A defined benefit plan allows you to accumulate more retirement assets, than any other plan, over a relatively short period of time. It can potentially offer you the largest contribution deduction and the highest retirement benefits. Recent tax law changes make it an attractive option for small business owners and sole proprietors.
| Your preferred investment option: |
|
Ethical Wrap Program |
Download Important Information |
Wrap Brochure |
Minimum to open |
$50,000* |
Download Plan Application |
Application (New plan? Complete worksheet) |
| Contributions |
Eligibility |
Ideal account for employers who are over age 50, want to save more aggressively than you can with a defined contribution plan (such as a 401k) with few or no employees and are willing to commit mandatory contributions. |
Contribution limit |
No limit; can vary. An actuary determines how much will be required each year to fund the projected retirement payments for all employees. The limit is based on age, years of service, and pay. The employer then makes contributions based on the actuarial determination.* |
Funding requirements |
Mandatory employer contributions based on plan |
Deadline |
To make contributions for the current tax year, plan must generally be opened by December 31. |
| Annual Tax Reporting |
Annual IRS Form 5500 filing required |
| Vesting |
Varies according to plan |
| Tax Advantages |
Contributions |
100% tax-deductible (within IRS limits) |
Earnings |
Grow tax-deferred (until withdrawn) |
| Withdrawals |
Taxable |
| Withdrawals |
Withdrawals after age 59½ |
Withdrawals are taxable income in the year received. |
Withdrawals before age 59½ |
Cannot take withdrawals from the plan until a "trigger" event occurs, such as turning age 59½, disability, and/or plan termination (certain exceptions may apply such as death, and disability). |
Required withdrawals at age 70½ |
You must take out what are known as required minimum distributions from your plan when you reach age 70½. |
| Key Strengths |
Key Tradeoffs |
|
- A good way to quickly increase your retirement assets
- Potentially offer the largest contribution deduction and highest retirement benefits to business owners
- Pretax contributions grow tax deferred
|
- Requires actuary services of administrator
- Mandatory employer contributions unless plan is amended
- Like all qualified plans, must comply with ERISA & IRC rules
|
* In 2008, the maximum annual retirement benefit an individual may receive is $185,000 ($195,000 for year
2009) or 100% of final average pay at retirement.
* This information is not intended as tax advice. For more complete guidance on your particular financial situation, please consult your tax advisor or speak to an Azzad investment advisor at 888-862-9923. Please make sure to read the Azzad mutual funds' prospectus or Ethical Wrap Program's brochure before you invest. The wrap minimum applies after meeting standard minimum with other accounts.
