To establish a Keogh db pension plan you must:
- Adopt a written plan
- Contribute to the plan
- Invest plan assets
- File government forms, and
- Take distributions.
1. Adopt a written plan
The plan document can be an IRS - approved prototype which sets forth the benefit provisions. The Benefit formula must be designed (we use bigSaveSM) to meet your anticipated needs. It must be signed prior to December 31st for contributions to be deductible on your Form 1040 due on the following April 15th, or approved extension date
2. Contribute to
the plan
We will specify the amount and date that you must make your contributions
to the plan. They are not voluntary. According to the rules, you must
contribute enough into the Plan to satisfy the minimum funding standard
each year. The calculation is complicated and depends on the actuarial
assumptions, plan benefit formula, asset return and individual earnings/demographic
data. The amount will change each year and will be known after the Actuarial
Valuation is completed.
3. Invest plan assets
An account in the name of the Pension Plan must be established prior to
December 31st for contributions to be deductible on your Form 1040 the
April 15th following. You invest the funds as you see fit. A broad range
of asset types are available: stocks, bonds, money market & mutual
funds, for example.
4. File Government
Forms
IRS Form 5500, which includes Schedule B signed by an Enrolled
Actuary must be filed annually for your pension plan.
5. Take Distributions
You will eventually be able to draw money out of your fund. If you take
distributions prior to age 55 or start after age 70 1/2, there may be
penalties/excise tax due, even if you decide to roll the funds over to
an IRA.
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