DB Keogh Plan Question

[Iggy]

For a defined benefit Keogh, with a final average pay formula, if the participant has no earned income reported on schedule C, can there be a minimum required contribution, or is it automatically zero, since there is no earned income.

[Fuzzy]

If the sole-prop has established sufficient history of non-zero Schedule C earned income, then there can be a benefit defined (see the plan for the definition of FAE and NRB!). If there is a defined benefit and the plan is not fully funded, then there probably is a minimum required contribution due. If there is no earned income in a particular year, then the defined benefit may be affected, but a contribution is still due if the funding standard account would otherwise show a deficiency. The IRS doesn't really care about the Schedule C (Form 1040) if the Schedule B (Form 5500) calls for a contribution!

In the "declining years", a DB Keogh plan can be a real bummer! The EA and the sole proprietor have to maintain their dialog and plan ahead.