Mainstar Trust is a limited purpose trust company, chartered under the laws of the state of Kansas. Since 1978, Mainstar Trust has specialized in providing quality non-discretionary custodial services for self-directed IRAs. Prior to 2016 Mainstar Trust was known as First Trust Company of Onaga.
Our Customer Service Department is available from 8:00am to 4:30pm Central time. Mainstar Trust observes the same holiday schedule as the Federal Reserve Bank.
Will Mainstar Trust accept documents using the cloud?
Mainstar Trust accepts documents sent via secure file sharing websites. However, Mainstar Trust is not responsible for the security of the documents.
What is an E-Sign form?
An E-Sign form allows for electronic signatures, rather than signing in ink.
Why do I have to answer identity questions for some E-Sign forms?
Certain E-Sign forms require additional security to protect you from fraudulent transactions.
The Spousal Consent section for new accounts and Change of Beneficiary form requires the spouse's signature only if one is married and not naming their spouse as 100% primary beneficiary.
When you open an account, Mainstar Trust asks for your name, address, date of birth, taxpayer identification number, and other information that allows us to identify you. We may also ask for other identifying documents in order to verify the information provided to us. We are required by law to attempt to match the information provided by you against lists issued by various governmental agencies in order to confirm that you are not and are not in any way affiliated with a known or suspected terrorist group.
The IRS requires an IRA custodian to report all distributions made from an IRA or Roth IRA annually. The IRA custodian reports the distributions made from an IRA for the prior year on Form 1099R. IRA distributions are shown in boxes 1 and 2a of Form 1099-R. A number or letter code in box 7 tells you what type of distribution you received from your IRA. All of the codes are explained in the instructions for recipients on Form 1099-R. The form is sent to the recipients of the distributions by January 31 and to the IRS by February 28 (or March 31 if filed electronically).
A Simplified Employee Pension (SEP) plan is a retirement savings plan adopted by a business that allows the business to make retirement savings contributions for its employees. Each eligible employee sets up a traditional Individual Retirement Account (IRA) to receive the employer SEP contributions.
A SEP plan is easy to establish, simple to administer, and inexpensive compared to other types of retirement plans, such as 401(k) plans. There are no compliance tests and employers are not required to file annual reports with the IRS.
Any type of employer, including a self-employed individual, can establish a SEP plan.
Establishing a SEP plan requires three steps:
An employer can establish a SEP plan up to the employer’s tax return deadline, including extensions. For example, a sole proprietor who wants to make a SEP plan contribution for 2017 would have until their tax return deadline in 2018 to set up the SEP plan and make a 2017 contribution.
Your SEP plan must cover employees who have
You can choose to apply less restrictive eligibility requirements.
Employees who are covered by a collective bargaining agreement or who are nonresident aliens with no U.S. source income can be excluded, along with employees who haven’t met the eligibility requirements.
For each employee, including yourself, you can contribute up to 25% of compensation or $54,000 (for 2017), whichever is less. Employer contributions to the SEP plan are tax deductible on your business tax return. You must generally contribute the same percentage of compensation for each eligible employee.
You are not required to make a SEP contribution each year and you can vary the amount you choose to contribute each year.
A SEP plan does not affect your ability to make annual contributions to a traditional or Roth IRA. In addition to your SEP contributions, you can make traditional or Roth contributions of up to $5,500 (for 2017), plus a $1,000 catch-up contribution if you are age 50 or older. Participating in a SEP plan may affect your ability to take a tax deduction for a traditional IRA contribution, depending on your income.
You can take distributions from your IRAs, including SEP contributions, at any time. The distribution will typically be included in taxable income in the year of the distribution and may be subject to a 10% early distribution penalty if you are not yet age 59½.
An Individual 401(k) plan (sometimes referred to as an “owner-only” 401(k) plan) is a retirement savings plan adopted by a business that allows the business owner to make retirement savings contributions. Individual 401(k) plans are intended for businesses with no employees.
An Individual 401(k) plan is easy to establish, simple to administer, and allows business owners to make large annual contributions. Because there are no employees, there are no nondiscrimination tests and employers are not required to file annual reports with the IRS until the plan reaches $250,000 in assets. Both pre-tax and Roth (after-tax) contributions are permitted in Individual 401(k) plans.
Individual 401(k) plans are designed to be used by businesses with no employees other than the business owners and their spouses. The business may be structured as a sole proprietor, partnership, or corporation.
To establish an individual 401(k) plan, the employer must sign a written plan document that has been approved by the IRS. The IRS does not offer free Individual 401(k) plan documents. Most 401(k) service providers offer 401(k) plan documents.
The plan document must be signed by the last day of your tax year. For a calendar-year employer, for example, this means the document must be signed by December 31 to make contributions for that year.
You can defer up to $18,000 (for 2017) of your compensation into the plan, plus an additional $6,000 catch-up contribution if you are age 50 or older. Most Individual 401(k) plans are designed to also permit profit sharing contributions in an amount that can vary from year to year. The maximum profit sharing contribution is 25% of compensation. Total deferrals and profit sharing contributions for a business owner can reach $54,000 (for 2017), plus an additional $6,000 catch-up contribution if they are age 50 or older.
An Individual 401(k) plan does not affect your ability to make annual contributions to a traditional or Roth IRA. In addition to your Individual 401(k) plan contributions, you can make traditional or Roth IRA contributions of up to $5,500 (for 2017) plus an additional $1,000 catch-up contribution if you are age 50 or older. Participating in the plan may affect your ability to take a tax deduction for a traditional IRA contribution, depending on your income.
In general, the funds in your Individual 401(k) plan cannot be distributed until you reach age 59½, die, become disabled, or terminate the plan. However, Individual 401(k) plans can permit hardship distributions and loans.
There is no IRS filing requirement until an Individual 401(k) plan reaches $250,000 in assets, unless the plan is terminated. Each year after the plan reaches the $250,000 threshold, the business will need to file IRS Form 5500, an annual information return, by the end of the seventh month following plan year end.
An Individual 401(k) plan is designed for owner-only businesses. If you hire employees, you must operate your plan according to thetraditional 401(k) plan rules, including conducting nondiscrimination testing and filing Form 5500 annually.
A Savings Incentive Match Plan for Employees (SIMPLE) IRA plan is a retirement savings plan adopted by a business that allows both employers and employees to make retirement savings contributions. Each eligible employee sets up a SIMPLE Individual Retirement Account (SIMPLE IRA) to receive the SIMPLE IRA plan contributions.
A SIMPLE IRA plan is easy to establish, simple to administer, and inexpensive compared to other types of retirement plans, such as 401(k) plans. There are no compliance tests and employers are not required to file annual reports with the IRS. Employees share the responsibility of funding the plan with their employers.
Any type of employer, including a self-employed individual, can establish a SIMPLE IRA plan, but the employer must generally have 100 or fewer employees. When calculating the 100-employee limit, employers count individuals employed by the business during the previous calendar year who earned $5,000 or more. Employers adopting SIMPLE IRA plans are also restricted from having any other type of employer-sponsored retirement plan (e.g., 401(k) plan).
Establishing a SIMPLE IRA plan requires three steps:
If you establish the SIMPLE IRA plan with a document that names a designated financial institution (DFI), all contributions will be made to SIMPLE IRAs held at that institution. If the document does not specify a DFI, employees can establish their SIMPLE IRAs at any financial institution they choose. If you use a DFI, employees must be permitted to transfer their balance without cost or penalty to another SIMPLE IRA. For simplicity and ease of administration, many employers use a DFI.
A SIMPLE IRA plan can be set up any time between January 1 and October 1 in the year you first adopt the plan. For example, an employer that wants to make a SIMPLE IRA plan contribution for 2017 would generally have until October 1, 2017, to set up the SIMPLE IRA plan. A new business that is established after October 1 may adopt a SIMPLE IRA plan as soon as administratively feasible after the business comes into existence.
Your SIMPLE IRA plan must cover all employees who
You can choose to apply less restrictive eligibility requirements.
Employees who are covered by a collective bargaining unit or who are nonresident aliens with no U.S. source income can be excluded, along with employees who haven’t met the eligibility requirements.
Each year, employees can defer up to $12,500 (for 2017), plus an additional $3,000 (for 2017) catch-up contribution if they are age 50 or older. An employer is required to make either a matching contribution (dollar-for-dollar up to 3% of salary deferred into the plan), or a nonelective contribution (2% contribution for all eligible employees). The 3% matching contribution can be reduced to as low as 1% for 2 out of every 5 years, subject to certain employee notice requirements. Employer matching or nonelective contributions are deductible on your business tax return.
A SIMPLE IRA plan does not affect your ability to make annual contributions to a traditional or Roth IRA. In addition to your SIMPLE IRA contributions, you can make traditional or Roth IRA contributions of up to $5,500 (for 2017), plus a $1,000 catch-up contribution if you are age 50 or older. Participating in a SIMPLE IRA plan may affect your ability to take a tax deduction for a traditional IRA contribution, depending on your income.
You can take distributions from your SIMPLE IRA, including employer matching or nonelective contributions, at any time. The distribution will typically be included in taxable income in the year of the distribution and may be subject to a 10% early distribution penalty if you are not yet age 59½. The early distribution tax rises to 25% for distributions taken within 2 years after the first contribution to your SIMPLE IRA.
A Health Savings Account (HSA) is a tax-advantaged custodial account, similar to an IRA, that may be established by an individual who is covered by a high deductible health plan (HDHP). HSAs are used to accumulate savings to pay for current and future medical expenses, and to supplement retirement savings.
A high deductible health plan (HDHP) is a health insurance plan that typically charges lower premiums than traditional full-coverage health insurance, but requires a higher deductible (the amount of medical expenses the individual must pay out-of-pocket before insurance will cover expenses). Individuals covered by an HDHP may save in an HSA to help pay for the medical expenses incurred before the insurance covers their expenses.
To be paired with an HSA, an HDHP must contain certain limits. It cannot cover medical expenses (with exceptions for preventive care and certain other limited coverage) until at least the minimum deductible has been reached, and must limit the amount of out-of-pocket expenses that the individual must pay.
HSA-Eligible High Deductible Health Plan Limits
Maximum out-of-pocket expenses
An HSA is easy to establish and provides the HSA owner with flexibility and control over contributions, investments, and distributions. HSAs offer a triple tax benefit:
1. HSA contributions are tax-deductible.
2. Earnings in the HSA grow tax-deferred.
3. HSA distributions are tax-free if used to pay for qualified medical expenses.
You may accumulate money in an HSA from year to year, like an IRA. It is your account and is not tied to your employer. You can continue taking tax-free qualified distributions from your HSA even if you no longer participate in an HDHP. These characteristics make HSAs useful not only for paying current medical expenses but also for saving for medical and other expenses that may arise in retirement.
To establish and fund an HSA, you...
Must be covered by an HDHP as of the first day of the month
Cannot also be covered by a non-HDHP health plan
Cannot be enrolled in Medicare
Cannot be claimed as a dependent on another person’s tax return
To establish an HSA, you must sign an HSA plan agreement with an HSA custodian. Banks, life insurance companies, mutual fund companies, brokerage firms and other financial institutions that offer IRAs can act as an HSA custodian.
An HSA may be invested in the same type of investment options permitted in an IRA, but not all HSA programs offer a broad range of investment options. A Mainstar HSA may be invested in mutual funds or any other type of investment that you would choose for your Mainstar self-directed IRA.
You can establish an HSA at any time you’re eligible to contribute. If you want to make an annual contribution for this year, you have until your tax return deadline, generally April 15 of next year, to establish the HSA and make the contribution. To take a tax-free qualified distribution to pay medical expenses, the HSA must be established before the medical expense was incurred.
In addition to the contributions you make as the HSA owner, some employers also choose to make HSA contributions to their employees’ HSAs.
You may take a tax deduction for any HSA contribution you make to your HSA. HSA contributions made by your employer are deductible by your employer.
The maximum contribution allowed each year depends on the type of HDHP coverage you have, your age, and how many months during the calendar year you are eligible to contribute to an HSA.
If you are eligible for all 12 months of the year and have self-only coverage:
Contribution limit for 2017 – $3,400
Contribution limit for 2018 – $3,450
If you are eligible for all 12 months of the year and have family coverage:
Contribution limit for 2017 – $6,750
Contribution limit for 2018 – $6,900
If you are age 55 or older, you may also make a catch-up contribution of $1,000 per year.
If you are HSA-eligible for only a portion of the year, you must prorate your contribution limit for the number of months you are eligible. For example, if you were covered by an HDHP for 4 months of the year, you may contribute 4/12 of the maximum contribution limit for the type of coverage you had.
HSA contributions made by your employer count towards your annual limit.
You are not required to make an HSA contribution each year, and you can vary the amount you choose to contribute each year.
If you contribute more to your HSA than you are eligible for in a year, you generally have an excess contribution. Excess contributions are not deductible and must be corrected. To correct the excess, you must remove the excess contribution plus any related investment earnings by your tax return due date, including extensions. Only the earnings are taxable if the excess contribution is removed timely. If an excess contribution is not removed, a 6% penalty applies for each year the excess remains in the HSA.
You may directly transfer assets from one HSA to another or from an Archer Medical Savings Account (MSA) to an HSA. You may also take a distribution from your MSA and HSA accounts and roll those distributions to an HSA. Rollovers must be completed within 60 days, and only one rollover is allowed in a 12-month period.
You may choose to take a distribution at any time. A distribution that is used to pay for unreimbursed qualified medical expenses is tax-free—even if you, your spouse or your dependent who incurred the expense is no longer covered by the HDHP or is not an HSA-eligible individual. With tax deductible contributions, tax-deferred earnings, and tax-free qualified distributions, HSA money may never be taxed. See IRS Publication, 502, Medical and Dental Expenses, for a list of qualified medical expenses (www.irs.gov).
HSA distributions that are not used to pay for qualified medical expenses must be included in your taxable income for the year and are subject to an additional 20% tax. The 20% tax does not apply to distributions made after your death, disability, or attainment of age 65. This means that you may build up your HSA balance to help pay for medical expenses in retirement, and if you want to use the money for other things after age 65, you may take distributions without the additional 20% tax.
Any remaining balance in your HSA will become the property of your named beneficiary when you die. If your spouse is your beneficiary, the HSA will be treated as your spouse’s own HSA. If someone other than your spouse is the beneficiary, the HSA stops being an HSA as of the date of death. The beneficiary must include the fair market value of the assets in their taxable income for the year. Death distributions are not subject to the additional 20% tax.