Save time with our cheat sheets, fact sheets, checklists & books!

October 23, 2012

SBO-K Plan Quick Reference Guide

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

Feature/Benefit

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

N/A

 

5500 filing

Yes. But only if assets exceed $250,000

 

Complexity

Low

 

Administrative cost

Low

 

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 http://irapublications.com. 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.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

Annual Benefit Limit

Definition The annual benefit limit for defined benefit plans is the lesser of: A) 100% of the participant’s average compensation for his or her highest

Be among the first to know when

IRA Rules
Change