Keogh plan

(redirected from Keogh Plans)
Also found in: Dictionary, Thesaurus, Legal.

Keogh plan

A type of pension account in which taxes are deferred. Available to those who are self-employed.

Keogh Plan

An account into which a self-employed person makes contributions up to a certain limit throughout his/her working life, and from which he/she begins to take distributions following retirement. Under a Keogh plan, contributions are tax deductible and withdrawals are taxed. The limit on annual contributions to a Keogh plan varies each year and is indexed to inflation, but in any case, it is higher than the limit for an IRA or a 401(k). Contributions to Keogh plans are invested in securities and usually own common stock and certificates of deposit.

Keogh plan

A federally approved retirement program that permits self-employed individuals to set aside for savings up to a specified amount. All contributions and income earned by the account are tax deferred until withdrawals are made during retirement. Investment opportunities include certificates of deposit, mutual funds, and self-directed brokerage accounts.

Keogh plan.

A group of qualified retirement plans, including profit sharing plans, money purchase defined contribution plans, and a defined benefit plan, is available to self-employed people, small-business owners, and partners in companies that file an IRS Schedule K, among others.

Together these plans are sometimes described as Keogh plans in honor of Eugene Keogh, a US representative from Brooklyn, NY, who was a force behind their creation in 1963.

The employer, not the employee, makes the contributions to Keogh plans, but the employee typically chooses the way the contributions are invested.

Like other qualified plans, there are contribution limits, though they are substantially higher than with either 401(k)s or individual retirement plans, and on a par with contribution limits for a simplified employee pension plan (SEP).

Any earnings in an employee's account accumulate tax deferred, and withdrawals from the account are taxed at regular income tax rates.

If you participate in a Keogh plan, a 10% federal tax penalty applies to withdrawals you take before you turn 59 1/2, and minimum required distributions (MRD) must begin by April 1 of the year following the year that you turn 70 1/2 unless you're still working. In that case, you can postpone MRDs until April 1 of the year following the year you actually retire.

The only exception -- and it is more common here than in other retirement plans -- is if you own more than 5% of the company. If you leave your job or retire, you can roll over your account value to an individual retirement account (IRA).

If you're eligible to establish a qualified retirement plan, a Keogh may be attractive because there are several ways to structure the plan, you may be able to shelter more money than with other plans by electing the defined benefit alternative, and you have more control in establishing which employees qualify for the plan.

But the reporting requirements can be complex, making it wise to have professional help in setting up and administering a plan.

Keogh Plan

Under prior law, a Keogh plan was a retirement plan set up for a self-employed taxpayer. The rules that applied to self-employed taxpayers differed from those that applied to common-law employees. Under current law, self-employed individuals are subject to the same rules as common-law employees.
References in periodicals archive ?
A cash-method taxpayer who receives compensation as a member of a board of directors may elect to defer it until retirement by making deductible contributions to a Keogh plan.
The court also cited the legislative history of Keogh plans, in which Congress stated that the plans cover "self-employed individuals (sole proprietors and partners).
FSC), for at least the prior 6 months, and maintained an aggregated balance of $1500 for the prior 3 months, in any individual or joint Fidelity Accounts or in any Traditional, Roth, Rollover, SEP, and SIMPLE-IRAs, and Keogh plans maintained by FBS or FSC ("Existing Accounts").
Oriental accounts for approximately 33 percent of the IRA market on the island and is a major provider of Keogh plans for self-employed individuals.
Keogh plans are subject to top-heavy rules regarding coverage of key employees.
The brochure explains how savings can grow by using investment vehicles such as 401(k) plans, Individual Retirement Accounts (IRAs), 403(b) plans, annuities, mutual funds, Keogh plans, stocks and bonds.
This excise tax is payable to sponsors (including self-employed individuals) of defined benefit Keogh plans, or their estates, on the plan's termination.
The trust company offers a full line of trust services, retirement plans and benefit plans, including IRAs, Keogh plans, profit sharing, savings plans, defined benefit and employee stock ownership plans.
The contribution limit for defined-contribution Keogh plans increased by $5,000 to $40,000 for 2002.
For purposes of determining eligibility to receive reduced-cost or no-cost services, the deposit balance in the IRA or Keogh plan is treated in the same manner as account balances (maintained by customers of the bank) of the same dollar amount other than those in IRAs or Keogh plans.
The account requires a minimum investment of $25,000 and works for any type of IRA -- Traditional, Roth, Rollover or SEP, as well as Keogh plans.
Offer is not valid for retirement accounts (including IRA's, Trusts, SIMPLE accounts, KEOGH plans, 401(k)'s, etc.