A Focus DB(k) is an DB(k) plan that provides a successful business owner the ultimate in retirement plan design. What is a DB(k) you ask? It’s a hybrid of a traditional defined benefit plan (hence the DB) and a 401(k) plan (that’s where the (k) comes in). This creative combination of plans allows a business owner with employees the ability to accumulate the greatest amount of tax-deferred retirement assets in a short period of time. Some of the Plan Features Include: Large Contributions: The Focus DB(k) can be designed to provide a pension benefit equal to the lesser of 100 percent of pre-retirement pay (last 3 year average) or $210,000 per year. The full retirement benefit becomes available as early as age 62. The add-on 401(k) plan give a business owner the flexibility to make salary deferrals (up to $18,000 or $24,000 for those ages 50 or over) as well as additional discretionary contributions up to 6 percent of pay. The combination of the two plans afford them the a maximum tax deductible contribution and the flexibility to adjust those contributions as business conditions dictate. A Focus DB(k) is designed for owners who want annual contributions in excess of $53,000. They can contribute enough to provide a maximum annual benefit up to $210,000 beginning at age 62. The add-on 401(k) profit sharing plan allows for even greater contribution and funding flexibility. Easy Administration: Focus DB(k) plan only require a single IRS Form 5500. ERISA 3(16): Included with a Focus DB(k) plan is our ERISA 3(16) services. That means all you have to do is work with your advisor to choose your investments and make contribution to the plan, we do the rest for you. Well, it’s not quite that simple, but it is really close! Deadlines: Focus DB(k) plans must be establish prior to the end of the business year. Is a Focus DB(k) Plan Right for Your Business? The Focus DB(k) plan should be considered by business owners with employees who want to contribution more than $53,000 annually and are at least 45 years of age.
A physician whose wife works for the practice as his office manager and has eleven employees would like to establish a plan in which the physician and his wife together receive contributions totaling about $178,000. A cash balance plan was established in which pay credits are specified dollar amounts, $85,000 for the physician, $25,000 for the office manager (who is the physician’s spouse) and $850 to each staff member. The safe harbor 401(k) plan is continued using the same classes as the cash balance plan. In this year, allocations of 6% are made to all classes. The plans are aggregated for testing and thus the profit sharing contributions to the staff can support the large cash balance contribution credits to the physicians and his wife. The cash balance plan is not covered by the PBGC. Therefore, the combined plan maximum deduction limits of IRC 404(a)(7) apply. Actual plan contributions are actuarially determined and thus may not exactly equal pay credits provided. Non-discrimination testing under 401(a)(4) is satisfied. Based on 2014 Limits.