Pensions Centre - Defined Benefit Plans
412 i Defined Benefit Pension Plan

PENSIONS CENTRE provides expert services for virtually every type of retirement plan, including: Defined Benefit Plans, 412(e)(3) Plans (formerly 412I Plans), Age-Weighted Comparability Profit Sharing, 401(k) Deferred Compensation Plans.

Who should establish a pension plan?

Any business owner, whether he is self employed or owns a corporation or partnership should establish a pension plan, particularly if he has significant taxable income and a limited number of employees. read more

An example of the types of small business owners who should have a rich pension plan are:

  1. Accountants
  2. Lawyers
  3. Physicians
  4. Dentists
  5. Pharmacists
  6. Veterinarians
  7. Psychiatrists
  8. Funeral Home Directors
  9. Small Business Owners
  10. Consultants & Independent Contractors (1099)

Why should I consider setting up a pension plan?

Retirement plans provide increased tax deductions for your business. There have been tax law changes that permit your business to make tax-deductible retirement contributions for you and other family members of more than half your earnings. You can direct most of the pension dollars to the owners or selected individuals without the plan being considered discriminatory if our pension specialist designs an IRS approved age weighted plan that takes advantage of newly issued IRS regulations and recent tax law changes.

What should a small business owner (medical, professional, attorney, etc.) know about a pension plan?

As a small business owner/medical professional/etc..., you may or may not be aware of how some of the recent tax law changes have impacted small business owners/medical professionals, etc., and their retirement plans. There have been tax law changes that permit you to cut your tax bill in half to reward you if you save your income for retirement. We can show you some ideas for tax deductions and retirement benefits that may be available to you.

If I already have a pension plan, can it be improved?

Is it a defined benefit plan? Because you are 40+ years old, the IRS and congress are aware that you have a limited number of years to accumulate monies for your retirement needs and they allow you to reduce your taxable income by as much as 50% or more so that you can timely accumulate as much as $1M of pre-tax income by the time you reach retirement age. The older you are the larger the % of your income you are able to contribute. You may not be aware that there are now bigger tax deductions available through tax law changes that were not available when you started your pension plan. We can show you how to get a much larger deduction that you are getting now.

Is a SEP plan less expensive than a customized pension plan?

Actually, it is just the opposite. A customized pension plan will cost you less because your tax-deductible retirement benefits are increased and the cost of providing benefits to your employees is decreased. A SEP has no setup fee. However, it is far more advantageous to individually design a plan that affords you the opportunity to deduct more than just the 25% of compensation limit of SEP and minimize the cost of benefits for your employees. With a SEP plan, you are only getting a % equal to the % of compensation you contribute for your employees. If you want to maximize your share of the contributions, we can likely develop an age weighted profit sharing plan that provides you with contributions of 100% of your compensation and as little as 5% to your employees and all set up charges are tax deductible. As an additional incentive, the 2001 Tax Act now also provides a $500 tax credit for the first three years that you maintain a customized pension plan.

Can my accountant handle the set up of a pension plan?

No. This is a very specialized field and requires an expert in the pension area. Our objective would be to get your accountant and our Pension Specialist together for your best benefit. Our Pension Consultant does this on a regular basis. We can have our Pension Consultant call your accountant to show this to him.

Can you increase the value of your business without increasing your taxes?

What are you showing in net profits? When will you retire? What will someone pay you for your business at retirement if your business is only showing limited profit? How would you like to be able to show more profits without paying any more in taxes?

Is there an advantage in having parents on the payroll?

Yes. If you can put your parents on the payroll you can support your parents on tax deductible dollars and you can enjoy larger deductions to fund pension benefits that will ultimately be enjoyed by you or your children who will be named as beneficiaries by your parents. You also have the opportunity to buy life insurance with pre-tax dollars that can provide you with an income tax free death benefit upon your parents’ death.

How can I get a tax deduction when I buy life insurance?

Did you know that through a pension plan you could pay for life insurance with pre-tax dollars? In the event that you do not live to retirement, who will take care of your spouse and family? By having a death benefit funded through your pension plan, you can provide for your family through life insurance that is subsidized by Uncle Sam. So you have now made a life insurance premium tax deductible, which never happens any other way and you have a pre-retirement death benefit on a tax-free basis.

How much of my business income can I deduct for Pension Plan Contributions?

AGE Maximum Income Tax Deductible Pension Contribution 3 Year Average Current or Prior 1099 or W-2 Taxable Income Needed For Maximum Pension Deduction Percentage of 3 Year Average 1099 or W-2 Income that is deductible
39 $ 55, 421 $108,204 51.22%
43 84, 340 1 108,204 77.95%
45 107,946 108,204 115.78%
48 132,291 125,722 105.23%
53 157,500 159,081 99.00%
56 174,716 104,000 168.00%
61 177,479 94,278 188.25%
63 196,532 109,746 179.08%
65 217,643 128,386 169.52%
70 280,903 195,476 143.70%
75 256,790 220,000 116.72%

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