How to initiate a personal defined benefit plan

How to initiate a personal defined benefit plan

Schwab's personal defined benefit plan is a retirement solution for high-earning small business owners. This plan promises participants a specific monthly  lifetime benefit amount Tooltip at retirement. Contribution amounts with this plan are calculated and adjusted annually to reach the targeted goal.

You can initiate a personal defined benefit plan using DocuSign® or paper forms.

All processes

A completed Defined Benefit Plan Funding Proposal Worksheet

  • Your firm's name, master account number, and contact information
  • Information for the plan sponsor Tooltip  and company, including sponsor's name, company name, type of business, address (no P.O. boxes or advisor addresses), phone number, fax number, email address, and company's employer identification number
  • Information for the participant, including birth date, hire date, compensation type (example: W-2 wages, Net Scheduled C, or K-1 Line 14A)*, current year expected compensation, actual compensation from company for highest three consecutive years, expected annual % increase in future compensation, employee types, expected retirement ages, and employee relationships to you
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website)
In addition to the information above, the following may be requested:
Account opening method
  • If using DocuSign to submit forms:
    • For existing Schwab clients, a complete Schwab Advisor Center® profile with the account holder's current email address and mobile phone number
    • For new-to-Schwab clients, the email address and mobile phone number
    • All clients will use text message (SMS) authentication and Knowledge Based Authentication (KBA) for DocuSign

*Only W-2 wages are considered for S-Corporations

For details, see How to use DocuSign. Use the Defined Benefit Plan Funding Proposal Worksheet to initiate a personal defined benefit plan.

  1. Go to the Forms library on Schwab Advisor Center and select the applicable form. Click Select and then select Open PDF.
  2. Complete all necessary fields and ensure all additional features the client requested have been added.
  3. Print the form and obtain any missing information from the plan sponsor. Fax the form to the Schwab Personal Defined Benefit Team at 800-977-8814.

Once you have submitted your request:

  • If the forms were submitted using DocuSign, see the What's next? Section of How to use DocuSign.
  • Once received, the Schwab Personal Defined Benefit Team contacts you or your client within five business days to review the funding proposal.
  • If your client accepts the proposal, the Schwab Personal Defined Benefit Team sends you or your client several items to draft the plan Adoption Agreement: a questionnaire to complete; a Summary of Plan Provisions to review and an IRS Form SS-4 to sign. In addition, copies of specific tax forms will be requested from the client
  • When Schwab Retirement Plan Services (SRPS) receives the completed questionnaire, IRS Form SS-4 and tax forms, they prepare and send your client the legal documents that include the Adoption Agreement and Resolution, account application, SRPS Services Agreement, and Beneficiary form to establish the plan. Your client completes and signs the forms and returns them to SRPS.
  • SRPS forwards the account application to operational services for account setup. You will receive an alert once your client's account is opened.
  • Once the account is opened, the Personal Defined Benefit Team sends a Welcome email to your client including the signed legal documents, a Plan Administrator's Handbook, and an invoice for setup fees.
  • The account holder should consult with their tax advisor if they have any questions about tax implications.
  • Your client mails a check to SRPS for the setup fees.
  • If you have questions about initiating a personal defined benefit plan, call your service team.

To select a form, go to the Forms library on Schwab Advisor Center. 

Form: Schwab Personal Defined Benefit Plan Funding Proposal Worksheet
Resource: Schwab Personal Defined Benefit Plan Information Guide
Resource: Is a Schwab Personal Defined Benefit Plan right for you?


Who is a personal defined benefit plan for?
A personal defined benefit plan may be best for professionals age 50 or over who can make annual contributions of $80,000 or more for at least five years and who have few, if any, employees. It's for people who are looking for a quick way to increase their retirement assets, most likely highly compensated business owners, partners, and key employees who are in their peak earning years.

What are the tax advantages of a personal defined benefit plan?
Contributions are generally 100% tax-deductible, within IRS limits. Earnings grow tax-deferred and are taxable when withdrawn.

What should my client know about administering a personal defined benefit plan?
While personal defined benefit plans have some of the highest contribution limits, there are also substantial costs and administrative requirements based on the terms of the plan, including annual actuarial calculations, required annual funding, and filing of IRS Form 5500.

Are personal defined benefit plans eligible for additional features?
Yes, if the trust agreement permits them. Additional features include:

  • Covered options Tooltip  are available if the trust agreement permits them.
  • Withdrawal power financial advisor (WPFA) or withdrawal power financial advisor—custody (WFPA-C). 

Margin loans, Schwab MoneyLink®, and Visa® debit cards are not available.

When should my client establish and fund their personal defined benefit plan?
The plan must be opened by the end of their business's fiscal year (usually December 31) in order to make contributions for that tax year. To open your plan by year-end, make sure they complete and submit the Funding Proposal Worksheet by November 15. For plans with a January 1 through December 31 plan year, contributions must be made before they file their business' tax return for the year, but not later than September 15 of the following year.

How long will it take to establish a plan?
This plan can take up to two months to set up. Schwab must receive the Funding Proposal Worksheet by November 15 to establish a plan effective for the current year.

Introduction to Personal Defined Benefit Plans