Keogh Plan Definition

Cite this article as:"Keogh Plan Definition," in The Business Professor, updated March 20, 2019, last accessed October 19, 2020,


Keogh Plan

Named after its creator, a Keogh plan is a retirement plan for self employed people including owners of small businesses like sole proprietorships and partnerships. Like any other saving plan, insurance Keogh plans are qualified by IRS (Internal Revenue Service). These plans are created as defined-contribution or defined-benefit and most of the plans are created as contribution plans. The contributions are tax deductible but they are also eligible for tax savings.

A Little More on What is a Keogh Plan

Keogh plans are retirement accounts available for self-employed individuals and those in unincorporated businesses. However, these plans are not available for freelancers. Since Keogh plans are qualified by IRS, they are categorized into two; defined benefit and defined contribution plans. Individuals contributing to Keogh plans are eligible to invest in stocks and bonds just like those contributing to 401k and IRA plans.

Qualified Defined-Contribution Keogh Plans

Individuals can contribute towards their retirement either through defined contribution or as profit-defined. In defined-contribution, an individual contributes a given amount of money at regular times up to a given limit while under defined-sharing plans, individuals contribute a given percentage of their business profits. The profit-defined plans, a business does not have to make a profit to make contributions.

Under money sharing plans, a business is required to contribute a fixed percentage of its annual income failure to which the business is penalized. In 2017, the percentage was set at 25 percent of annual incomes or a minimum of $54,000.

Qualified Defined-Benefit Keogh Plans

Qualified defined-benefit plans shows the yearly benefits to be received on retirement. These benefits will be calculated from the salary and the length of employment. The defined benefits Keogh plans are determined by factors such stated benefits, age and returns from investment. The annual benefits of Keogh plans in 2018 were set at $220,000 or 100 percent of an employee’s compensation.

Advantages and Disadvantages of Keogh Plans

Keogh plans were initiated in 1962 by Rep. Eugene Keogh. The accounts are accessible at age 59.5 and withdrawals start by age 70.5. While Keogh retirement plans have high upkeep costs, their contribution is higher than other plans and this is why most people in high-income businesses prefer these plans. Because retirement laws do not set aside Keogh retirement plans, the term is not commonly used.

References for Keogh Plan

Academic Research for Keogh Plan

  • Are” Load” charges of a Keogh Plan deductible as business or investment expenses?, Seidman, J. A., Borini, M. P., Castles, R. H., & Friedman, B. L. (1969). New York Certified Public Accountant (pre-1986), 39(000003), 222. This paper examines how Keogh operates specifically the deductibles applicable in these plans. The paper takes a case of different businesses and individuals and analyzes their contributions in relation to other retirement plans such as IRA and 401K plans.
  • Keogh plan deductions, Quinn, C. (1985). The CPA Journal (pre-1986), 55(000006), 76.  This paper compares and contrasts deduction applicable on IRA, 401K and Keogh plans. It shows that, in the long run, there are higher upkeep costs in Keogh plans than in other retirement plans such as IRA. However, the article also shows the benefits associated with each of the retirement plans and why they all seem to tally in the pros and cons they present.
  • Disputes over IRA and Keogh plan adjudicated, Volkmer, R. R. (2002). Keogh plans are different from IRA. While IRA and 401k plans are available employees of the government and large corporate, Keogh plans are available for self-employed individuals. Disputes may arise in the deductions that apply to different retirement plans. This article examines how disputes were adjudicated.
  • Court upholds Keogh Plan of professional partners whose employees were transferred to corporation, Ress, S. S. (1975). The CPA (pre-1986), 45(000006), 58. This paper examines a case where Keogh plans of the employees of professional partners who transfer to a corporation were upheld. The paper examines the transfer of Keogh plans when a business expands into a corporation or when employees transfer to a different corporation.
  • Choosing a Keogh plan, Alderman, R. H. (1977). Journal of Accountancy (pre-1986), 144(000002), 34. There are two types of Keogh plans bases on the mode of contribution. Individuals can choose between defined contribution and defined benefit plans. This paper examines the two types of plans looking at the advantages and disadvantages to advise consumers on which one to choose. It explains all the intricate details of these two plans to show the consumers how to go about it.
  • How to handle an excess contribution to your Keogh plan., Hoffman, A. J. (1968). GP, 38(4), 187. There are different types of Keogh plan contributions and each has different benefits. Consumers must understand the different benefits and how contributions affect the benefits. This paper explains how consumers should choose the plans and how to handle excess contributions.
  • Terminating a Keogh plan? Get expert tax advice., Dick, S. P. (1977). Dental economics-oral hygiene, 67(4), 67-68. Can a Keogh plan be terminated?  What are the financial implications of terminating such a plan? This paper seeks to answer these questions and offer advice on what consumers are supposed to do. The paper specifically examines tax implications of terminating a Keogh plan.
  • The new Keogh plan., Samer, H. (1984). CAL [magazine] Certified Akers Laboratories, 48(3), 1-3. This paper is a description of the Keogh plan and the changes that have been seen in the plan to compete with other mainstream retirement plans. It shows the response of consumers to this plan and how the consumers should get started on it to reap maximum benefits.
  • Keogh (HR 10) versus Corporate Profit Sharing Plan for Small Businesses, Sawyer, W. W. (1975). Mich. St. BJ, 54, 976. This paper compares HR 10 plans, also referred to as defined contribution plans, with corporate profit sharing plans. The main difference between the two contribution plans is that in HR10 plans, consumers contribute a fixed amount in regular durations while in profit sharing, consumers contribute a certain percentage of their business profit.
  • Comparison of Tax Effects from Death Benefits, including Life Insurance Proceeds, Received under a Qualified Plan versus a Keogh Plan, Kemper, J. D. (1980). Taxes, 58, 547. The author in this paper notes that estate tax and federal income tax implications are different for different individuals and for different plans by the time one receives death benefits. The author offers suggestions on how consumers should structure their plans to get the maximum benefits.
  • Keogh plan, James, S. (2012). In A Dictionary of Taxation, Second Edition. Edward Elgar Publishing Limited. This paper is a deep analysis of Keogh plans and how it is affected by taxation. It examines the various deductions applicable on Keogh plans and how this affects the death benefits.
  • S corporation income not self-employment earnings for Keogh plan deduction purposes., Fiore, N. J. (1996). Tax Adviser, 27(1), 61-62. This paper examines how different deductions apply to different Keogh plans. It compares deductions from S corporation incomes and from self-employment earnings.

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