Marvin establishes an HR-10 plan. The plan calls for contributions of 10% of his earned income to be used to provide a pension for him and contributions of 10% of each employee's earnings to provide for their retirements.
However, his earned income would drop further because it is computed after taking into account amounts contributed by the self-employed individual to the HR-10 plan for himself, as well as for his common law employees.
Contributions made on behalf of an owner-employee to an HR-10 plan are deductible from gross income on the owner-employee's federal income tax return.
The benefit accumulated in an HR-10 plan for an employee who was married during his participation in the plan while a resident of a community property state belongs equally to the employee and his or her spouse.
Contributions were made to an HR-10 plan each year on his behalf throughout the 15-year period.
For example, Sel Horvitz, a practicing attorney who teaches three days a week at a local law school and who is participating in the school's tax deferred annuity plan, can still set up an HR-10 plan for himself based on the income earned in private practice.
Question--Under what circumstances can benefits be paid from an HR-10 plan?
In addition, an HR-10 plan generally must begin distributing benefits by April 1 of the year following the year the employee attains age 701/2; however, as with all corporate qualified plans, the plan may delay distributions until April 1 of the year following the year an employee retires, provided he is not a more-than-5% owner.