Can an Non Profit Employer fund Trad IRA’s for its employees???
I was told that a prospect opted not to offer a Qualified plan for its employees. They instead funded Trad IRA’s via bank CD’s for each employee. I don’t think this is allowed but cannot find anything on the IRS Site that specifically says that it is not allowed.
Permalink Submitted by David Mertz on Fri, 2018-09-21 15:51
An employer funding a contribution to a traditional IRA for an employee is equivalent to the employer paying the money to the employee as part of the employee’s wages and the employee making the contribution. Effectively, the employer is paying the employee a bonus and depositing it into a traditional IRA for the employee’s convenience. The employer must include in the employee’s wages reported on the employee’s W-2 the amount contributed and the employee must report the contribution on the employee’s personal tax return as teh employee’s own contribution. Since this is part of the employee’s wages, the employer must withhold income, Social Security and Medicare taxes.