Owner-only Defined Benefit plan

The Edward Jones Owner DB® is a retirement plan designed for business owners who want to maximize retirement contributions and secure a guaranteed retirement benefit. It's for businesses that have no employees other than the owner and their spouse. Unlike defined contribution plans, contributions to a DB plan are calculated annually by an actuary based on the benefit promised at retirement. This structure allows for significantly higher contributions than defined contribution plans like SEP IRAs or 401(k)s.

This plan is especially well-suited for owners aged 40 or older with high, stable income who want to accelerate retirement savings and are comfortable with required annual contributions and increased administrative complexity.

Defined Benefit plan eligibility

Any for-profit or nonprofit business with no employees other than the owner(s) and their spouse(s) can establish an Owner-only DB plan. This includes sole proprietorships, partnerships, LLCs and corporations (S or C).

Employee eligibility

Even in owner-only plans, eligibility rules apply. Employers may choose more lenient criteria, but the maximum requirements are:

• Age: 21 or older, and
• Service: One year of service with at least 1,000 hours or two consecutive years of service with at least 500 hours

Who contributes to a Defined Benefit plan?

Only the employer contributes to a DB plan. Contributions are required annually and must be calculated by a qualified actuary. While technically allowed, vesting schedules are not typically used in Owner-only DB plans.

Employer contributions are tax-deductible to the business. Once contributed to the plan, those assets grow tax deferred and are taxable as regular income when distributed to the participant.

Employer contributions

There is no fixed dollar limit. Instead, the business must contribute the amount needed to fund the promised retirement benefit. This amount varies based on:

• Age and compensation of participants
• Expected retirement age
• Plan assets and assumed rate of return
• Maximum annual benefit allowed

Maximum annual benefit

The benefit payable at retirement is capped by IRS rules. The maximum annual benefit is the lesser of:

• 100% of the average compensation for the highest three consecutive years
• A fixed dollar limit (see Annual limits page)

Owners may pair an Owner-only DB plan with an Owner-only 401(k) to make additional salary deferrals and further increase retirement savings.

Distributions and plan loans

Distributions follow traditional pension rules. Early withdrawals (before age 59½) are generally not allowed and may be subject to a 10% IRS penalty unless an exception applies.

Most DB plans are designed to begin paying benefits at a normal retirement age, often defined as age 62 to 65. However, participants may elect to begin receiving benefits earlier (early retirement) or defer them beyond normal retirement age, subject to plan rules and IRS limits.

Participant loans are technically allowed, subject to plan rules, but they are uncommon.

Defined Benefit plan deadlines

The plan must be established by the end of the business’s fiscal year (e.g., December 31 for calendar-year filers). Employer contributions must be made by the business’s tax-filing deadline, including extensions. DB plans require actuarial certification and annual Form 5500 filings.

Defined DB plan characteristics summary 

Choosing a Defined Benefit plan

To compare Owner-only Defined Benefit plans with other retirement plan types, visit Workplace retirement plans for business owners.

How Edward Jones can help

An Owner-only Defined Benefit plan can help you secure a predictable retirement income and maximize your savings. An Edward Jones financial advisor can help you evaluate whether this plan fits your goals and guide you through setup, funding and ongoing administration.