Pension plan for small business
originally posted: 11/22/2006 reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email asktony@tonynovak.com.
Q: Can defined benefit plans use separate accounts for each employee?
A: No, true defined benefit pension plans keep all of the funds unallocated until the time of distribution. However, by 2010 most small businesses will want to convert their pension plans and 401(k) plans into the new type known as "DB(k)" that combines the best features of each with simpler requirements and lower costs for the employer. In the meanwhile, the best option is to use a "target benefit annuity plan" that takes advantage of the parallel section of tax code known as 412(i). This option combines the benefit "look" of a pension, the contribution limits of a defined contribution plan and the administrative simplicity of a SEP or SIMPLE plan. The investment options are usually fixed and variable annuities. These plans are available at FreedomBenefits.org for a $150 setup fee.
Summary
More resources:
Annuity Pension Plans for Small Businesses
FreedomBenefits.net