Books
in black and white
Main menu
Home About us Share a book
Books
Biology Business Chemistry Computers Culture Economics Fiction Games Guide History Management Mathematical Medicine Mental Fitnes Physics Psychology Scince Sport Technics
Ads

Beyend 401 small buisness owners - Jean D.

Jean.D Beyend 401 small buisness owners - Wiley & sons , 2004. - 274 p.
ISBN 0-471-27268
Download (direct link): beyond401korsmallbusinessowners2004.pdf
Previous << 1 .. 2 < 3 > 4 5 6 7 8 9 .. 98 >> Next

Additional Benefits
Life and disability insurance
Dependent care and health care reimbursement accounts (also called Section 125 plans)
and then add other benefits as the business becomes able to afford the expense (see Table 1.1).
Small businesses have to be creative with compensation since few of them can match the pay and benefits offered by larger companies (see Table 1.2).
Flexibility and the opportunity to share in future growth are major attractions for employees of small businesses. Providing employees with incentive compensation that matches the goals of the business (and business owner) is critical.
Table 1.2 Creative Compensation Incentives
On-site gym/fitness center, basketball Ice cream/pizza days Coffee Car, travel
Flexible hours, work from home
Day care
Bringing child to work Bringing dog to work Company outings Free turkey at Thanksgiving
4
What Are You Trying to Accomplish?
“BE CAREFUL WHAT YOU ASK FOR”
There is an old saying: “Be careful what you ask for—because you may get it.” Employees respond to incentives, so it is important to align your incentives with the company goals. If the two do not match, you will not get the desired results. Poorly designed incentive compensation can backfire and be counterproductive, whereas rewarding excellent performance with well-designed incentive compensation can create a prosperous business environment (see Table 1.3).
FOR A CURRENT TAX DEDUCTION, YOU NEED A “QUALIFIED PLAN”
To get a tax deduction for contributing funds to a “qualified plan,” you must comply with strict rules for including employees and limiting contributions. Examples of qualified plans include 401(k), SEP (Simplified Employee Pensions), SIMPLE (Savings Incentive Match Plans for Employees), and ESOP (Employee Stock Ownership Plans). In addition, there are investment options and differences between defined-benefit (DB) and defined-contribution (DC) plans (see Table 1.4).
Table 1.3 Incentive and Deferred Compensation Plans
Commission and bonus plans Profit sharing
Stock options (qualified and nonqualified)
To Limit Participation, You Need a “Nonqualified Plan” 5
Table 1.4 Qualified Plans (Current Tax Deduction)
401(k) program
Simplified Employee Pension (SEP)
Savings Incentive Match Programs for Employees (SIMPLE) Defined benefit (DB)
Defined contribution (DC)
Employee Stock Ownership Plan (ESOP)
TO LIMIT PARTICIPATION IN THE PLAN,
YOU NEED A “NONQUALIFIED PLAN”
Nonqualified plans allow you to limit the participants in the plan. This means that you can exclude some employees and only include the principals or selected members of your team. Although you will not get a current tax deduction for your contributions, you can achieve aggressive financial benefits with nonqualified plans.
With these plans, there is no tax deduction until the employee begins receiving benefits (usually at retirement). When the employee begins reporting income, the employer can deduct the payment. Examples of nonqualified plans include Supplemental Executive Retirement Plans (SERP), excess benefit plans, and split dollar plans (see Table 1.5).
Nonqualified plans that enhance retirement benefits can be powerful tools to attract and retain key employees. “Forfeiture” provisions (also called “golden handcuffs”) encourage employees to stay with their present employer instead of leaving to work for a competitor.
6
What Are You Trying to Accomplish?
Table 1.5 Nonqualified Plans (No Current Tax Deduction)
Supplemental Executive Retirement Plans (SERP) Excess benefit plans Split dollar plans
LOOK AT THE BIG PICTURE BEFORE DIVING INTO THE SPECIFICS
It is important to step back and reassess what you are trying to accomplish before focusing on specifics. Incentives, deferred compensation, and retirement planning are components of the overall compensation plan for the company. Since compensation drives business performance, you need to align your compensation strategies with your business goals.
THE BEWILDERING ARRAY OF ALTERNATIVES
Evaluating the alternatives can be overwhelming for small business owners who focus primarily on running the business. Examining the options can be like getting lost in the “trees” (details and issues) and losing sight of the “forest” (the business goals). Large corporations hire compensation experts to perform analyses, design models, and create complex, multifaceted compensation programs. Most small business owners, however, have neither the time nor personnel for such elaborate processes.
In choosing a plan for your business, cost and complexity of administration are major factors. So it makes sense to focus on that perspective when looking at your options. As we discuss
The Bewildering Array of Alternatives
7
Table 1.6 Options Framework by Complexity and Cost of Administration
Easy/Inexpensive More Complicated/Costly Complex/Expensive
Bonus Defined contribution Stock options
SEP 401(k) Nonqualified plans
SIMPLE Defined benefit ESOP
the alternatives, we will view them from the perspective of easy and inexpensive to administer, to more complicated and costly, to complex and expensive. This framework will help you evaluate the pros and cons and make a choice that is a good fit for your business (see Table 1.6).
Previous << 1 .. 2 < 3 > 4 5 6 7 8 9 .. 98 >> Next