The Small Business Pension Program is a defined benefit plan. What is a defined benefit plan?
A defined benefit plan is a qualified retirement plan in which the employer sets a target retirement benefit – the amount you want plan participants to have when they retire; then annual contributions are calculated to provide that benefit. Contributions are based on current age, the average of the three highest consecutive years of income, the planned retirement age, and in subsequent years, the balances that have accumulated in the plan. Annual contributions are mandatory and a higher benefit will result in higher annual contributions. Contributions will increase or decrease as the four factors mentioned above change.
Related Questions
- In the past, I have had a Profit Sharing Plan for my business. Can I now terminate that plan and set up a Small Business Pension Program?
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