Define Benefit Plan

A Define Benefit Plan is considered a qualified retirement plan, so the contributions are tax-deductible. They can be implemented along with your existing 401k plan. These plans are funded by the employer in a single account for the benefit of the owner and employees. The passing of PPA of 2006 (Pension Protection Act of 2006), the IRS reaffirmed the legitimacy of Define Benefit plans and the use of “age-weighted” profit sharing arrangements. A successful DB plan is one that is managed by an experienced TPA (Third Party Administrator) and investment management professional. The IRS has specific guidelines and filing requirements that must be met when establishing/managing a DB plan.

Ideal Candidate

A DB plan can be a great option for a small business owner who is maxing out their 401k contributions, wants to contribute additional tax-deductible contributions and has consistently produced high W-2 income or self-employed income. A DB plan isn’t for everyone but can be a valuable way to catch up on retirement savings. The typical DB plan candidate is usually a sole proprietor, small law or physician practice or any small professional service company. To see if you are a good candidate please feel free to contact us.