Retirement
  Annual
    Contributions
  Investments
  Changing Plans
  Eligibility

Retirement

What happens if I quit working before the plan's retirement date?
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.

Do I have to retire on the plan's specified retirement date (year)?
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.

When can I retire?
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.

How much money can I take out of the plan each year at retirement?
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). Income taxes must be paid when distributions are received.

Annual Contributions

Is the contribution fixed and mandatory?
Yes. A contribution is required each year to fund the benefit promised at retirement. However, the plan benefit formula can be amended for future years and thus increase or decrease the contribution amount.

Is my annual contribution limited to a percentage of income like a SEP or Profit Sharing plan?
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. When is my annual contribution due? 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).

Can my contribution amount be reduced after I set up my plan?
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.

What is the maximum amount I can contribute?
There is no specified limit — the limit is on the allowable benefit, not the contribution.

• The benefit is the amount your client's plan will pay out annually in retirement.
• The contribution is what your client pays in each year while participating in the plan to accumulate enough to make the pre-determined annual benefit.
• The accumulation, also called the benefit commitment, is the total amount in the plan at retirement.

Unlike defined contribution plans (e.g., 401(k)s, SEPs, SIMPLEs, etc.,) which have limits on the amount that can be contributed, defined benefit plans have limits on the benefit that can be paid out.

There are two separate limits on the benefit, either of which may apply:

1. 100% of compensation, reduced pro rata for years of service less than 10.
2. $180,000, reduced pro rata for less than ten years of participation in the plan.
   • This limit is further reduced actuarially if benefits commence prior to age 62
   • This limit is increased actuarially for benefits beginning after age 65. For this reason, contributions for older participants can be much higher.

Contributions Required to Fund Maximum Benefit

* Since the participant only has 5 years of participation, the maximum benefit is limited to 50% of the maximum benefit payable at age 65 ($180,000)

Investments

What happens if my investment performance is greater than the actuarial assumed interest rate?
If the investments grow faster than expected you will be required to put less money into the plan to achieve your goal.

Changing Plans

In the past, I've had a Profit Sharing Plan for my business. Can I now terminate that plan and set up a Hartford Solo db plan?
Yes. Your existing profit sharing plan can be terminated and you can set up a Hartford Solo db plan. However, if you've 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. Please talk to your tax advisor and refer to IRS Publication 560 concerning deductibility and carryovers to future years.

Can I terminate the plan? How?
Yes, you can terminate the plan. You submit final filings to the IRS and the actuary calculates your benefit under the plan. Depending on the amount in your plan, you could have an excess or a shortfall to fund your benefits.

Eligibility

I already participate in a plan sponsored by another company where I am employed. Can I participate in both plans?
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.

I own more than one business. Do I have to cover employees in both businesses?
Generally, yes if you are more than a 50% owner in both businesses. 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.

I participate in a 401(k) or a 403(b) plan, but I have earned income from a source that is not covered in that plan, such as royalties, director fees, lecture fees. Can I open a Hartford Solo db to cover that income?
Yes.