DefinedBenefit.com

DB plans are retirement plans that allow for much larger contributions than 401k plans or SEP plans.  It is not unusual to have annual contributions that are 4 times as large as the maximum contribution to a 401k plan.  

1-person and husband-wife businesses are often ideal for DB plans.

DB plans are appropriate when business owners want to contribute more than is allowed under a 401(k) profit sharing plan.  ​​Don't know what your 401(k) plan maximum is?  Call us and we can advise you (we also can help you adopt a 401(k) plan). ​

Maximum contributions of over $200,000 for each owner are not uncommon (actual contribution limits depend on the business owner’s particular income history and age).

The IRS does not impose any age restrictions. Typically, business owners are typically age 45 or older when they establish a DB plan, because the maximum allowed DB contribution diminishes at younger ages. 

Participants in a DB plan must have "Earned Income." Earned Income is generally income on which you pay Social Security tax.  For corporations, W-2 income is earned income.  For sole proprietors, Earned Income is Net Schedule C income (Schedule F for farmers). 

Your ultimate maximum benefit from the plan, and therefore your annual contributions, is based on your highest 3 consecutive years of Earned Income. 

Have employees? Absent special conditions, sponsors of DB plan typically have no more than 5-10 employees, due to employee costs.

DefinedBenefit.com will first prepare a study to determine what the maximum possible contribution range will be under the proposed DB plan – then the business owner can decide if the DB plan is good for their business.

Already have a 401(k) plan?  No problem, 401(k) plans are often paired with DB plans and both can be funded in the same tax year.  

Generally, you must maintain a DB plan for at least 3 years.  For example, you cannot setup and terminate a DB plan in a single year. 

Other conditions can apply other than those listed above.  Have a question about whether a DB plan is right for you?  Call or email with your inquiry.