What is a Deemed IRA?

A Deemed IRA is an individual retirement account feature that is integrated into certain qualified retirement plans. This arrangement allows participants in those plans to essentially have an IRA that is treated as if it were a separate account for certain purposes, despite being held within the umbrella of the qualified plan.

Under this structure, individuals can enjoy the tax benefits associated with traditional IRAs while still benefiting from the features of their employer-sponsored plan. This means that contributions made can qualify for the same tax treatment as conventional IRA contributions, while also affording individuals the opportunity to self-direct their investment choices within the parameters set by the plan.

The other options do not accurately define a Deemed IRA. A type of tax-exempt IRA does not capture the essence of its relationship within qualified plans. Similarly, a Deemed IRA is not specifically for self-employed individuals nor does it pertain to independent IRA accounts, which are distinct from the employer-sponsored plans that offer Deemed IRAs. Understanding this context clarifies why the chosen answer reflects the proper definition and function of a Deemed IRA within the retirement plan landscape.