Below are a few examples of how the experience and expertise of the SPC team makes a real bottom line impact for our clients. Contact us today to see the difference we can make designing a custom retirement plan for your team or revising your existing plan.
A small business client failed an ADP test. The failed test required a QNEC (Qualified Non-Elective Contribution) to be made and when the TPA calculated the correction, the total amounted to $5,400 due to the staff. The general way to run the calculation is to provide the same % to all participants.
Adam knew there was another way. Revising the calculation with a Bottom-Up QNEC not only reduced the amount of staff which needed a correction, but also reduced the overall amount owed from $5,400 to only $650. That is almost a $5,000 bottom line savings for the client with a simple change to the way the calculations were completed. That is a happy client who is now compliant at a much lower expense.
A doctor office client with an underperforming Cash Balance Plan. This plan had been in force for over 10 years, but never seemed to have the benefit he had been promised. Adam reviewed with the client and due to the initial actuarial design of the plan, the client had been funding the minimum amount required for almost 10 years. Between the Doctor and his wife, they could have contributed almost $1.4M more into the plan in the prior 10 years. That's $140,000 per year in missed tax deductions!
With a consultation about the doctor's goals, when he planned to retire, and the maximum amount he & his wife could comfortably contribute to the plan in the next 5 years, Adam was able to re-design the Cash Balance plan formulas to allow the client to play "catch-up" in contributions. He is now on track to fully max his account at almost $3M and his wife is set to retire with almost $2.8M in her account. A total of $5.8M in tax-deferred retirement plan contributions all stemming from simple consultation & discussion about the company goals, timeline, and background about their plan.
A law firm client wanted to provide a 3% Safe Harbor for their rank & file office employees, but not provide an immediately vested 3% to the highly-paid attorneys. Adam designed their 401k plan to provide the 3% Safe Harbor for the Rank & File employees, but not for the HCEs/Executives.
This unique design solution allowed the law firm to also exclude the large attorney quarterly bonuses & commissions from the definition of plan compensation. Due to the design, the attorneys can now receive a larger annual Profit Sharing contribution in the plan, with a vesting schedule rather than an immediately vested 3%.
What's the net benefit? Lowered the minimum forecasted cost for the firm for immediately vested funds, but provided an opportunity to provide an additional profit sharing opportunity for the executives as a retention tool for the firm. Happy Client with a unique plan design customized for their needs & staff.
A large 401k Plan Sponsor was always upset with their Third Party Administrator because every year that their plan had been operating, there was always a fight about the match calculation & true-up correction every year. The client's financial advisor called Adam for help to determine what was causing the issue. With a quick review & discussion with the client, the issue was discovered - the determination period for the match.
The match was being calculated on an annual basis of the total W2 when the client expected, since they were funding each pay period, that it would be calculated "per pay period". This is a common issue in 401k plans that always gets overlooked. Remember, full annual comp could include all of the pay the participant received before they even entered the plan (so a participant who entered the plan in Oct, could be getting a match based on the Jan-Oct payroll). So when is a 4% match not actually a 4% match - when it isn't calculated the correct way for the client.
Adam was able to redesign the plan moving forward to exclude pay before participation as well as calculating the match per pay period. Net Result? More accurate, easier to manage match for the client and never needing to worry about the dreaded annual true-up. Happy client.
Solo Business Owner with a traditional Defined Benefit Plan upset with needing to keep a high payroll for himself to fully fund his DB plan annually. The client's CPA called Adam to see if there were any changes to the plan we could make to help reduce his annual tax bill. With a plan valuation review and discussion with the actuary, the consultation was easy. Actually there were no changes needed to the plan - simply that no one had informed the client that he could reduce his annual compensation. This is very common.
With a traditional Defined Benefit plan, the annual compensation is generally the average of your highest three years of compensation. This sets the formula moving forward. There was no communication from the actuary to the client to explain that he did not need to keep increasing his annual compensation to the maximum amount each year (back then, needing to take $280k, $290k, $305,000 in W2). His average was already set. The discussion with the client was an interesting experience.
Net Result? The client decreased his annual compensation by 2/3 (saving payroll tax and medicare surcharges), kept his defined benefit contribution exceedingly high, and allowed the CPA to find other tax deductions for the client that weren't possible while the owners compensation was so high. Very happy client and CPA.
In a controlled-group situation (ownership group owns 80%+ of multiple companies), generally you need to cover all employees of all companies either in one large plan or mirrored plans (same overall design for separate plans). This owner was adamant that the new company he just started should not be included in their existing plan because it was not yet profitable and he wanted to wait until it could support the benefit for the new company's employees. The called Adam to see if there was anything they could do.
With a plan review, employee census and several discussions about the long-term goals for the new additional company, the strategy was determined. Adam was able to re-design the existing plan to exclude the owner's new business and its employees with a sample 410(b) test and providing a quick test roadmap for the client so that they were armed with the information and custom plan design suited to their specific needs. It simply takes someone willing to listen to a client working to find a solution.
Net result? The owner is happy and the day-to-day plan administrator is excited that they will not need to manage 2 sets of payrolls & benefits for each company moving forward. Custom Solutions.