Overview

The operation of your plan is governed by the plan document. The provisions specified in the document spell out the range of acceptable actions you can take. Solo Pensions helps monitor your plans to ensure the actions taken follow your plan document. It is important that plan operation follows the plan document, the Internal Revenue Code and the regulations to ensure the plans maintain their tax qualified status.

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While retirement plans allow a certain level of flexibility, sometimes changes to the plan are needed. You may make changes to your plan document by executing a plan amendment. Solo Pensions will draft your plan amendment and provide to you for your signature. Once signed, the amendment is executed and officially changes the specific provisions addressed in the plan. A copy of the amendment should be kept in your permanent files, but it does not generally need to be submitted to any federal agency. 

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Example - Increasing Plan Benefits in Cash Balance Plan

A cash balance plan provides a fixed annual contribution of $100,000 to the business owner. The owner decides that he wants to put an additional $100,000 into the plan beginning with the 2024 tax year. He notifies Solo Pensions that he wishes to put in $200,000 going forward. Solo Pensions drafts the resolution, plan amendment and Summary of Material Modifications (SMM), which is signed by the owner, executing the change.

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Example - Reducing Plan Benefits in Cash Balance Plan

Benefits already earned under a cash balance plan (or any defined benefit plan) cannot generally be reduced. However, benefits that have not been earned can be reduced or eliminated entirely prospectively. Consider a cash balance plan the provides a fixed annual contribution of $175,000. In early 2024, the owner loses a significant client and expects lower earnings going forward. He wishes to reduce his cash balance plan contribution to $100,000. For the change to be effective for the 2024 calendar year, the amendment must be executed before he earns the 2024 contribution of $175,000. The annual benefit is earned after completing a Year of Service, which typically occurs after May 31 each year.

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