If anyone reading that title has ever sat down with me for a new client interview, you probably know exactly what I’m referring to. The rest of you have probably been left a bit confused and scratching your heads. We’ll clear that up. Stick with me if you haven’t already figured it out.  Well…stick with me anyway. 

For a great many employees, working full time in professional environments, disability income insurance (also known as Long Term Disability) is almost always an afterthought. It’s something likely provided by the employer and almost never works the way or covers the amount of income the employee (or even the business owner) thinks it does. For the small business owner, however, the possible implications of a poorly designed disability plan could be far more dire. So, I’m going to dedicate this month’s article to the independent professional. 

Let’s say we have a professional firm of one hundred employees and our business owner has a stroke or is diagnosed with cancer. (It sounds awful,...

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               This is the actual insidious IRS definition of the federal estate tax. I repeat, “a tax on YOUR right”.  And, thanks to the Sixteenth Amendment (as discussed last month) our grandparents and great-grandparents granted the government rights to tax all our rights. 

Surprisingly enough, the federal estate tax’s deepest leg of its roots reaches all the way down to 1797 and the Stamp Tax, which was a fee the federal government imposed for items it required its stamp of certification upon – like letters of administration, inventories, and wills set for probate. It cost fifty cents and the actual tax on assets transferred was at most $1 per $500 of bequests…but widows, children, and grandchildren were exempt. Oh and guess what? This tax lasted only 5 years. You see, the federal government instituted this tax in order to raise additional revenue for the Navy during an undeclared war with France that ended in 1802. 

Any other history buffs remember what major event happened in 1802 between...

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Last month I gave a teaser that we would dive into the vile world of federal Estate Taxes. I thought perhaps this would be a good opportunity to back up a little further into history and run through a synopsis of tax evolution in America, particularly considering the political winds blowing at present. Why? What does this have to do with Business 101?  Simple. If a business owner doesn’t understand how taxes started and why, they can’t effectively defend against them to protect the legacy they’ve built with hard work. 

In 1787 Alexander Hamilton (the $10 bill guy) along with James Madison (4th US President), and John Jay (not the hair stylist) were polishing up what would 2 years later be ratified by the 13 colonies as the United States Constitution in September of 1789. It was during this two year period that these three men toured the colonies to argue in favor of ratification, thereby creating a very small and very limited federal government to perform a very few and quite clearly defined list of duties...

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            Happy New Year! 2010 is sure to bring some changes, including a few tax planning ones for your retirement plans. It is important to make sure you familiarize yourself each year with these numbers, especially if you are trying to max out your contributions to your retirement accounts. Getting these set for payroll deductions is certainly one thing, but making sure you can plan your budget accordingly is another. Fortunately, there has not been much change for most folks this year, so this will be a brief column.

             Contribution limits for 401k, 403b, 457, and SEP IRA plans will hold at $16,500. For those of you ages 50 and over, you can drop an extra $5500 “Catch-Up” contribution in there as well if you are a little behind on your retirement savings program or trying to recover from late 2008 losses. The maximum limit is $49,000, which includes the employee’s contribution from their paycheck and any matching, profit sharing, or safe harbor contribution from the business. These figures...

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            As we approach 2010, it would be prudent for us to take a snapshot of our businesses right now and perform the following maintenance and polishing programs:

         Review Employee Benefits

        First and foremost, January 1st is NOT a magical date that must be worshiped as the golden day to trigger new or modified employee benefits, including a new 401k plan.  I see too many businesses shoot their collective feet (and by extension, those of their employees) by needlessly hanging onto a bad or too-expensive plan for the sake of paying homage to New Year’s.  You can change these any time of year, but for the sake of this article, I will use the time honored tradition of New Year’s Resolutions.

       Let’s not forget about group insurance programs like our group or individual medical insurance plans. Medical insurance premiums are one of the fastest moving targets in terms of price in the industry.  Premiums are constantly changing due to the extremely competitive nature of these companies. I’ll repeat that – Medical Insurance companies are VERY competitive, especially the smaller ones.  Just wanted to clear that up for anyone who’s been hearing a bunch of bilge bubbling out of Washington lately.

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            We’ve come a long way these last several months in our series about 401k design and best practices. But, even after it’s established, the employees still need to use it. It sounds so silly to put it so simply, but that’s where even the best laid plans of mice of men hit a brick wall. It’s all about the execution of the plan. It’s all about the participation.

            The most common questions that arise are, “How much should I put in?” and “What do you think I should invest in?”  Neither is really an easy answer as each person’s goals, needs, and financial abilities tend to differ.

            For someone who is living on a limited budget and is having a hard time making ends meet, funding a retirement plan of any kind seems like a pure luxury. However, the beauty of most plans is that contributions can be pretty low.  If you want to put in $10/paycheck, you may be able to.  I always advise everyone do something. It creates a good habit and gets you used to the idea of paying yourself...

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 We’ve finally come to the last leg of our journey through the world of company sponsored retirement plans – the financial advisor. The reason I refer to them as “the Face of the Plan” is because they are indeed who your employees will recognize and visually attach to their retirement assets in these cases. Financial advisors provide a point of contact, information, education, and communication (along with the plan provider) to your company and your employees. When employees have questions about their investments, they should be calling the advisor directly – NOT some 800 number.

              Last month we explored two of the most common types of plan providers, each having their pros and cons as they’d relate to any given plan. However, as we discuss plan administration, I want you to bear in mind this singular truism – a bad or even no plan administrator (like a TPA) can, and often does, cost you far more than an excellent one.

             The role of the administrator is to properly design the plan for the sponsoring business, maintain it’s ongoing functions (short of offering investment advice – that’s next month), file annual reports such as returns to the IRS, keep the plan compliant and up-to-date with the ever-changing laws that govern such devices like ERISA and the Pension Protection Act, and defend the plan in a court of law if needed.

 

            Now that may sound like a short and simple list that can be handled by HR staff. Uhhh, no. Has it been done like this by some? Sure. Do I suggest you try? Nah-uh. This is an arduous and time consuming process...

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To pick up where we left off last month, the basic ingredients of any good employer- sponsored retirement plan (like a 401k) are always the same: Plan Provider, Financial Advisor, and Plan Administrator. For this month’s purposes we’re going to dig as deep as we can into plan providers and their associated “Dos and Don’ts.”

  

The Plan Provider is simply the company hosting the plan for the sponsoring employer (aka, Plan Sponsor). This provider is most often either an insurance company (like MassMutual, John Hancock, Prudential, etc…), or held directly with a mutual fund family (like American Funds, Oppenheimer, Fidelity, etc…). Each 401k Plan Provider has their own pros and cons, but there some extremely important, general aspects to be aware of that can and will make all the difference in the world.

  

Mutual Fund Direct – This is often the best (and sometimes only) option for smaller plans, generally under $500,000 in total assets, first-time/start-up plans, or those just...

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In all my professional experience, there has been no problem more pervasive and more frequent with any employer-sponsored retirement plan (like a 401k) than an almost total lack of any real education provided to the employees who participate in the plan. Furthermore, in today’s market and financial climate, there is no problem more potentially devastating to both employee AND employer than this one.

 

 Whether you’re an established business with a 401k plan, a new upstart thinking about one, or an employee who is utterly lost as what to do right now, the following information is an absolute, unequivocal must-read.

 

 For the employee it’s a simple clear cut matter of having your hard-earned retirement monies invested in a manner which may or may not be in your best interest. By that, I’m referring to what kinds of mutual funds or other such investments you really have in there, and are they really what you should be holding given your unique and specific retirement goals? Well…? Are...

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