Keogh Plan
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Keogh plans are full-fledged pension plans for self employed people in the United States.
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[edit] History
Named for United States Congress Representative Eugene James Keogh of New York, they are sometimes called HR10 plans and are not Individual Retirement Accounts (IRA).
[edit] Scope
Since a Keogh Plan is a full-fledged pension, there is a Keogh for every employer-sponsored pension-plan design.
A person could have a traditional defined benefit plan with a corporation, and a self-employed person can have a defined-benefit Keogh. Likewise a large company could have a defined-contribution plan like a 401(k) or 401(a) money purchase plan; likewise HR 10 plans could be set up as defined-contribution plans for self-employed earners as well.
The only difference between these plans for self-employed workers and employer-sponsored plans is the calculation of the deductible limit. This occurs merely because the employer pays its share of the FICA or Social Security tax while self-employed people must pay both the employee and the employer portion of FICA. For this reason, the net income under HR10 plans is adjusted to remove the double FICA.
The maximum annual deductible amount is the lesser of 20% of gross self-employment income or $46,000 (in 2008), where 20% of gross self-employment income is a shortcut to the long-form method of calculating 25% net Keogh earnings, as stated in the code.
[edit] Impact
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