• Individual Retirement Account (IRA): is a retirement plan account that provides some tax advantages for retirement savings. The major types are:
  • Traditional IRA: Contributions are often tax-deductible, often simplified as "money deposited before tax" or "contributions made with pre-tax assets", the account earnings are tax deferred and withdrawals at retirement are taxed as income.
  • Roth IRA - contributions are made with after-tax funds, all transactions within the IRA are tax deferred and withdrawals at retirement are usually tax-free.
• Employer - Provided Plans: These retirement plans are more intricate and requires a more detailed analysis since there are many components to these plans. Contributions, vesting, matching, loans, fees, fixed, variable, are some of the many parameters that need to be considered before setting up a plan. The most common types of accounts are:
  • SIMPLE IRA: The Savings Incentive Match Plan for Employees are business sponsored plans that allows both employer and employee contributions, similar to a 401(k) plan, but with lower contribution limits and less costly administration fees. This plan may be ideal for employers with less than 30 employees.
  • SEP: The Simplified Employee Pension plan is a provision that allows an employer typically a small business or self-employed individual to make larger retirement plan contributions into a qualified account. These contributions are often done exclusively by the employer with no matching funds from the employee.
  • 401(k) and 403(b) plans: With a 401K plan, money is withheld from your paycheck at a level (usually a percentage) determined by the employee. Typically, an employer will then add a matching amount to the employee’s money. Some employers match dollar for dollar, others might match only 10% of the employee’s contribution, and some may not match at all. The money that is withheld from your check is then combined with your company match, and invested in mutual funds that the employee chooses, or money- market, or company stock, or whatever other investment options that your particular 401K plan offers. 403(b)s are mostly designed for non for profit organizations.
  • 412(e) (3): The defined benefit pension plan is a unique retirement plan for business owners and professionals maximizing and offering large deductible contributions, tax-deferred earnings and a defined retirement fund. The program could minimize the contribution for employees and help with estate tax planning. The participant could access tax-favored retirement benefits while these assets are protected from creditors at all times. Avoidance of stock market volatility is a major characteristic of this plan, while the returns are guaranteed. The defined benefit pension plan may not be the ideal plan for all situations and businesses. The large, required contributions that must be made each year will work only when the business is established and highly profitable. It works best when there are very few employees (less than five); and where the owner is around fifty years or older with about 10 years before retirement. No policy loans are allowed. No flexibility in investments. The plan must be funded exclusively through insurance contracts in order for all benefits to be guaranteed. The plan is guaranteed by the Insurance Company which makes this one of the most important considerations of the 412 plans. The choice of a top rated, mutually structured, triple A, superior rated life insurance companies with proven financial strength must be taken into consideration by the client who is planning to install a 412(e)(3) plan.

Owners, Executives and Employee Benefits

• Executive Bonus Arrangement:An executive bonus plan is a non-qualified employee benefit arrangement in which an employer pays additional compensation to one or more selected employee. This executive bonus arrangement also known as section 162 bonus plan may be of interest to employers who want to provide supplemental nonqualified benefits to selected few employees and executives without having to offer that benefit to all employees. Nonqualified executive bonus plans are increasingly popular because of their many tax advantages, and because these plans can be adopted by entities such as C Corps, S Corps, LLCs and partnerships. Bonus plans are flexible and can be tailored to the specific needs and objectives of the company and the participating executives.
• Split- Dollar Insurance Arrangement: In this type of arrangement, employer and employee share one or some of the values of a permanent life insurance policy such as premium payments, death benefit and/or cash value. The taxation of split-dollar life insurance was extensively changed over the past several years. Although the rules now are much clearer than before, many existing plans are now subject to taxation under an entirely different tax regime. Existing split-dollar life insurance plans should be carefully reviewed to determine whether they are still cost-efficient.
• Key-Man Insurance: Sometimes the inevitable happens and valuable and experienced employees must be replaced. That carries a tremendous cost and expense to the company. Training, the “learning curve” and overall adjustments especially with clients carries a cost. This product or insurance policy taken out by a business to compensate that business for financial losses that would arise from the death of a key member of the team is known as key-person or key-man insurance. The aim is to compensate the business for losses and facilitate business continuity. Key-man Insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.
• Buy - Sell Agreements: Within a closely held corporation, shareholders are often concerned about what might occur if one of the owners dies. Will the deceased shareholder’s family retain the economic value of the corporate interest? Can the surviving owners avoid interference from the deceased shareholder's family? Will the survivors have the economic resources to redeem the deceased owner's interest? Given these concerns, corporate owners are best served by entering into a buy-sell agreement while they are all alive. Owners usually choose from two basic types of buy-sell agreements. With a cross-purchase agreement, each owner of the corporation purchases an insurance policy on the other shareholders. Another commonly used type of agreement is a stock redemption agreement, in which the corporation owns policies on the lives of the shareholders. When a shareholder dies, the corporation buys the deceased shareholder’s interest in the company with the insurance proceeds.