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Setting Up A Defined Benefit Plan As A CD

ESB
  |     |   3 posts since 2020

Hello fellow savers

Has anyone been successful at setting up a CD for a Defined Benefit Plan associated with their company at a Credit Union? Anywhere else?

I have attempted to set this up (as it's no different from an IRA in a way) for my sole member company at a few larger credit unions and have not been successful.

I would appreciate learning more about how one does this? Thanks in advance,

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Answers
Choice
  |     |   937 posts since 2020
If incorporated, need to go to a FI that offers defined benefit plan...suspect very few do it these days but may for defined contribution plan. If unincorporated there are several IRA plans out there but those are defined contribution plans. May want pension plan experts and pay “a lot” to set up your plan and see what they say. I set up my sole proprietorship years ago and used multiple IRAs since cost effective for my business size, IRS provided TIN and I was off to races
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MY2CENTSWORTH
  |     |   437 posts since 2016
ESB, I once worked for a company that provided a SARSEP, which I think was a Salary Reduction Simplified Employee Pension. Those are no longer available as such, but if my memory serves me correctly the old SARSEP became A SIMPLE plan or a Savings Incentive Match Plan for Employees Individual Retirement Account. I'm sure you could find a wealth of information online or possibly with a bank or credit union. The one I was enrolled in was setup by a financial advisor at the company I worked for and while it had many similar rules and regulations as compared to an IRA, there were differences as well. Good luck!
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Ally6770
  |     |   4,294 posts since 2010
On average, a defined benefit plan should cost around $2,000 to $4,000 to set up. Other costs include administration and tax filing fees which can be around the same amount. But the defined benefit plan cost can vary depending on employee count and plan design.
How Defined Benefit Plans Works
Obtain a financial advisor and CPA (or other tax professional)
Engage a third part administrator.
Prepare illustrations of plan contributions.
Draft the plan document.
Make your contributions.
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Ally6770
  |     |   4,294 posts since 2010
Forgot to post that a define benefit pension program is insured by the PBGC and quite a lengthy form has to be filed with them every year. You can get an idea of it by going to Free Erisa and looking up a plan and a few of the forms filed.
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cdqueen
  |     |   78 posts since 2016
No answer to this question, sorry, but another question about CD offerings within this proposed (DB) structure.: Do CD rates within such set up plans tend to run higher than the recent average/high 3% we are seeing today? (3% and falling fast to qualify stipulated rate). It is difficult to see any possible advantage to paying thousands of dollars to set up such a plan where the investment(s) within are limited by pre-determined time horizon and inflexible rate such as CDs are. Almost sounds like good joke material for comedy routine artists-- something isn't adding up. Seeking additional clarity and grateful for any relevant insights. Thank you.
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ESB
  |     |   3 posts since 2020
My challenge is that I have not been able to find a single Credit Union that will open a CD in the name of a DBP. If you know of any I'd much appreciate it. Seems like CUs are comfortable opening IRA CDs and business accounts in a LLC but dont know much about a DBP structures. BTW as someone mentioned above my DBP was opened by a separate administrator, with EIN and the annual filings will cost in the range mentioned above. Thanks
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cdqueen
  |     |   78 posts since 2016
ESB, just asking in an attempt to understand the difference: is the DBP you are seeking to set up different from, analagous to or inclusive of a Roth IRA designation? Or are Roth IRA contributions irrelevant to the type of DBP you are referring to in your post? Thanks for differentiating or commenting on this for clarity.
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ESB
  |     |   3 posts since 2020
Thanks. It's analagous to an IRA in that it is an ERISA administered DBP plan. Unlike an IRA which is tied to one's SSN it has it's own EIN and requires annual set up, filing and admin.
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Ally6770
  |     |   4,294 posts since 2010
Have you even set up your plan, have your trustees, have you had your first trustee meeting establishing your Defined Benefit Plan? I don't think you realize the expense in having one. There are a lot better plans for a single employer. Do your research. Why are you so fixed on a Defined Benefit Pension Plan?
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