Portsmouth Chamber Business Toolkit Series


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Portsmouth Chamber Business Toolkit Series

  1. 1. March 16, 2011<br />Presentation by:<br />Steve Scott<br />Managing Partner<br />Retirement Solution Group, LLC<br />
  2. 2. Agenda<br />Who Is RSG?<br />Idea<br />Case Studies<br />Next Steps<br />
  3. 3. Who Is RSG?<br />
  4. 4. Retirement Solution Group, LLC<br />All decisions are made in the best interest of participants per ERISA. We adhere to the DOL guidelines on participant reporting and ensure that full disclosure be present throughout. <br /> This is our CORE business.<br />Retirement Plan consulting firm<br />Administers over 250 plans<br />Co-Fiduciary on more than $200,000,000<br />Participant Services for more than 8000 participants<br />2 federally enrolled actuaries on staff <br />2 on-staff enrollment & education support available (Spanish speaking available)<br />We are fully independent<br />Regional offices in Portsmouth, Chicago, and Florida (business in 22 states)<br />Members of NIPA, ASPA and CFDD<br />99% (+) of firm revenue comes from qualified retirement plan related business<br />Retirement Solution Group<br />
  5. 5. Definition of a “Fiduciary”<br />You are a fiduciary of an employee benefit plan if you meet any one of the following tests:<br />You exercise discretionary authority or control over plan assets or plan management - “Functional Fiduciary” <br />You are specifically identified in the written documents of a plan as a “Named Fiduciary”<br />You have discretionary responsibility in the administration of the plan.<br />You manage the plan or its assets or render investment advice for a fee.<br />
  6. 6. Roles & Responsibilities of Plan Fiduciary <br />Cost<br /><ul><li>Breakdown
  7. 7. Prudent Man Standard
  8. 8. Investment Related Expenses
  9. 9. Support Related Expense
  10. 10. PERA Opportunities</li></ul>Technical <br /><ul><li>Proper valuation work
  11. 11. Tax and relevant government filings
  12. 12. Plan Document and SPD compliance
  13. 13. Methodologies
  14. 14. Best Practices</li></ul>Investment <br /><ul><li>Co-Fiduciary
  15. 15. Benchmarking
  16. 16. Conflicts of Interest
  17. 17. Investment Policy Statement (IPS)
  18. 18. Adherence to IPS
  19. 19. Education</li></ul>Investments, Recordkeeping, and Participant Reporting Services<br />Client<br />Independent Pension Consulting Services<br />Through an efficient delivery model, we offer a variety of solutions to your retirement plan. The roles and responsibilities must be clear and explicit. Accountability is key. <br />Retirement Solution Group<br />
  20. 20. Idea<br />
  21. 21. The Idea<br />While a “Selling Event” probably will be a very significant financial event for a business owner, will it be enough?<br />Take monies out of business in a strategic manner prior to transaction event<br />Create a customized solution<br />Defined Contribution (skewed to business owner using various formulas, most notably new comp)<br />Defined Benefit (Largest top-line deduction often available to owners but needs to be managed NOT sold!)<br />RSG can coordinate with advisors, consultants, CPAs, attorneys… to create the supplement to transaction.<br />
  22. 22. Case Studies<br />
  23. 23. Case Study: Optimizing Profit Sharing Allocations<br />Situation: Local dentist sponsored a profit sharing plan with a standard pro-rata allocation (% of pay) set-up by his accountant in the late 80’s . <br />Complication: Maximizing the dentist contributions at the IRS individual aggregate limit ($49,000 in 2010) would required a 20% of pay contribution to all eligible employees.<br />Result: RSG redesigned the Plan using a “cross-tested” profit sharing contribution reducing the required contribution to the staff to 5% of pay. Client saved $58,000 (25% of total contribution) in year 1.<br />Retirement Solution Group<br />
  24. 24. Case Study: Defined Benefit Plan – Retention <br />Situation: Private school, was looking for a way to reward loyalty and service through a retirement plan program.<br />Complication: IRS limits the ability to reward service in defined contribution plans through eligibility provisions (maximum of one year and two entry dates) and a maximum allowable vesting schedule (six year graded or three year cliff vesting).<br />Result: RSG implemented a defined benefit plan with a benefit formula structured to pay and years of service – 1% of pay times years of service up to 25 (maximum benefit is 25% of pay with 25 years of service).<br />Retirement Solution Group<br />
  25. 25. Case Study: Retirement Plans – Overlay Strategy<br />Situation: Three person consulting company with one owner/President driving revenue and making significant monies.<br />Complication: Asked his “advisor” how much he could put in to max out the tax deduction as his earnings were more than $1mm. He was told $11,000 was his max contribution.<br />Result: RSG had the client terminate the SIMPLE prior to the calendar year starting anew and implemented a DC/DB combo plan driven by DB deductions. He is scheduled to receive $242,000 (approx.) in 2011 tax deduction, and 92% of total benefit. <br />Retirement Solution Group<br />
  26. 26. Case Study: Retirement Plans – Overlay Strategy<br />Situation: Sole attorney in his mid-40’s with no staff was putting away $49,000/year into a profit sharing plan and was looking for increased deductions.<br />Complication: The attorney was already maximized at the IRS individual aggregate limit for his Defined Contribution Plan (2010 limit).<br />Result: RSG implemented a Defined Benefit Plan in addition to the Defined Contribution plan. Year 1 contributions/deductions were $111,000 under the Pension Protection Act of 2006 – over a 100% increase.<br />Retirement Solution Group<br />
  27. 27. Case Study: Designed Based “Carve-Out”<br />Situation: Radiologist group had Money Purchase Plan, which they maximized to the DC limit, and had to give a flat allocation to all staff. <br />Complication: Radiologists make a lot of money, and they needed a bigger deduction. Plus, they wanted to give a fair, but not flat, staff contribution.<br />Result: By implementing a “Carve-Out” plan design solution we offer the senior doctors an additional $165,000 deduction via Cash Balance Plan. The 401(k)/Profit Sharing Plan is both cross tested for group allocation and for coverage testing, and lowered their average staff contribution from 10% to 7.5%. No staff or non-owners are regular participants in the Cash Balance Plan. In addition, the Cash Balance Plan is individually allocated so that each doctor can decide appropriate allocation level. Note 40% coverage.<br />Retirement Solution Group<br />
  28. 28. Summary<br />Who Is RSG?<br />Core Competency, Institutional Partnership Experience<br />Case Studies<br />Substantial, and Unique, Value to Business Owner<br />Idea<br />Play Defense – Create Substantial Accounts to “Compliment Sale”<br />Play Offense – Create A Plan With Advisors and Transaction Consultants<br />Consultative vs. Transactional – Many factors can better or ruin a “Plan Design”<br />
  29. 29. So What?<br />The Number of Service Businesses Scheduled for a Transaction Event Creates a “Problem”<br />You can Fix These Problems By: <br />Have a “Transaction Plan” <br />Ensure Financials are “In Order”<br />Look for Creative Tax Strategies Today to Supplement Tomorrows “Pay Day”<br />Work With Specialists<br />Next Steps: <br />Analyze Situation<br />Select a Path<br />Create a Project Calendar<br />Retirement Solution Group<br />
  30. 30. RSG Support Team<br />RSG is always available, 866-352-7731<br />Steve Scott, Managing Partner x 21<br />Scott Emering, Partner x11<br />Ed Emering, Partner/FSA<br />Cynthia Baldwin, ASA<br />Julie Yanez, Sr. Pension Consultant<br />Bob Kibble, Pension Consultant<br />Christie Cheng, Education & Relationship Manager (Bi-Lingual) x31<br />Elvia Sanchez, Education & Relationship Manager (Bi-Lingual) <br />Ian Emering, Associate<br />Dawn Vazquez, Associate x 51<br />Retirement Solution Group<br />