On date of lunch, business owners and wealth management specialists gathered at place of lunch for a discussion on qualified retirement plans for small-business owners. The lunch aimed to show business owners that it was possible to go beyond a 401(k) plan and get the most out of a pension fund.

Jared Reynolds, of Wilkerson & Reynolds Wealth Management, helped facilitate the lunch. Reynolds talked about how during the past year business owners have been changing their minds on qualified retirement plans.

“We saw those business owners really search out the way to maximize their retirement contributions and shelter money from taxes,” Reynolds says.

One thing Reynolds noticed during his time in wealth management was that business owners who went out and sought qualified retirement plans always came out of their search confused. Reynolds compared the financial field to the medical field and said clients can’t go to just a generalist anymore but have to seek out the help of a specialist.


Qualified retirement
Reynolds stressed that business owners can create retirement documents that are completely legal and “blessed” by the IRS.

David Bare(?), a principal with Advanced Pension Solutions, spoke about Defined Contribution Plans, such as a 401(k), and how such a plan can be more dynamic than what is generally perceived.

“Having a large qualified retirement plan account balance as a business owner is a good thing, say nothing of the tax benefits you get along the way,” Bare says.

During his presentation, Bare pointed out that qualified retirement plans are one of the few things that a business owner can invest in that doesn’t immediately depreciate in value. This is unlike buying equipment, which is immediately depreciated, or buying a building, which could fluctuate in value. Bare did say, however, that many small-business owners don’t make it to implementing a 401(k) and stick with a simple cookie-cutter retirement plan.

Cash balance plans

Dan Kravitz, of Kravitz Inc., spoke on the design and implementation of cash balance plans as an option to go beyond the 401(k) plans. Kravitz Inc. is a national leader in cash balance plans. Kravitz emphasized that such plans can reduce business owners’ tax head.

Cash balance plans are defined benefit plans that specify contributions from the party searching for a plan as well as the investment earnings to be made by that contribution. According to Kravitz, the account grows through the company contribution, which is a percentage of pay or flat dollar amount, as well as an annual interest credit with a guaranteed rate of return.

Kravitz explained that these plans are not as flexible as a 401(k) plan, for which the contribution can be slowed or stopped based on the fiscal year a company has had. With a cash balance plan, a plan amendment must be made, which requires business owners to be more proactive with their planning. Cash balance plans do have extra tax benefits, however.

“Because these are an employer contribution and not a salary reduction, you avoid federal tax, state tax and the Medicare tax,” Kravitz says.

Small-business owners do have options when it comes to retirement funds, and this lunch provided some with the first steps toward creating a qualified plan.