Why would an employer choose a Defined Benefit Plan over another type of qualified plan?

Smaller companies adopt defined benefit plans to allow significant funding opportunities and retirement savings for owners and key employees who may be older with many years of service. Defined benefit plans can offer the largest qualified plan contributions, often far exceeding defined contribution plan maximums. Many larger companies sponsor defined benefit pension plans to attract and retain employees or provide long-term benefits to career employees.

Is a Defined Benefit Plan Right for You?

If you’re a sole practitioner or own a family business, you may qualify for a huge tax deduction each year against your business income. You qualify for a DB Plan if you are:

• 35+ years of age
• Interested in contributing more than allowed in a 401(k) or SEP
• Able to make that contribution for at least three years
• Earning $100,000+ annually

Advantages of Defined Benefit Plans:

• Highest allowable contributions to a qualified plan - $250,000 or more
• Investments grow tax-deferred, building wealth faster
• Tax-deferred roll over to an IRA at retirement (or at plan termination)
• Simplified plan set-up
• You and your financial advisor select the investments
• Reduces income to allow certain S-corporations, partnerships, and sole proprietorships to take potentially up to 20% pass-through deduction on income

Typical Plan Owners Include:

• Independent contractors, consultants, professionals, and sales reps
• Owner-only or owner+ spouse or family business
• Self-employed spouses of high-income earners
• Employees who also receive self-employment income from a side business

Contribute 2-3 times the amount you might otherwise contribute to a SEP or 401(k).

 Typical Occupations:

• Attorney
• Construction Trades
• Consultant
• Dentist
• Engineer
• Entertainer
• Farmer
• Independent Corporate Director
• Internet Entrepreneur
• Physician
• Real Estate Agent
• Sales Rep
• Software Developer
• Writer