No. Your annual contribution is determined as a function of age, compensation, investment performance, actuarial assumptions and maximum benefit allowed. An actuary calculates the amount that you must fund each year.

The deadline for pension plan contributions is no later than 8 1/2 months after the close of the plan year. For the contribution to be deductible, you must make it on or before the due date of your tax return (with extensions).

Yes. This can happen in several ways. You can always amend your plan formula down for future years (but, depending on when you amend the plan, you may still be required to make the contribution for the current year). If your compensation decreases, your annual required contribution may decrease. If your investment performance is greater than the assumed interest rate, your contributions will also decrease.

The maximum that you can contribute each year is determined by the amount required to fund your maximum allowable annual benefit on your retirement date. The maximum annual benefit is 100% of your highest three-year average compensation, up to a certain dollar maximum. Your contribution is determined by an actuary and is not limited to a maximum dollar amount.

Sheffler Consulting Actuaries, Inc. will inform you annually of contribution requirements for the coming year. At the end of the year, Sheffler Consulting Actuaries again will remind you to fully fund the contribution before filing your taxes.

• Actual investment earnings vs. the assumed interest rate
• Changes in compensation
• Changes in the maximum benefit limits

These are inter-dependent. For example, if assets earn more than the assumed rate (decreases the contribution) and compensation increases (increases the contribution), we may get the same contribution amount as the previous year.

Your plan places no restrictions on investment volatility. You and your investment advisor are responsible for selecting and managing your investments. If your investments earn above the assumed rate of return, your required contributions will decrease. If they earn below the assumed interest rate, your required contributions will increase.

These type investments require substantial additional care. There are special regulations that must be satisfied in order for a real estate investment to be acceptable in a qualified retirement plan. In general, only publicly traded REITs are exempt from these rules. If you intend to invest some of your retirement fund assets in real estate, we recommend that you do so only with the advice of legal counsel specializing in ERISA plans.

You can stop the plan at any age and roll the value of your benefit over to an IRA. Routinely, however, a plan is expected to be maintained at least five years and the earliest retirement date is age 55.

That's fine. Your plan can be terminated at any time and the value of your benefit rolled over to an IRA. Early planning is always helpful, so inform us as early as possible if you intend to stop working before the plan's retirement date.

No. 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 plan to change the retirement date. Let us know as soon as possible so we can make the appropriate amendments.

You submit final filings to the IRS and the actuary calculates your benefit under the plan. Depending on how much money you have accumulated, you may have an excess or a shortfall to fund before your plan is terminated.

You can choose from several options once you decide to start taking the money out of the plan. One is to terminate the plan, and roll your money into an Individual Retirement Account (IRA). Another is to purchase an annuity, and start receiving regular distributions. Income taxes must be paid when distributions are received.

Generally, yes. If you own other businesses and you are considered part of a controlled group or affiliated service group, then all businesses must be covered under the plan.

You can participate in both plans if the two companies are not part of a controlled group - that is, two or more firms controlled by the same 5 or fewer people.

Yes. Your existing profit sharing plan can be terminated and you can set up a defined benefit 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. In any year in which an employer maintains a defined benefit plan and a defined contribution plan, the maximum deductible limit for both plans is the GREATER OF (1) 25% of total compensation, or (2) the amount necessary to fund the defined benefit plan. Usually, the contribution amount for the defined benefit plan exceeds 25% of total compensation, so any employer contribution to the defined contribution plan might not be deductible this year. Please talk to your tax advisor and refer to IRS Publication 560 concerning deductibility and carryovers to future years.

Yes. Elective deferral contributions do not count against the deductible limit described above. As long as the 401(k) plan is a deferrals only plan, you can make contributions to both plans. Employer contributions to a 401(k) plan over 6% of pay will severely limit your defined benefit plan contributions and deductions, as noted above. Starting in 2005, an employer can contribute up to 6% of pay to a profit sharing or 401(k) plan without reducing the deductible limits in their companany's defined benefit plan.

A defined benefit plan is a qualified plan in which you set a target retirement benefit - the amount you want to have when you retire; then your annual contributions are calculated to provide that benefit. Contributions are based on current age, the average of your three highest years of income, your planned retirement age, and in subsequent years, the balances you have accumulated in the plan. Annual contributions are mandatory and a higher benefit will result in higher annual contributions. Contributions will increase or decrease as the four factors mentioned above change.

Yes. Generally, you can amend the plan to increase the benefit formula or decrease the formula. You cannot amend up, then amend down, then amend up, then amend down, etc., since this may be viewed by the IRS as abusive.

Following are some of the changes that can be made:

• Change your benefit formula. You can decrease or, if you qualify increase your benefit formula, thereby changing your contribution amount.

• Change your retirement date or age at retirement, if you qualify.

The plan does not permit hardship withdrawals. Participant loans are available if the employer chooses this feature.

• Section 415(e) of the Tax Code was repealed. Because of the repeal, a business owner can now use a defined benefit plan to build assets without taking into consideration money already accumulated in other retirement plans.

• Section 415(b)(1)(A) was amended to increase the maximum retirement benefit allowed.

• Section 415(b)(2)(C) was amended to lower the age at which the maximum retirement benefit could be received.

Together, these changes allow small business owners to now contribute more to a defined benefit plan.

Yes, but the benefit from the prior plan will need to be considered in the determination of the new benefit.

Sheffler Consulting Actuaries is the third party plan administrator, also known as a ‘TPA”. It provides the plan document, the actuarial calculations, prepare all pension plan tax forms and answer any questions that may you have. It doesn't provide investment or tax advice.