Defined Benefit Plans
All types of Defined Benefit Plans
A Defined Benefit plan is a qualified pension plan which allows for certain tax benefits under the law, like tax-deferred investment growth and tax deductions based upon targeted annual contributions. Since all contributions into this type of plan are made by the sponsoring company, the tax deductions are taken by the entity sponsoring the plan. Defined benefit plans provide a fixed, pre-established benefit for employees and owners at retirement. Employees often value the fixed benefit provided by this type of plan. On the employer side, businesses can generally contribute (and therefore deduct) more each year than in 401(k) Profit Sharing plans. However, Defined Benefit plans are often more complex and, thus, more costly to establish and maintain than other types of retirement plans. There are different types of Defined Benefit plans which provide for different targeted contributions. Each type is based upon certain criteria: targeted amount of total annual contributions to be made; ages of employees both non-highly compensated and highly compensated and all owners. If an employer establishes a Defined Benefit plan, the plan sponsor:
• Can have other retirement plans in place during the same plan year (except SEP or SIMPLE)
• Can be a business of any size
• Will need to annually file a Form 5500 with a Schedule SB
• Must have an enrolled actuary to determine the funding levels and sign the Schedule SB
• Can adopt a DB Plan for the preceding tax year if done so by the company tax return filing date
At PPC we employee 7 actuaries as well as credentialed plan administrators that can assist with any type of Defined Benefit plan structure. We specialize in targeting contributions based on plan goals. Please allow our experts at Pension Planning the opportunity to help you design a retirement plan structure to accomplish your retirement plan needs.
Solo Owner Defined Benefit Plans
A Solo Defined Benefit plan is a qualified retirement pension plan designed specifically for a single business owner with no employees (other than the business owner and spouse). A Defined Benefit plan is a company sponsored plan in which an owner’s pension payments are calculated according to length of service, age and the salary earned at the time of retirement. The Defined Benefit plan allows for certain tax benefits under the law, like tax-deferred investment growth or tax deductions for the company since all contributions are made by the company with no employee contributions. The Defined Benefit plan is structured so that a specified pension payment, which can be taken in a lump-sum or annuitized, is received by the owner participant.
There are many ways to structure a Defined Benefit plan to maximize the owner’s pension needs. Our pension actuaries at PPC are experts in structuring Defined Benefits plan to meet the overall goals of the business owner. Please allow our experts to help you with your Defined Benefit plan.