Work with IRA Financial Trust to establish your Self-Directed IRA or Checkbook IRA account today

A Self-Directed IRA is a type of IRA structure that allows the IRA holder (you) to have more control over your retirement funds. Unknown to some, not all Self-Directed IRAs are the same. It is well known that the IRS allows you to use your IRA to make traditional investments, such as stocks and mutual funds, it is not as well known that the IRS also allows you to use IRA funds to make investments such as real estate, precious metals, tax liens, private business and much more tax-free and penalty-free!

The SIMPLE IRA in a Nutshell

A SIMPLE (Savings Incentive Match Plan for Employees) IRA plan allows employees and employers to contribute to traditional IRAs set up for employees. Employees may choose to make salary-reduction contributions, and the employer is required to make either matching or nonelective contributions. Contributions are made to a retirement account or annuity set up for each employee.

A SIMPLE IRA plan account is an IRA and follows the same investment, distribution, and rollover rules as traditional IRAs. Any employer (including self-employed individuals, tax-exempt organizations, and governmental entities) that had no more than a hundred employees with $5,000 or more in compensation during the preceding calendar year (the “100-employee limitation”) can establish a SIMPLE IRA plan. You can set up a SIMPLE IRA plan effective on any date between January 1 and October 1 provided you (or any preceding employer) didn’t previously maintain a SIMPLE IRA plan. If you’re a new employer that came into existence after October 1 of the year, you can establish the SIMPLE IRA plan as soon as administratively feasible after your business came into existence.

All employees who received at least $5,000 in compensation from you during any two preceding calendar years (whether or not consecutive) and who are reasonably expected to receive at least $5,000 in compensation during the calendar year are eligible to participate in the SIMPLE IRA plan for that calendar year. Each eligible employee may make a salary-reduction contribution, and the employer must make either a matching contribution or nonelective contribution. An employee may defer up to $12,500 in 2015, subject to cost-of-living adjustments for later years. Employees age fifty or over can make a catch-up contribution of up to $3,000 in 2015, subject to cost-of-living adjustments for later years.

With respect to employer contributions, the employer is usually required to

  • match each employee’s salary-reduction contribution on a dollar-for-dollar basis up to 3 percent of the employee’s compensation (not limited by the annual compensation limit); or
  • make nonelective contributions of 2 percent of the employee’s compensation up to the annual limit of $265,000 for 2015, subject to cost-of-living adjustments in later years).

If you choose to make nonelective contributions, you must make them for all eligible employees whether or not they make salary-reduction contributions. With respect to the 3 percent match, you may elect to reduce the 3 percent matching contributions for a calendar year, but only if

  • the limit isn’t reduced below 1 percent;
  • the limit isn’t reduced for more than two years out of the five-year period that ends with (and includes) the year for which the election is effective; and
  • you notify employees of the reduced limit within a reasonable time before the sixty-day election period during which employees can enter into salary-reduction agreements.

Usually, the same tax results apply to distributions from a SIMPLE IRA as to distributions from a regular IRA.

Types of Self-Directed SIMPLE IRA Accounts

There are essentially three types of Self-Directed SIMPLE IRAs:

1. Financial Institution Offered Self-Directed SIMPLE IRA

The most popular Self-Directed SIMPLE IRA account offered is the financial institution Self-Directed SIMPLE IRA. The reason that this type of Self-Directed SIMPLE IRA is so popular is because it is generally offered by the major financial institutions, such as Bank of America, Wells Fargo, Fidelity, Vanguard, etc. With this type of Self-Directed SIMPLE IRA, the SIMPLE IRA holder is generally able to only make SIMPLE IRA investments offered by the financial institution which typically only includes financial related investments, such as stocks, mutual funds, and ETFs. Even though these types of IRA accounts are called “Self-Directed IRA” accounts, they are very limited in their investment scope and do not allow IRA investors to make any non-traditional investments, such as real estate.

Why do the financial institutions limit the investment options available?

A financial institution that offers IRA accounts is not required to offer its IRA investors with the opportunity to make all allowable types of IRA investments. For example, even though real estate is an IRS approved investment, an IRA custodian is not required or obligated to offer that investment option. Accordingly, most financial institutions offering SIMPLE IRA accounts will restrict the SIMPLE IRA investment option to financial products offered by the financial institution. The reason behind this is quite clear – a financial institution earns fees from the sale of financial products, not by allowing its clients to pull money out of the IRA account to buy real estate from a third-party.

2. Custodian Controlled Self-Directed SIMPLE IRA

IRA Financial Trust Company offers Self-Directed SIMPLE IRA investors full IRA custodial services for traditional and alternative asset investments, such as real estate. All IRA funds will be held with Northern Trust, an FDIC insured global banking leader for over 125 years, before the client directs the funds for investment.

Until a 1996 court case, the custodian controlled Self-Directed SIMPLE IRA was the only way one was able to use IRA funds to make a non-traditional investment, such as real estate. In essence, with a custodian controlled Self-Directed SIMPLE IRA, every step a SIMPLE IRA holder wanted to make had to be carried out through a custodian, such as IRA Financial Trust Company. In other words, the SIMPLE IRA holder directs the IRA custodian, IRA Financial Trust, to make the investment directly. All transaction related activity, such as paying expenses or depositing checks, must be paid by the IRA custodian.

3. “Checkbook Control” Self-Directed SIMPLE IRA LLC

IRA Financial Trust is proud to offer Checkbook IRA custodial services along with its full service IRA administration services all for one low price without any transaction or asset valuation fees. IRA Financial Trust Company is one of the few full-service IRA custodians who specialize in establishing Checkbook Control IRA LLC accounts.

IRA Financial Trust Company is a regulated, non-banking financial institution that is made up of retirement tax specialists committed to helping you make Self-Directed retirement investments quickly, while minimizing annual fees. IRA Financial Trust Company was founded by tax attorneys who worked at some of the largest law form in the world, including White & Case LLP and Dewey and LeBoeuf LLP and have helped over 15,500 clients self-direct their retirement funds through their ownership in the IRA Financial Group LLC. Our experience working with Checkbook Control IRA LLC structures is unmatched in the industry.

In the 1996 case of Swanson vs. Commissioner, 106 T.C. 76 (1996), the tax court gave its blessing to a new type of Self-Directed IRA structure — the Self-Directed SIMPLE IRA LLC also known as the Checkbook SIMPLE IRA— that is much simpler than investing through a regular custodial controlled Self-Directed IRA account.

With a “Checkbook Control” Self-Directed SIMPLE IRA, the SIMPLE IRA holder (you) will have total control over your SIMPLE IRA funds. You will no longer have to get each investment approved by the IRA custodian of your account like in a custodian controlled Self-Directed SIMPLE IRA. Instead, with IRA Financial Trust Company’s Checkbook Control SIMPLE IRA account, all decisions are truly yours. When you find an investment that you want to make with your SIMPLE IRA funds, simply write a check or wire the funds straight from your Self-Directed SIMPLE IRA LLC bank account to make the investment.

Under the Checkbook SIMPLE IRA format, the Checkbook Control SIMPLE IRA is set up as a Self-Directed account with IRA Financial Trust that's capitalized by funds rolled over from your current retirement account. The funds are deposited with Northern Trust. Then, a Limited Liability Company (“LLC”) is created in which your new SIMPLE IRA purchases all the membership units/interests. Now, your money is held in an LLC and you are ready to invest at your discretion. A “Checkbook Control” Self-Directed SIMPLE IRA allows you to eliminate the delays, IRA custodian transaction fees, and IRA account annual valuation fees, enabling you to act quickly when the right investment opportunity presents itself.

With a Self-Directed SIMPLE IRA, when you find an investment that you want to make with your SIMPLE IRA funds, simply write a check or wire the funds straight from your Self-Directed SIMPLE IRA LLC bank account to make the investment. The Self-Directed SIMPLE IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

IRA Financial Trust offers one low, flat fee IRA Custodian fee without any transaction fees and annual account valuation fees. We believe that Self-Directed SIMPLE IRA investing should be affordable and simple. IRA Financial Trust is committed to helping all our clients build their retirement wealth through Self-Directed IRA investments without the high costs and complexities.

To learn more about what type of Self-Directed SIMPLE IRA account will best suit your retirement and investment needs, please contact a Self-Directed retirement expert at 1-800-472-1043.