Attention Business Owners: It's Time for a Review of Your Company Retirement Plan

Client Centered


Chad Halbur, CFA | President | Cornerstone Private Asset Trust Company

As a fellow business owner, I know that the summer months present an excellent opportunity to assess our company’s progress and explore new ventures. One project I encourage all our clients to consider is their company retirement plan. For those who still need to implement one, now might be the perfect time to evaluate if this employee benefit aligns with your business goals. For those already operating a retirement plan, reviewing its efficacy, and ensuring it remains the optimal choice for your current business stage is essential.

At the core of this endeavor lies the significance of providing your employees with a secure financial future. A well-designed retirement plan is a powerful way to achieve this goal while fostering loyalty and commitment within your workforce. In this article, I aim to shed light on various retirement plan options, including 401(k) plans, Defined Benefit plans, and Rabbi Trust plans. Understanding these options will empower you to make informed decisions that benefit your employees and contribute to your business’s long-term success.

The 401(k) Plan

The 401(k) plan is renowned for its popularity in the corporate world, and rightfully so. It empowers your employees to save a portion of their income for retirement and, with employer contributions, encourages active participation and loyalty. The flexibility of investing in various funds based on risk tolerance and retirement goals allows employees to take charge of their financial future, reaping the rewards of compound interest over time.

While 401(k) plans offer numerous benefits, they also come with responsibilities for business owners. Ensuring correct plan administration, monitoring investment options, and effective communication with employees is key to maximizing the plan’s impact.

The Defined Benefit Plan

A Defined Benefit plan is a traditional pension plan that guarantees a specific monthly benefit for eligible employees upon retirement. This plan calculates retirement benefits based on years of service and salary history, ensuring a stable income stream for employees during their golden years. Defined Benefit plans can be particularly attractive for businesses that reward long-term employees and retain valuable talent.

However, due to substantial financial commitments and administrative complexity, Defined Benefit plans require meticulous attention, making professional assistance indispensable to ensure the plan’s financial viability.

The Rabbi Trust Plan

Rabbi Trust plans offer non-qualified deferred compensation, providing supplemental retirement benefits for key employees. Customizable to fit the unique needs of top talent, these plans enable you to offer enticing compensation packages, fostering employee motivation and retention. The ability to defer taxes on contributions and earnings until retirement can reduce employee tax burdens.

However, it’s essential to know that Rabbi Trust plans are not protected from creditors in certain situations. Careful consideration and proper structuring are vital to safeguard your employees’ interests.

Choosing the Right Plan

Selecting the ideal retirement plan is a decision that warrants careful consideration. Factors such as workforce size, budget constraints, and employee preferences are pivotal in determining the most suitable plan. Legal and regulatory compliance should also be a top priority to avoid potential penalties.

Consulting with retirement plan specialists, like myself, can provide invaluable guidance throughout this process. A thorough assessment of your business goals and employees’ needs will lead to a retirement plan that aligns with your company’s values and fosters financial security among your workforce.

Conclusion

As business owners, we can positively shape our employees’ financial futures. Offering retirement plans like the 401(k) plan, Defined Benefit plan, and Rabbi Trust plan demonstrates a commitment to employee well-being and facilitates talent attraction and retention. The flexibility in plan design and funding limits makes these options even more appealing. Whether you lack a retirement plan or have had one for years, I encourage you to seek expert advice and review a plan tailored to your needs.

A well-designed retirement plan meets the needs of three parties: the business, the employees, and the owners. If you would like a free assessment and review of your plan, our Cornerstone Private Asset Trust team is here to assist you. Let’s make this summer the time to secure a brighter financial future for your employees and your business.

If you have questions or want to learn more, contact Chad Halbur at CHalbur@cornestonetrust.net.