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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Pension plan for small business

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: Can defined benefit plans use separate accounts for each employee?

A: No, true defined benefit pension plans keep all of the funds unallocated until the time of distribution. However, by 2010 most small businesses will want to convert their pension plans and 401(k) plans into the new type known as "DB(k)" that combines the best features of each with simpler requirements and lower costs for the employer. In the meanwhile, the best option is to use a "target benefit annuity plan" that takes advantage of the parallel section of tax code known as 412(i). This option combines the benefit "look" of a pension, the contribution limits of a defined contribution plan and the administrative simplicity of a SEP or SIMPLE plan. The investment options are usually fixed and variable annuities. These plans are available at for a $150 setup fee.


More resources:

Annuity Pension Plans for Small Businesses