The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty.
Given the potentially huge tax consequences for non-compliance with the rules, you should consult with your organization's benefit specialist and your tax professionals to figure how your compensation might be affected by these new rules.
Deferred compensation plans are often used to provide for the deferral of salary, incentive compensation (i.e., commissions or bonuses), or supplemental compensation for top executives, independent corporate directors, and individual board members. The new rules apply to nonqualified deferred compensation plans at taxable and tax-exempt organizations.
An option for independent corporate directors and individual board members who receive 1099 income for their services may consider is to freeze their nonqualified plan and adopt a qualified plan such as the "one person defined benefit plan", called the Solo-DB Plan. Qualified retirement plans are exempt from the requirements of the American Jobs Creation Act.
The Solo-DB plan allows the highest deductible contributions possible in a qualified retirement plan. For example in 2005 one can contribute up to $170,000 of compensation into a tax-deferred Solo-DB plan.
Defined benefits plans have been around for a long time. But, recent pension legislation has raised the contribution and deductibility limits as well as simplified plan fund requirements. Thus, defined benefit plans like Solo-DB have become much more attractive to upper-income individuals with self-employment income. The Solo-DB plan will allow you to aggressively fund your retirement while cutting your taxes significantly.
Individuals who qualify for the Solo-DB plan include sole proprietors, independent contractors, and small business owners age 45 or older who can contribute more than $41,000 annually to the plan for at least three years.
For more about Solo DB plans visit Lamaute Capital at: http://www.InvestSafe.com.
About The Author
Daniel Lamaute, CEO of Lamaute Capital, Inc. (www.InvestSafe.com) specializes in setting up retirement plans. You may visit http://www.investsafe.com to access a free calculator that will help you estimate what your maximum contribution might be under different plans.
Its only been about 5 years since we had major... Read More
For investors only... and for speculators who need to invest... Read More
Motivational guru Tony Robbins teaches that the reason for doing... Read More
If you're like many people, your retirement savings have not... Read More
Ever since the turn of the century, world stock markets... Read More
There are many reasons to be investing these days, and... Read More
In this "special report", I want to pose a few... Read More
Stock trading strategies are as rampant today, as they were... Read More
Here are some useful tips on investing. When you make... Read More
Do you ever wonder exactly what's going on in the... Read More
If you've ever listened to Warren Buffett talk about investing,... Read More
In the last two decades, even though gold prices have... Read More
For a successful retirement investment plan to work in the... Read More
The Roth is kind of weird until you get used... Read More
"Through wisdom is a house built. And by understanding it... Read More
One among many ways you lose money in non-indexed mutual... Read More
When raising capital for a business venture, warrants are a... Read More
It always amazes me how much stock market investors resemble... Read More
One of the most common mistakes made by inexperienced investors... Read More
If you are looking for a safe investment and you... Read More
First and foremost, an opportunistic strategy for creating wealth in... Read More
Okay, so I can tell you I have sat in... Read More
We've helped a number of clients develop business plans and... Read More
Sales Leaseback compared to traditional property investmentCan a Sales Leaseback... Read More
Online trading is so seductive - just sit, click, and... Read More
Investing and Trading are not the same thing. The returns... Read More
This article attempts to help give the investor a broader... Read More
Agonizing displays of poor theatrics failed to entertain my mind... Read More
Purpose: Expose Opportunities for Smart InvestorsThe move by China's central... Read More
If Johannes Kepler, the renowned 17th century astronomer and discoverer... Read More
The Light Crude Continuous Contract fell from $67.70 a barrel... Read More
In recent months, many advisors have talked a lot about... Read More
Some time ago I attended a seminar where participants were... Read More
The following lists of questions are suggested questions to ask... Read More
"The American Age of Inflation is finished." So says economist... Read More
Putting Rare Coin Market Cycles to Work for You...Until recently... Read More
Many investors think that investing in mutual funds is free.... Read More
The financial characteristics of the automobile dealership are attractive:". .... Read More
Penny stocks and options are high volatility investments that attract... Read More
If Johannes Kepler, the renowned 17th century astronomer and discoverer... Read More
Firing an employee seems to be easier and easier for... Read More
When it comes time to retire how many people would... Read More
There are several reasons people give for not investing their... Read More
If there were one piece of advice that an investor... Read More
Scams and frauds are designed to take your money through... Read More
Convertibles are stealing the show with their safe investment image... Read More
What are the risks?Today, investors are increasingly turning to global... Read More
Press releases are a means through which companies can keep... Read More
Investors are always looking for the best investments that will... Read More
If you're like many people, your retirement savings have not... Read More
According to Morton Pollack, CEO of PWS, The Laundry Company... Read More
Even though inflation has been relatively quiet in the U.S.... Read More
The cries are heard from the distance, "I need help... Read More
Several days ago, the Commerce Department reported that May's factory... Read More
"To drift is to be in hell, to be in... Read More
In April, the U.S. Mint revealed plans to strike in... Read More
Typical day traders and swing traders look for stocks with... Read More
An option is a derivative trading product that is best... Read More
A barrel of oil bounced to over $60 Thu, which... Read More
There are a number of key reasons why individuals and... Read More
Need some insight on what you should really be striving... Read More
The Nature of Penny StocksFor anyone new to investing in... Read More
Rolling is defined in options online trading as moving a... Read More
Can you concisely summarize your investment philosophy in a few... Read More
You might think that if you win the lottery or... Read More
Asset allocation is a critical component of investing success. Both... Read More
Investing |