Keogh Plan: What It Is and Why the Name Stuck

A Keogh plan is a tax-deferred retirement plan for self-employed people and unincorporated businesses. If that sounds like a description of a half-dozen plans you already know, that’s the point: the IRS no longer uses the word “Keogh” at all. What used to be called a Keogh is today just a qualified retirement plan for the self-employed.

So why does the term keep showing up? Because it’s still on licensing and CFP exam outlines, it’s still printed on plan documents drafted decades ago, and clients who set one up in the 1990s still call it that. As a benefits broker you won’t sell a Keogh plan, but you’ll hear the word — and being the person in the room who can translate it cleanly is worth the five minutes it takes to read this.

Keogh Plan Meaning in Plain English

The plan is named after Eugene James Keogh, a New York congressman who pushed through the Self-Employed Individuals Tax Retirement Act of 1962. Before that law, retirement plans with tax-deferred contributions were essentially a benefit available to corporate employees. The 1962 act let unincorporated businesses — sole proprietors, partnerships, LLCs — sponsor their own qualified plans for the first time. People started calling them Keogh plans, and the nickname stuck.

Quick definition: A Keogh plan is an older name for a qualified retirement plan established by a self-employed individual or unincorporated business; the IRS now refers to these as qualified plans or HR-10 plans.

Two things eroded the name. First, later tax law stopped distinguishing between corporate and self-employed plan sponsors, so the separate “Keogh” category lost its legal meaning. Then the Economic Growth and Tax Relief Reconciliation Act of 2001 reshaped the self-employed retirement landscape and made simpler vehicles far more attractive. The IRS itself now notes that the term is seldom used. You’ll also see these plans called HR-10 plans, after the House resolution number from the original bill.

The Two Structures: Defined Benefit vs. Defined Contribution

A Keogh isn’t one product. Like any qualified plan, it can be built as a defined benefit plan or a defined contribution plan, and that choice drives everything about how much goes in and how much paperwork comes with it.

Defined contribution Keogh

This is the common one. You contribute a percentage of compensation each year, the money grows tax-deferred, and your retirement balance is whatever you put in plus investment performance. It’s typically structured as a profit-sharing plan (flexible contributions year to year) or a money purchase plan (a fixed percentage formula stated in the plan document). Functionally, it behaves like a SEP IRA or a profit-sharing plan you’d recognize today.

Defined benefit Keogh

This one promises a fixed annual benefit in retirement, like an old-fashioned pension. Contributions aren’t a flat percentage — they’re whatever an actuary calculates is needed to fund the promised benefit, based on the owner’s age, income, and years to retirement. For an older, high-earning sole proprietor trying to shovel money into retirement fast, the deductible contribution can be far larger than any defined contribution plan allows. It also carries the most administrative weight.

Keogh Plan Contribution Limits in 2026

The limits track the standard qualified-plan rules, because that’s what a Keogh is. For a defined contribution Keogh in 2026, the cap is the lesser of 25% of compensation or $72,000 ($70,000 in 2025). One wrinkle that trips people up: for a self-employed individual, the effective limit works out to roughly 20% of net self-employment income, because the 25% is calculated on income that has already been reduced by the contribution itself and by half of self-employment tax.

A defined benefit Keogh has no flat dollar contribution cap. Instead, the plan funds toward a maximum annual retirement benefit — for 2026, the lesser of 100% of average compensation or $290,000 per year. That’s why this structure can absorb very large deductible contributions for the right person.

Keogh vs. SEP IRA vs. Solo 401(k)

This is the comparison that actually matters, because almost nobody should open a new “Keogh” today when the same tax outcome is available with less work. The deductible contribution at a given income level is roughly the same across a defined contribution Keogh, a SEP IRA, and a Solo 401(k). The real differences are administrative.

Read down the table and the pattern is clear. A SEP IRA gives the same contribution room with almost no paperwork but no loan access. A Solo 401(k) matches the contribution room, adds a Roth option, and allows loans. The one thing a Keogh structure offers that a SEP doesn’t is loan availability — and a Solo 401(k) covers that too. That’s the short version of why these plans fell out of favor: more compliance, no offsetting advantage for most people. The defined benefit version is the exception, because its contribution ceiling can dwarf the others for an older high earner.

When a Keogh Actually Comes Up for a Broker

You’re not going to write Keogh plans. But the word lands on your desk in three predictable ways, and handling each cleanly is what separates the advisor who looks current from the one who doesn’t.

The first is exam prep. Health and life licensing curricula and the CFP outline still test “Keogh plan,” “HR-10,” and “qualified plan” as interchangeable vocabulary. If you mentor newer producers, this is the explanation to give them: same thing, retired label.

The second is a legacy plan document. A self-employed client — a consultant, a solo physician, a partner in a small firm — hands you paperwork from the 1990s that literally says “Keogh Plan” on the cover. Knowing it’s a qualified plan, and that the loan provision and the Form 5500-EZ filing trigger at $250,000 in assets are the two live issues, lets you point them at the right CPA question instead of guessing.

The third is the client who says “I have a Keogh” when they mean a SEP, a Solo 401(k), or nothing in particular. Treat the word as a prompt to ask what’s actually in place, not as a fact.

Frequently Asked Questions

Is a Keogh plan still legal?

Yes. The plans still exist and function exactly as before — the IRS simply stopped using the word and now calls them qualified plans or HR-10 plans. Existing Keogh plans don’t need to be renamed or unwound.

What’s the difference between a Keogh plan and an HR-10 plan?

There is no difference. “HR-10 plan” refers to the House resolution number of the 1962 law that created these plans for the self-employed. Keogh, HR-10, and qualified self-employed plan all describe the same thing.

Can an employee set up a Keogh plan?

No. These plans are sponsored by self-employed individuals or unincorporated businesses — sole proprietorships, partnerships, and LLCs. An employee can’t establish one independently, though employees of a sponsoring business can be covered by it.

Is there such a thing as a Roth Keogh plan?

No. Keogh-structure contributions are made pre-tax and taxed on withdrawal in retirement. If a self-employed client wants a Roth option, a Solo 401(k) is the vehicle to look at instead.

Should a self-employed client open a new Keogh plan today?

Rarely. For most people a SEP IRA or Solo 401(k) delivers the same tax outcome with less administration. The defined benefit version is the main case where the structure still wins, because its contribution ceiling can far exceed the alternatives for an older, high-income owner. That’s a CPA and actuary conversation.

Talk to a GA That Sweats the Details

Keogh plans aren’t benefits brokerage — but the instinct behind this post is. Knowing why a term stuck around, what it really means today, and where the live compliance triggers sit is the same diligence brokersbloc brings to group health: getting the details right so you don’t have to guess in front of a client. If you want a general agency that works that way, and that opens the door to non-BUCA carriers your current shelf doesn’t reach, that’s the conversation worth having.