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Publication 560

Setting Up a Qualified Plan(p13)

There are two basic steps in setting up a qualified plan. First, you adopt a written plan. Then, you invest the plan assets.
You, the employer, are responsible for setting up and maintaining the plan.
If you are self-employed, it isn't necessary to have employees besides yourself to sponsor and set up a qualified plan. If you have employees, see Participation under Qualification Rules, earlier.

Set-up deadline.(p14)

To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers).

Credit for startup costs.(p14)

You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2017. For more information, see Credit for startup costs under Reminders, earlier.

Adopting a Written Plan(p14)

You must adopt a written plan. The plan can be an IRS pre-approved plan offered by a sponsoring organization. Or it can be an individually designed plan.

Written plan requirement.(p14)

To qualify, the plan you set up must be in writing and must be communicated to your employees. The plan's provisions must be stated in the plan. It isn't sufficient for the plan to merely refer to a requirement of the Internal Revenue Code.

IRS pre-approved plans.(p14)

Most qualified plans follow a standard form of plan approved by the IRS. An IRS pre-approved plan is a plan, including a plan covering self-employed individuals, that is made available by a provider for adoption by employers. Under the prior IRS pre-approved plan program, a plan could be a master plan, a prototype plan, or a volume submitter plan. Under the restructured program, the three plan types were combined into one type called a pre-approved plan. IRS pre-approved plans include both standardized plans and nonstandardized plans. An IRS pre-approved plan may use a single funding medium, for example, a trust or custodial account document, for the joint use of all adopting employers or separate funding mediums established for each adopting employer. An IRS pre-approved plan may consist of an adoption agreement plan or a single document plan. For more information about IRS pre-approved plans, see Revenue Procedure 2017-41, 2017-29 I.R.B. 92, available at–29_IRB.
Plan providers.(p14)
The following organizations generally can provide IRS pre-approved plans.

Individually designed plan.(p14)

If you prefer, you can set up an individually designed plan to meet specific needs. Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. You may need professional help for this. See Revenue Procedure 2018-4, 2018-1 I.R.B. 146, available at, as annually updated, that may help you decide whether to apply for approval.
User fee.(p14)
The fee mentioned earlier for requesting a determination letter doesn't apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. At least one of them must be a non-highly compensated employee participating in the plan. The fee doesn't apply to requests made by the later of the following dates.The request can't be made by the provider of an IRS pre-approved plan that intends to market to participating employers.
For more information about whether the user fee applies, see Revenue Procedure 2018-4, 2018-1 I.R.B. 146, available at, as may be annually updated; Notice 2017-1, 2017-2 I.R.B. 367, available at; and Form 8717.

Investing Plan Assets(p14)

In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets.
You set up a trust by a legal instrument (written document). You may need professional help to do this.
You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee.
You don't need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. If anyone other than a trustee holds them, however, the contracts or certificates must state they aren't transferable.

Other plan requirements.(p14)

For information on other important plan requirements, see Qualification Rules, earlier in this chapter.