Summary of Keogh Plans

General Overview

A qualified employer plan set up by a self-employed individual is sometimes called a Keogh or HR-10 plan. A sole proprietor or a partnership can set up a qualified plan.These plans can also be set up and maintained by employers that are corporations. The plan must be for the exclusive benefit of employees or their beneficiaries. A qualified plan can include coverage for a self-employed individual. A self-employed individual is treated as both an employer and an employee.

Any self-employed individual, business owner, or individual who earns any self-employed income

You can take advantage of all the benefits a Keogh offers if you're a sole proprietor, in a partnership, or the owner of any unincorporated or incorporated business (including S Corporations) AND you earn self-employed income by providing a service, either full-time or part-time

Highest contribution maximums

Key Disadvantages

Money purchase portion requires fixed commitment to contribute
Company must contribute for all eligible employees
Must know profits before can contribute if self-employed
No contribution allowed for self-employed if company has a loss

Funding Responsibility

Generally, employer contributions only

Up to 25% of compensation, up to a maximum of $30,000

Cannot take withdrawals from plan until a "trigger" event occurs. A 10% penalty may apply if participant is under age 59 1/2, or under age 55 and separated from service.

May offer vesting schedules

Form 5500

Depends on plan, generally medium. Requires trust and trust reporting.

All limits and features are for the 1999 plan year.