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A Keogh plan is a qualified retirement plan set up by self-employed individuals, sole proprietors, and unincorporated businesses. If the business is set up as a corporation, a Keogh may not be used.


Keoghs may only be funded with earned income during a period when the business shows a gross profit. If the business realizes a loss, no Keogh contributions are allowed. A self-employed person may contribute the lesser of 25 percent of their post-contribution income or $52,000. If the business has eligible employees, the employer must make a contribution for the employees at the same rate as their own contribution. Employee contributions are based on the employee's gross income and are limited to $52,000 per year. All money placed in a Keogh plan is allowed to grow tax-deferred and is taxed as ordinary income when distributions are made to retiring employees and plan participants. From time to time a self-employed person may make a nonqualified contribution to their Keogh plan; however, the total of the qualified and non-qualified contributions may not exceed the maximum contribution limit. Any excess contribution may be subject to a 10 percent penalty tax.

An eligible employee is defined as one that:

• Works full time (at least 1,000 hours per year)

• Is at least 21 years old

• Has worked at least one year for the employer

Employees who participate in a Keogh plan must be vested after five years. Withdrawals from a Keogh may begin when the participant reaches 59 1/2. Any premature withdrawals are subject to a 10 percent penalty tax. A Keogh, like an IRA, may be rolled over every 12 months. In the event of a participant's death, the assets will go to the individual's beneficiaries.


Tax-sheltered annuities (TSAs) and tax-deferred accounts (TDAs) are established as retirement plans for employees of nonprofit and public organizations such as:

• Public educational institutions (403B)

• Nonprofit organizations (IRC 501C3)

• Religious organizations

• Nonprofit hospitals

TSAs/TDAs are qualified plans and contributions are made with pretax dollars. The money in the plan is allowed to grow tax-deferred until it is withdrawn. TSAs/TDAs offer a variety of investment vehicles for participants to choose from, such as:

• Stocks

• Bonds

• Mutual funds . CDs


In order for a school to be considered a public school and qualify to establish a TSA/TDA for their employees, the school must be supported by the state, the local government, or a state agency. State supported schools are:

• Elementary schools

• High schools

• State colleges and universities

• Medical schools

Any individual who works for a public school, regardless of their position, may participate in the school's TSA or TDA.


Organizations that qualify under the Internal Revenue Code 501C3 as a nonprofit or tax-exempt entity may set up a TSA or TDA for their employees. Examples of nonprofit organizations are:

• Private hospitals

• Charitable organizations

• Trade schools

• Private colleges

• Parochial schools

• Museums

• Scientific foundations

• Zoos

All employees of organizations that qualify under the Internal Revenue Code 501C3 or 403B are eligible to participate as long as they are at least 21 years old and have worked full time for at least one year.

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