Bear Stearns Offering Individual (k) Plan

May 7, 2003 ( - Bear, Stearns & Co. Inc. has entered the Individual (k) plan arena by offering its new retirement product to self-employed individuals, individuals with self-employment income, and certain small business owners.

The Bear Stearns Individual (k) Planis designed for owner-only businesses and businesses with part-time or seasonal employees that can be excluded from participation in traditional 401(k) plans. The product enables small-business owners to contribute significant amounts of income, in some cases more than twice as much as they are allowed under traditional small-business plan regulations.

For 2002, the maximum aggregate contribution is approximately $40,000 or 100% of compensation, whichever is less. This consists of two funding components; the ‘profit sharing’ contribution, including up to 25% of compensation, and the ‘salary deferral’ contribution, which includes up to $11,000 for 2002, $12,000 for 2003 and increases of $1,000 each year through 2006. Additionally, individuals over 50 may select an elective deferral, with a catch-up provision of $1,000 for individuals over 50, according to a news release. 

Further, the Bear Stearns Plan is self-directed, offering a choice of stocks, bonds, mutual funds, and money market funds.   Technical support for the plans will be provided by BISYS.

The Individual (k) was made possible with provision in the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 that lifted many of the limits on the amount and deductibility of contributions for 401(k) plans. Prior to that, single-owner businesses were better off saving for retirement in other types of plans. However, EGTRRA effectively put 401(k) plans on an equal—and, in some cases, better—footing compared with other tax-deferred savings plans for sole proprietorships—giving life to a “new” product, the Individual (k) or “solo (k)” (See Solo “Flight” ).