J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Retirement Plans for Self-Employed Individuals

Self-employed individuals have 3 main options in retirement plans. First, they can set up qualified retirement plans, which used to be called Keogh plans. These plans may also be known by other names. They have been called H.R.10 plans, reflecting the number of the bill in Congress under which qualified plans for self-employed individuals were created. They may also be called Basic Plans or some other name created by a bank, brokerage firm, insurance company, or other financial institution offering plan investments. A second option in retirement plans for self-employed individuals is a simplified employee pension plan (SEP). A third option in retirement plans is a savings incentive match plan for employees (SIMPLE).

Self-Employed Qualified Plans in General

Qualified plans for self-employed individuals are subject to the same requirements as qualified plans for corporations. (Banks, brokerage firms, mutual funds, and insurance companies offering plans for self-employed individuals generally may denominate them as Keoghs, basic plans, or simply by the type of plan established, such as a profit-sharing plan.) Like corporate qualified plans, self-employed qualified plans must cover employees of a self-employed person on a nondiscriminatory basis. Also like corporate plans, they are limited in the amount that can be contributed and deducted.

There is an important distinction between self-employed qualified plans and corporate qualified ...