Payroll deduction IRAs

It’s easy to help your employees save

Payroll deduction IRAs are an easy, no-cost way for small-business owners to help their employees save for retirement and take advantage of American Funds’ quality investment options and exceptional service.

Details

Employers who set up payroll deduction IRAs must allow all employees to participate. There are no service-length requirements. Employees are responsible for setting up a traditional or Roth IRA and must meet IRA eligibility requirements.

Employees determine how much of their paychecks they want to contribute to their IRAs. The 2025 contribution limit for IRAs is $7,000 , or $8,000 for investors age 50 or older. Employer contributions are not allowed.

No cost to employers.
Employees pay $10 setup fee and $10 annual maintenance fee.

Employees who set up a payroll deduction IRA benefit from all the tax advantages offered by IRAs.

Traditional IRA contributions are made before taxes are deducted, which means that income taxes are not paid at the time of investment. Instead, taxes are paid when the money is withdrawn, including on any earnings.
Roth IRA contributions are made with money that has been taxed. Money that’s been taxed won’t be taxed when employees withdraw it. Additionally, earnings are tax- and penalty-free for qualified distributions.*

* Withdrawals from Roth accounts are tax- and penalty-free if the account was established at least 5 years before, and if the participant is at least 59½ years old, disabled or deceased. For nonqualified distributions, earnings are taxable and may be subject to a 10% early withdrawal penalty.

Payroll deduction IRA distributions follow traditional and Roth IRA distribution rules.

Traditional IRA — Distributions are taxable, but can be taken without penalty after age 59½. Distributions before age 59½ are subject to a 10% early withdrawal penalty, although exceptions may apply, such as for periodic payments, withdrawals for disability, medical bills or a first-home purchase.
Roth IRA — Distributions up to the amount contributed can be made at any time without taxes and penalty. Distributions from earnings are tax- and penalty-free if the first Roth contribution was made at least 5 years before and the investor is at least 59½, is purchasing a first home, or is disabled or deceased. Otherwise, taxes and penalties may apply.

Contributions are automatically deducted from employee paychecks.
There are no IRS forms to complete.
The program can be discontinued at any time without penalty.
Employers don’t have any fiduciary liability because it’s not an employer-sponsored retirement plan.

Employees can establish an IRA with American Funds or another financial institution, and choose any of the investments offered.

American Funds Target Date Retirement Series®

Convenience — A single investment provides a “funds of funds” portfolio of actively managed American Funds aligned with an investor’s time horizon. A carefully monitored retirement glide path means no more manual reallocation for you.

American Funds Portfolio Series^SM

Objective-focused — With objectives like preservation and appreciation, these “funds of funds” offer diversification and control in a single investment.

Individual mutual funds

Customized — Investors can build an investment portfolio of American Funds to meet their specific preferences and needs.

Ready to prospect?

Payroll deduction IRA program highlights

This single sheet explains the key benefits of opening a Capital Group payroll deduction IRA program.

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Small business retirement plan options

Propspecting broucher/presentation booklet that advisors can use to drive new small-business retirement plan sales.

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Identify the retirement plan solution that meets your clients’ needs

Follow these steps to gather the information you need to deliver the best retirement solution.

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Set up a payroll deduction IRA plan

Employer authorization for payroll deduction programs

Employers complete this form to establish a plan.

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IRA payroll deduction election

Employers can use this form to collect payroll deduction information from employees.

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Payroll deduction enrollment for Traditional/Roth IRAs

Employees complete this form to establish their own account.

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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Although the target date portfolios are managed for investors on a projected retirement date time frame, the allocation strategy does not guarantee that investors' retirement goals will be met. Investment professionals manage the portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the target date gets closer. The target date is the year that corresponds roughly to the year in which an investor is assumed to retire and begin taking withdrawals. Investment professionals continue to manage each portfolio for approximately 30 years after it reaches its target date.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only. Use of this website and materials is also subject to approval by your home office.

Capital Client Group, Inc.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

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Payroll deduction IRAs

It’s easy to help your employees save