement should cover the following key areas:

1. Eligibility criteria: The agreement should specify the criteria for who is eligible to participate in the Simple IRA plan. This can include factors such as length of service, age, and compensation.

2. Contribution limits: The agreement should outline the contribution limits for both the employer and the employee. For 2021, employees can contribute up to $13,500 to their Simple IRA, and those over 50 can make catch-up contributions of up to $3,000.

3. Vesting: The agreement should specify the vesting schedule for employer contributions. Vesting refers to the employee`s ownership of the contributions made by the employer. The vesting schedule can be immediate or gradual over time.

4. Investment options: The agreement should outline the investment options available to plan participants. This can include mutual funds, stocks, bonds, and other investment vehicles.

5. Plan fees: The agreement should include all plan fees, including administrative fees, investment fees, and custodian fees. Employers should carefully review these fees to ensure that they are reasonable and transparent.

In summary, a Simple IRA custodial agreement is a critical document when setting up a Simple IRA plan. Employers should review it carefully to ensure that it meets their objectives and that the plan is structured correctly to benefit their employees. By doing so, employers can provide a valuable retirement plan option for their employees while also enjoying tax benefits for themselves.