What laws changed to make defined benefit plans more attractive for small business owners?
Section 415(e) of the Tax Code was repealed. Because of the repeal, a business owner can now use a defined benefit plan to build assets without taking into consideration money already accumulated in other retirement plans. Section 415(b)(1)(A) was amended to increase the maximum retirement benefit allowed. Section 415(b)(2)(C) was amended to lower the age at which the maximum retirement benefit could be received. 2006 Pension Protection Act provides additional flexibility by allowing contributions of no more than 6.0% to a defined contribution plan, in addition to salary deferrals, without impacting the contribution to the defined benefit plan. Together, these changes allow small business owners to contribute more now to a defined benefit plan.
