For relief under PTE 97-11, a number of conditions apply, including a requirement that the services offered to the IRA or Keogh plan
under the arrangement must be the same as those offered to other customers with account values of the same amount or the same amount of fees generated.
The federal estate taxation of survivor benefits payable under a Keogh plan
(see Q 425) is the same in the estate of a self-employed individual/participant as in the estate of a participant covered under a "corporate" plan (see Q 673).
The Keogh plan
, SEP, or IRA is established and maintained for the exclusive benefit of the participant or IRA owner, his spouse, or beneficiaries.
A Keogh plan
works much like any qualified plan; the details of the various types of qualified plans such as defined benefit or profit sharing plans are discussed in separate chapters of this book.
In the defined contribution Keogh plan
, the value at retirement depends on the amount of annual contributions and the growth rate of investments.
You can also contribute part of your business earnings to a retirement plan for the self-employed--either a Keogh plan
or an Individual Retirement Account Simplified Employee Pension (IRA-SEP).
The District Court for the Northern District of Illinois has recently reaffirmed that Keogh plan
contributions are not deductible from business gross income for purposes of the self-employment tax.
The annual ceiling on deductible contributions to a Keogh plan
was also increased from $7,500 to $15,000.
Opening a SEP IRA or a Keogh plan
is a good way to reduce the tax bill and save for retirement.
The typical Keogh Plan
is designed as a defined contribution plan without a fixed contribution formula (in 2010 participants can contribute up to 100 percent of income to a maximum of $49,000).
Where an individual has a relatively small amount of self-employment income and the SIMPLE IRA contribution limit is higher than that available for any other form of tax-favored plan, such as a Keogh plan
or a SEP.
To contribute $46,000 to a retirement fund for those using a SEE profit-sharing, or Keogh plan
, the wage would need to be $184,000 ($46,000 / 25%).
She now has $3,430 parked in a money market account and is also starting a new retirement savings account designed for the self-employed: either a Keogh plan
or SEP IRA.
However, the person's right to receive payment under any IRA or Keogh plan
was exempt only to the extent reasonably necessary for the support of the person and any dependents.
403(b) or 457 plan, a Keogh plan
and/or a traditional IRA.