Retirement Plan Services for Small Business
Owners of small to mid-sized businesses and professional practices (law, medicine, etc.) often face a common dilemma – how to contribute enough to their tax-qualified retirement plan to meet their future needs, without the cost of contributions to cover other eligible employees making the retirement plan unaffordable to the business.
RSM McGladrey Retirement Resources actuaries provide an innovative solution—one which will outperform the maximum allowable pre-tax contribution to a stand alone profit sharing plan.
Wealth Accumulation Vehicle (WAVe)
By adding a new defined benefit pension plan to an existing or new profit sharing plan, your firm will be able to meet its goal of providing the maximum allowable benefit to the partners, while providing modest benefits to all other staff members. Below is an example of a possible plan design:
- A profit sharing plan with a 3% safe harbor 401(k) component (non-elective contribution) was implemented.
- A profit sharing contribution was made where partners received an allocation of 10.3% of pay. All other staff members received an allocation of 6% of pay (each in addition to the 3% safe harbor contribution).
- A defined benefit pension plan with a contribution of 2% of pay on behalf of each non-partner and 16.6% of pay on behalf of each partner was implemented.
Partner/Staff
|
Defined
Benefit Plan
|
Traditional Profit
Sharing Plan
|
Total
|
Adams
|
$117,000
|
$18,000
|
$135,000
|
Baker
|
$45,0002
|
$14,000
|
$59,000
|
Cox
|
$104,500
|
$14,000
|
$118,500
|
Totals
|
$266,500
|
$46,000
|
$312,500
|
Staff Members
|
$23,600
|
$33,500
|
$57,100
|
Totals
|
$290,100
|
$79,500
|
$369,600
|
Percent of Total
|
Owners
|
92%
|
57%
|
85%
|
Staff Members
|
8%
|
43%
|
15%
|
Observations:
- The percentage of contributions allocated to the partners is much higher with WAVe than with a stand-alone profit sharing plan.
- The tax-deductible contributions far exceed the maximum contributions to a stand-alone profit sharing plan.
See the results you can achieve with WAVe
Combining a defined benefit plan with a defined contribution plan to achieve your retirement goals is highly efficient, but with such efficiency comes the need for experienced and knowledgeable consultants to implement and administer the design.
RSM McGladrey Retirement Resources consultants will walk you through every step of the implementation process and will continue to provide the kind of focused and responsive service you deserve.
