How to Use a Defined Benefit Plan for a One-Person S-Corp

 

English Alt Text: A four-panel comic titled “How to Use a Defined Benefit Plan for a One-Person S-Corp.” Panel 1 shows a businessman saying, “I’m a solo S-Corp, and I need to save more for retirement.” Panel 2 shows an advisor replying, “A defined benefit plan lets you contribute large, tax-deductible amounts.” Panel 3 shows the businessman holding “Form 5500” and saying, “Adopt Plan,” while another panel shows “Trust Account.” Panel 4 shows the man celebrating and holding a sign that reads “DEFINED BENEFIT CONTRIBUTION $200,000.”

How to Use a Defined Benefit Plan for a One-Person S-Corp

If you’re a solo business owner operating as an S-Corporation and earning a high income, a defined benefit plan could be your most powerful retirement and tax-saving tool.

Unlike 401(k)s or SEP IRAs, defined benefit plans allow you to contribute up to hundreds of thousands of dollars annually—depending on your age and income.

This guide explains how to set up and maximize a defined benefit plan within your one-person S-Corp.

📌 Table of Contents

What Is a Defined Benefit Plan?

A defined benefit (DB) plan is a pension plan that promises a specific retirement benefit based on a formula involving your age, compensation, and years of service.

For solo business owners, the IRS allows large annual contributions to fund that future benefit—especially for those in their 50s or 60s.

Why One-Person S-Corps Choose DB Plans

✔️ Contributions are tax-deductible to the S-Corp

✔️ Annual limits far exceed those of 401(k) and SEP IRA plans

✔️ Can be paired with a solo 401(k) for even greater savings

✔️ Assets grow tax-deferred

How to Set Up a Defined Benefit Plan

1. Work with a third-party administrator (TPA) to draft your plan

2. Open a trust account to hold the DB plan assets

3. Adopt the plan by your tax year-end (usually Dec 31)

4. Make your contribution by your tax return due date (plus extensions)

5. File Form 5500 annually once plan assets exceed $250,000

Contribution Limits: How Much Can You Deduct?

✔️ Contributions are actuarially determined based on your target retirement benefit

✔️ A 55-year-old may contribute $150,000–$250,000 annually depending on income

✔️ Limits increase with age and compensation (up to $345,000 benefit cap in 2024)

Compliance and Exit Strategy

✘ Must make consistent contributions annually—unless plan is frozen

✔️ Can terminate the plan and roll funds into an IRA tax-free

✔️ Avoid overfunding—can trigger excise taxes or IRS scrutiny

✔️ Hire a CPA and actuary familiar with DB plans for solo firms

🔗 Resources for Retirement & Solo Business Tax Strategy

— Turn high earnings into tax-sheltered retirement assets.

— Pair defined benefit savings with private insurance.

— Reinvest DeFi income into qualified plans.

— Use S-Corp distributions to fund advanced insurance.

— Layer charitable and retirement benefits efficiently.



Keywords: defined benefit plan, solo S-Corp retirement, tax-deferred pension, high-income retirement strategy, one-person pension plan