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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
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If you already have a plan in place, changing is tricky. You must carefully plan any changes and clearly communicate them to motivate employee performance and achieve business results. Changes are disruptive and raise concerns with employees. To ensure a positive outcome, think about compensation in a comprehensive manner. Do not just add a 401(k) plan without looking at the overall picture.
So, step back and reassess what you are trying to accomplish before tackling the specifics of the options. Filling out Worksheet 1.1 will pinpoint your long-term objectives and enable you to make informed choices about the options available.
Different situations require different plans. Writing down this information will make it easier to pull together a request for proposals later. It will also help you avoid the following common mistakes.
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What Are You Trying to Accomplish?
Worksheet 1.1 Company Background Information Worksheet
Name of Company _______________________________________________
Address of Company ____________________________________________
Employer Identification Number (EIN) __________________________
Organization Form
_____S-Corp ________C-Corp ________LLC ________Unincorporated
Year Founded
Type of Product or Service ____________________________________
Names of Owners Percentage of Ownership Age
Family Members Work Number of Employees___________ in the Business__________
Employee
Employee Ages_________________ Salary Range__________________
(See also the Employee Data Table Worksheet 4.1 on p. 36.) Affiliated Companies
(Is there common ownership of any other companies?)
How is the business doing?
Stable or increasing revenues?
Can you make a fixed annual commitment to fund a plan? Do you need to determine plan contribution annually?
The Bewildering Array of Alternatives
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How much employee turnover do you experience? What is the competition doing?
How strong are your administrative systems?
Do you outsource payroll and benefits administration? Do you want to minimize administrative requirements? What are your business problems?
What are your goals?
How many years until you retire?
Do you plan to sell the business?
Do you want to maximize owner compensation?
Do you want to share rewards with employees without sharing ownership?
Do you want to encourage employee ownership?
What do you want to avoid?
What is your worst fear for your business?
What is most important to you?
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What Are You Trying to Accomplish?
Common Mistakes in Retirement Plans
Cynthia Sechrest, CPA, co-owner of Sechrest Financial Services, LLC, a fee-only financial planning firm located in Acton, Massachusetts, and on the Internet at www .sechrestfinancialservices.com, shares her insights and experience.
In her tax practice, Cindy met many small business owners with successful businesses but a short-term financial perspective. Cindy saw a need to help her clients with long-range financial planning for small business owners and individuals.
In working with her clients, Cindy sees some recurring patterns:
1. Not taking the time to think about retirement planning
Business owners just do not take the time to think about retirement planning. “Turning 50” is a triggering event for many people to get serious about retirement planning.
2. Picking a plan that is too complicated for their business
It is quite common for a business owner to implement a 401(k) plan that sounds great. In reality, for a business with 10 or fewer employees, the cost can be prohibitive and the complexity overwhelming.
3. Underestimating the amount of time needed to educate employees about the plan
Communicating with employees about the plan takes a lot of time. It is not uncommon for an employer to put a plan in place that achieves only low employee participation. This causes the plan to fail the “nondiscrimination” tests and triggers a big administrative hassle. If employees are not English-speaking, the complexity of communication is significantly greater.
The Bewildering Array of Alternatives
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4. Not understanding how the plan is funded
In looking closely into some plans, Cindy found that they were funded with life insurance or variable annuity contracts. These business owners thought they were dealing with a “pension consultant,” but in reality they were dealing with a life insurance salesperson. If the person’s business card says “securities offers through . . .” or “registered with . . .” you are talking with someone who is selling products, not just offering advice about retirement plans.
Life Insurance Is Not Appropriate for Funding Retirement Plans
Cindy feels strongly that although life insurance is an important part of personal financial plans, it may not be appropriate for retirement plans.
A business owner should ask these key questions:
• “Am I locked in?”
• “Are there surrender charges?”
• “Can I change my investments?”
In conclusion, Cindy encourages business owners to carefully assess what is necessary to successfully implement the retirement plan before jumping in.
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