What is a Checkbook Defined Benefit Plan?

Checkbook Defined benefit pension plans allow for the highest annual tax-deductible contributions and are ideal for those who benefit from large tax deductions. Current tax obligations can be substantially reduced while contributing hundreds of thousands of dollars towards retirement security and estate planning. These plans require the greatest level of expertise to administer and are relatively more expensive to maintain. However, relative to the tax savings and retirement benefits they provide the costs incurred represent a great investment.

Defined benefit pension plans are structured to provide retirement benefits based on a formula incorporated into the plan design. Factors that determine the benefit to be provided may be years of service, compensation, and age.

Defined Benefit Plan annual contributions and tax deductions are determined based on amounts required to fund the plans future liabilities and require actuarial calculations. Factors that impact the annual contribution amount are participants’ age, planned retirement age, and investment performance.

Defined Benefit Plans are required to maintain a specified funding status to avoid IRS imposed restrictions and penalties, so plan design and ongoing communication are necessary to ensure compliance.

What are some of the special features of a Checkbook Defined Benefit Plan?

The key feature of a CheckBook Defined Plan is the ability to rapidly fund your retirement through very high tax deductible contributions. Although the IRS does impose certain funding requirements on such plans, with proper structuring they can be incredibly flexible. When necessary, plans can be amended to align with company cash-flow.

There are several types of defined benefit plans, including traditional and hybrid cash balance structures. DB plans can be implemented in conjunction with a Solo 401k or traditional 401(k) Plan for added flexibility and even higher contribution levels.

Defined benefit plan investment strategy depends on the plan design and is not the same as Solo 401k investing. Being that investment performance impacts required contributions, DB investing must integrated with the plan objectives.

Properly structured and for the right candidates, Defined Benefit Plans can enable small companies with full-time employees to provide substantial contributions for the business owners while still satisfying non-discrimination requirements.

Upon plan termination, Defined Benefit Plan funds can rolled-over to a Checkbook IRA for continued tax deferral.

Is a Defined Benefit Plan right for you?

If your business provides predictable cash flow, you have a low ratio of owners to employees, or there’s an age-gap between the business owners and employees a Defined Benefit Plan may be for you. Contributions to DB plans are much higher and the tax deductions available to you more than offset the amounts that may have to be contributed on-behalf of employees, if applicable.

What is the process for forming a Checkbook Defined Benefit Plan?

The process of forming a DB Plan begins with a thorough assessment of whether it is the right plan for you and your business. If a DB Plan may be right for you, we’ll formulate a proposal for your review and if you choose to implement the plan we’ll proceed with formation.

What is the process?

The process is straightforward:

1) Contact as and fill out a Defined Benefit Plan application
2) We’ll provide your customized DB Plan Proposal and review it with you
3) If you choose to proceed, we’ll provide the plan documents
4) Open the accounts and start investing
5) Maintain ongoing communication to ensure annual compliance

Ready to have control of your own Defined Benefit Plan?

Contact us to obtain a Defined Benefit Plan proposal and get control of your finances.