Keogh Plans

Before 1962, self-employed people who had not incorporated could not avail themselves of the tax incentives associated with pension plans because they were not considered "employees." That year, the Congress authorized specially restricted retirement plans for those individuals (and their employees). Because of Congressman Eugene J. Keogh's efforts to secure their passage, the plans were designated Keogh plans.

Initially, Keogh plans were subject to even tighter qualification rules than were corporate plans. However, the Tax Equity and Fiscal Responsibility Act of 1982 eliminated most of the distinctions between Keogh plans and plans sponsored by corporate employers, in part by extending many of the special restrictions on Keogh plans to all top-heavy plans. Although self-employed and corporate plans no longer differ in structure, the term "Keogh plan" survives, particularly with respect to single-person plans. The term also survives as a line on IRS Form 1040, on which self-employed taxpayers deduct contributions made to a retirement plan on their own behalf .⁽¹⁾