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October 23, 2012

SBO-K Plan Quick Reference Guide



SBO-k Plan Quick Reference Guide : 2012 Plan Year


Eligible Employer

Any employer, providing only the business owner/s is/are eligible to participate in the plan. Spouses of owners ,and partners in a partnership are considered ‘owners’


Age Requirement

Can exclude employees under age 21


Service requirement

Must include employees who have performed at least one year of service. Ayear of service can be defined as up to 1,000 hours of service during a 12-month period.


Salary deferral allowed

Yes. Up to $17,000 + catch-up of $5,500


Maximum contributions allowed

Lesser of 100% of employee’s compensation or $50,000+ catch-up


Deductible limit

25% ofeligible compensation


Limitation on Compensation

Compensation cap of $250,000 applies


Vesting of Contributions

100% immediate vesting


Deadline to Establish Plan

Last day of the employer’s taxable year with respect to which a contribution is made


Deadline for making/

depositing contributions

( see end notes for salary deferral contributions)

Salary deferrals- as soon as such contributions can reasonably be segregated from the employer’s general assets[i].

Employer contributions –by the employer’s tax filing deadline, including extensions


Nondiscrimination testing



5500 filing

Yes. But only if assets exceed $250,000





Administrative cost



Notable notes

This is really a traditional 401(k) plan, branded with a different name. Because no testing is required, paperwork is trimmed/reduced, to excludeoptions that don’t apply to owner-only plans


Ideally suited for …

Business owners where the only eligible employees are the business owners, and their spouses. Business owner must either have no non-owner (common-law) employees, or all common-law employees who are under age 21and/or work less than 1,000 hours each year…of course, the business owner must be at least age 21 and work at least 1,000 hours or they too would be ineligible if those requirements are chosen


[i] No later than the 15th business day of the month, following the month to which the deferral applies. The 15th business day is the latest deadline, and applies only if the assets cannot be segregated sooner. Plans with fewer than 100 participants as of the beginning of the plan year, may remit salary deferrals within 7 business days after the date the amount is received or withheld.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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