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| Self-Employed Defined-Benefit Plans |
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| For the ultimate in tax-deductible contributions, no retirement plan beats the Defined Benefit Plan. Depending on your circumstances, you may be able to contribute in excess of $170,000 per year in such a plan.
The Solo-DB plan is a slimmed down “One Person” version of the Defined Benefit (DB) pension plans commonly found at large corporations.
A Defined Benefit plan is a qualified retirement plan in which you set a target monthly or annual dollar benefit that you want to receive when you retire. Your annual contributions to the plan are calculated taking into account your current age, the average of your three highest years of income, your planned retirement age, and in subsequent years, balances you have accumulated in the plan. Annual contributions are mandatory, and a higher targeted benefit will result in greater required annual contributions. |
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| Eligibility |
| The Solo-DB plan makes most sense for the older than 50, highly compensated business owner who consistently earns more than $120,000 per year.
The Solo-DB plan was designed for sole proprietors and business owners with no more than 4 employees. Your business generally should be in existence for three or more years and you must be willing to make ongoing mandatory annual contributions of more than $45,000 per year for a period of three years or more.
Please use the Calculator to estimate what your maximum contribution might be with a DB plan as compared to other types of retirement plans.
The One person DB or Solo DB plan that we market is the plan by Oppenheimer Funds, which they service marked "Single-DB Plus". Oppenheimer is one of the major investment management firms in the country.
The deadline to set up a Solo-DB plan, and still make contributions for 2005, is December 31. Fill out the application request form to get a free application kit for the Uni-DB plan |
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| Questions and Answers on the Uni-DB plan |
| Caveat -- The information presented here should be used for general guidance only. Please refer to the plan documents and other supporting documents, which you will receive from the providers of the plan, for more details. For tax or legal advice please consult with your tax or legal professional.
I currently have a Keogh profit sharing plan for my business. Can I terminate it and establish a Solo-DB plan?
Yes. You can establish a Solo-DB plan and terminate the existing profit sharing plan. However, if you have already made your profit sharing contributions for the current plan year, those contributions might not be deductible if the defined benefit plan is established for the same year. Please consult with your tax advisor.
Can I rollover and consolidate my other retirement funds into my Solo-DB plan?
Yes. You may rollover without dollar limit pre-tax contributions from an IRA, SEP-IRA, or other retirement plan into your Solo-DB plan.
Can I contribute to both a Solo 401(k) and a Single-DB plan?
Yes. As long as you make only salary deferral contributions to the Solo 401(k) plan , you can contribute to both plans. For 2005, the salary deferral contribution limit for a Solo 401(k) is up to $18,000 for individuals age 50 and older, and up to $20,000 for 2006.
I already participate in the retirement plan of another company. Can I participate in both plans?
You may be able to participate in the retirement plans of more than one company as long as the companies are not part of a controlled group – (two or more firms controlled by five or fewer people). Please consult with your tax advisor.
What if I own more than one business?
If you are the sole owner of more than one business some of which have employees, you will need to consider all of your employees when setting up a Solo-DB plan and you may be required to make contributions for all of them. Depending on your ownership interest or affiliations with multiple businesses, the businesses may be considered under common control as defined by the IRS . Please consult with your tax advisor.
Can I exclude part-time employees from the Solo-DB plan?
You may exclude from the plan any employee who works fewer than 1,000 hours per year. |
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| Contribution Information |
What is the maximum amount I can contribute to a Solo-DB plan?
The amount you contribute is the amount necessary to provide the promised benefit at retirement. Your contribution requirement is determined each year by the plan's actuary. It is calculated based on your income, years to retirement, investment return on plan assets, and the plan benefit formula. The maximum annual benefit you can receive is 100% of your highest three-year average compensation, up to a certain dollar maximum. For a quick estimate of your maximum contribution see Calculator .
Must I contribute to the Solo-DB plan every year?
A contribution is required each year. However, the plan benefit formula can be amended for future years, resulting in an increase or decrease of the required contribution amount.
What are my investment choices?
You can choose from over 60 Oppenheimer mutual funds, Tremont hedge funds . You can also allocate up to 30% of your total plan assets to non-Oppenheimer sponsored investment options. For information about the Oppenheimer funds, feel free to contact us, or visit www.oppenheimerfunds.com The prospectus of the fund contains complete information about the fund's investment objectives, fees, risks and expenses. Please read the prospectus carefully before investing.
What is the deadline for contributions to take a deduction for a tax year?
Contributions must be made by your business's tax filing deadline for the tax year plus any extensions, but no later than September 15th.
Can I reduce my contributions after I set up my plan?
Yes. You may request to amend the plan so as to lower your target retirement benefit amount for future years. Depending upon when you amend the plan, you may still be required to make the contribution for the current year.
What money can I use for my Solo-DB contributions?
Contributions must be made by the business that is sponsoring the plan. A sole proprietor may have more than one source of money, but in no event can the sole proprietor deduct more than the net income generated from the business that is sponsoring the plan.
If a business is an S-Corporation or an LLC taxed as an S-Corp, the type of compensation a business owner elects to receive can determine whether the owner qualifies to contribute. Only compensation that appears on the owner's W-2 counts as income for purposes of determining contributions. For example, if an owner receives his or her entire income as dividend distributions from an S-Corporation, the owner is not eligible to receive benefits or contributions under a retirement plan.
What happens if my investment performance is greater than the actuarial assumed interest rate?
Each year you may be required to put more or less money into the plan to achieve your goal, depending on if the plan's investments exceed the assumed rate of return that was used to determine your annual contribution amount. |
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| Plan Administration |
What are my administrative responsibilities?
The third-party record keeper for the Solo-DB plan, provides the signature-ready plan document, the ongoing annual actuarial calculations, prepares all tax forms and answers any administrative questions that you may have.
When can I retire?
You can terminate the plan at any age, however, your Solo-DB plan is expected to be maintained at least five years and the earliest retirement date is age 55.
What happens if I quit working before my plan's retirement date?
Your plan can be terminated at any time. Contact us as early as possible if you are considering this option.
What if I wish to work beyond the plan's specified retirement date?
The plan's retirement date is one of the provisions used to determine the amount of money you must contribute each year. You may be able to amend your individual defined benefit plan to change the retirement date. Contact the record keeper if considering this option. Your Solo-DB plan will have to be amended.
Are loans allowed?
Yes. Loans are available if you select this feature, but taking a loan could have a potential impact on the calculated contribution amount. The plan does not permit hardship withdrawals. |
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| Additional Information |
How much does it cost?
One-time plan set up and installation fee: $1,100 + $50 per eligible employee
Annual administration fee: $1,500 + $100 per eligible employee
These plan fees are estimates only and do not include any mutual fund purchase fees or other fees that may apply for plan related special services. The prospectus for each fund contains more information about that fund, including charges and expenses. Please read the prospectus carefully before you invest or send any money.
How do I get started?
Fill out the application request form to get a free application kit for the Uni-DB plan . Y
You will receive by email the documents you need to get started |
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