Defined Benefit Plan

A Personal Defined Benefit Plan helps self-employed and small business owners save aggressively for retirement by allowing you to make very high contributions.

Eligibility

Defined Benefit Plans are available to businesses of any structure—including sole proprietorships, LLCs, partnerships, and corporations—with steady, predictable income. These plans are most effective for firms with five or fewer employees or for sole practitioners seeking to accelerate retirement savings. The business must be able to commit to making consistent contributions each year to fund the promised benefit.

Contribution Limits

Contribution limits are not fixed by the IRS annually like in 401(k)s or SEP IRAs. Instead, they are actuarially determined based on the retirement benefit the plan is designed to provide. For high-income individuals in their 50s or 60s, contributions can often exceed $100,000–$300,000 per year, depending on age, income, and years until retirement. Contributions are made entirely by the employer.

To see how much you could contribute, request a customized illustration from Global Advisers.

Tax Benefits

All contributions made to a Defined Benefit Plan are tax-deductible to the business. Investment earnings grow tax-deferred, and retirement distributions are taxed as ordinary income. The ability to contribute significant amounts each year can reduce taxable income dramatically for high-earning business owners.

Who contributes

Only the employer contributes to a Defined Benefit Plan. The contribution amount is calculated annually by an actuary to ensure the plan is properly funded. Contributions are mandatory once the plan is established, and employers must be prepared to fund the plan consistently each year. Plan funding requirements are more rigid than other retirement plans due to the promised benefit formula.

Withdrawals & Distributions

Plan participants begin receiving defined monthly benefits at retirement age, typically starting at age 62 to 65. The plan may allow for lump-sum distributions, depending on its design. Early withdrawals are discouraged and may result in penalties and plan disqualification. As with most retirement plans, Required Minimum Distributions (RMDs) apply beginning at age 72.

Fees & Expenses

Defined Benefit Plans have higher administrative and compliance costs compared to simpler plans. Fees include actuarial services, plan design, IRS filings, and investment management. At Global Advisers, we provide coordinated plan oversight and transparent advisory fees. We work with trusted actuaries and third-party administrators to manage complexity on your behalf.

Administrative responsibilities

These plans require annual actuarial certification, Form 5500 filing, and adherence to strict IRS and Department of Labor rules. Employers must maintain adequate funding levels to meet future obligations. Global Advisers coordinates with actuaries and TPAs to manage these responsibilities and help ensure full compliance.

Deadlines

A Defined Benefit Plan must be established by your business’s tax filing deadline, including extensions, to be effective for the current tax year. Contributions must be made annually based on actuarial calculations. Plan setup can take several weeks due to the custom nature of the design, so we recommend starting early.