Putting into place a retirement plan at your company can seem daunting. There are so many options. Plan sponsors need to set goals and determine what type of plan they want.
Ary Rosenbaum, a New York attorney with The Rosenbaum Law Firm P.C., has come up with 10 things all plan sponsors should do before starting a retirement plan.
3. What is the age and compensation of the owner(s) or other highly compensated employees? The biggest benefit for most plan sponsors of setting up a plan is for the owners and highly compensated employees to be able to save the maximum benefit themselves. “One way to achieve the maximum savings is the use of a defined benefit plan, cash balance plan, or a cross-tested profit-sharing allocation that will award higher contributions to these high paid employees and some of the key factors are age and compensation,” Rosenbaum said.
4. How much can you afford in employer contributions? If the company can’t afford any employer contributions, then plans with an employee salary deferral feature, such as a 401(k) plan where the employees contribute all or most of their retirement savings, should be the plan of choice, he said.
8. Find a good third-party administrator or ERISA attorney. They can help you maximize your tax deductions, facilitate your plan administration and maintain its qualification at an affordable price.
9. Get the proper insurance for the plan and the plan’s fiduciaries. The Department of Labor requires all retirement plans get an ERISA bond to protect plan assets from theft. In addition, Rosenbaum recommends buying a fiduciary liability policy that protects the plan’s fiduciaries from any litigation from plan participants for breach of fiduciary duty.