IRAs

Liberty Bank of Arkansas' trust services department offers the following IRAs for small businesses:

Simple IRAs

A SIMPLE is a salary reduction arrangement similar to a 401(k) plan. However SIMPLE contributions are deposited into a unique SIMPLE IRA. This IRA can only accept contributions under a SIMPLE. No other IRA contributions are permitted.

Salary Reduction Employee Contributions

• Any contributions made by employees to their SIMPLE-IRA accounts are pre-tax. Each eligible employee may contribute up to $10,000* of compensation via salary reduction each year to his or her SIMPLE-IRA account. (No maximum percentage of compensation applies.)
• If you are age 50 or older, you are eligible to make an additional $ 2500* “catch-up” contribution.

Flexible Employer Contribution Levels

• SIMPLE-IRA contributions made to the accounts of eligible employees are deductible as legitimate business expenses for federal tax purposes.
• In any given year, your company has two different options for making the required contributions to your employees’ SIMPLE-IRA.
• 3% Match: Match dollar-for-dollar the amount that each eligible employee contributes to his or her own account, up to 3% of the employee’s compensation. This method is based on employee contributions, so if an employee does not contribute, the employer does not have to contribute either.
• Non-Elective 2% Contribution: Contribute 2% of compensation to the account of each eligible employee- based on a maximum of $220,000* in annual compensation – regardless of whether an employee has made any contribution that year to his or her own account. *The Internal Revenue Service will adjust these amounts to reflect changes in the cost of living. Figures shown are for 2006.

SEP IRAs

A simplified employee pension (SEP) plan is a retirement plan established by an employer. Each year, the employer can contribute a certain percentage of each eligible employee’s compensation directly to the employee’s traditional IRA.

The deadline for establishing or contributing to a SEP plan is your business’s income tax-filing deadline, including extensions.

What advantages does a SEP offer to the business owner?

• Minimal amount of paperwork and bookkeeping necessary to start and maintain the plan.
• Flexibility it affords with respect to contributions. The employer can contribute any amount is wishes, up to a maximum set by law or it can choose not to make any contribution at all.
• The employer’s fiduciary duty is reduced because participants in a SEP choose their own investments when they establish IRAs.
• A SEP may be established after the end of the employer’s taxable year.

For more information on these IRAs, contact our trust services department.