There is more attention being paid retirement plans by Congress. How to decrease the federal budget has the hill looking for short term and short sighted solutions. This includes retirement plans. Small business owners must review their current company retirement to be certain they are taking full advantage of current tax laws. Alternatives are many and require a thorough analysis of your current situation.

Consider the case of a cardiac surgeon with two partners plus seven employees that Foster handled. The doctors had a profit sharing planfor years. The surgeon and his partners each saved $49,000 per year, and put away the matching percentage for his employees based on their salaries. After a while, the doctors’ wealth accumulation slowed due to slumping markets. Foster helped them change the plan from a traditional 401(k) profit sharing plan to a strategy using “New Comparability Allocations.” One requirement for this plan is this: If owners want to be able to contribute the full $49,000 for themselves, they must contribute a minimum of 5% of salary for each employee.In addition, the surgeon and his partners added another retirement plan, called a “cash balance plan.” This works for small business owners who are over age 45, have sustained profitability and are worried about taxes and accumulating enough to retire. If done properly, the business owner does not have to pay all of the employees additional money in the cash balance plan. After paying the employees 5% on the defined contribution plan, and then adding another 2.5% minimum on the cash balance side, the business owners only have to include 50 employees, or 40% of the employees, whichever is less.

There are alternatives for all business owners when saving for retirement. Each individual business has it’s own goals and must be custom designed to provide optimum results. Cash balance plans are gaining traction for businesses with steady cash flow.

Please comment or call to discuss how this affects you and your organization.