Pensions & Employee Benefits Practice

Case Study: Retirement Plan Strategies Reflect Owners’ Changing Goals

Opportunity: The two owners of a furniture company, both in their mid-fifties, wanted to save more money for retirement. They felt that their employees were well compensated and they did not want to make significant contributions to a retirement plan for them. Every year the owners had been contributing $53,000 each to the Simplified Employee Pension Plan (a "SEP") their company sponsored, and were contributing $100,000 into the SEP for their 10 employees (whose average age was 34).

Action: After gathering certain information, our actuaries proposed that the client establish a Profit Sharing/Safe harbor 401(k) plan along with a Cash Balance Plan.

Result: By modifying the client's retirement program in this manner, we were able to save the client $50,000 in required staff contributions, while increasing the amount of tax deductible contributions for the owners by $294,000.

    Before D&M

  • Owners' Contribution: $106,000
  • Contribution for Staff:  $100,000

    After D&M

  • Owners' Contribution: $400,000
  • Contribution for Staff:    $50,000