Company Size is not a factor when choosing pension plans
-- all companies should consider a pension plan
John R. Hall
7 February 2000
Air Conditioning, Heating & Refrigeration News ; Volume 209; Issue 6
WELLESLEY, MA -- If Bruce Fenton had his druthers, all HVAC contractors would
get on the phone and ask his advice on starting a company pension plan. But if
that doesn't happen, he at least wants business owners to explore the benefits
of having a retirement plan in place.
"If you are self-employed and work solo, or own a company with a handful of
employees, you can start a pension plan with benefits equal to, or even greater
than, those offered by big corporations," said Fenton, president of Atlantic
Financial, an Internet-based financial services firm.
Fenton said that having a SEPIRA (simplified employee pension) plan is a
two-sided advantage. He noted that SEPs allow business owners to shelter up to
15% of compensation from taxes -- as much as $30,000 annually.
"With few employees, the tax savings typically outweigh the cost of the SEP
contribution," he explained. "Owners can earn worker loyalty, too"
IS YOUR PLAN OUTDATED?
While many companies already have a pension plan in place, it may be outdated
and "out-of-touch" for many new workers, who can pick and choose their employers
in a worker-starved trade such as the HVAC industry.
"There might be some companies with old-style benefit plans dating back to the
pre-70s," Fenton said. "Those plans are expensive and usually less popular with
And despite the fact that we are well into 2000, Fenton said there is still time
to put a SEP plan in place for 1999. "You can still start a SEP for last year,
up until you file your 1999 tax return.
"If you don't have the money to contribute by April 15, 2000, request an
automatic extension from the IRS. That will give you extra time to raise the
money needed to fund the plan."
As an alternate to SEP, self-employed individuals and their employees may
establish a "Simple IRA plan" that boosts the annual contribution limit to
$6,000 (instead of $2,000, as with ordinary or Roth IRA accounts).
Fenton said that every situation is different and company owners should have
their financial situation looked at professionally.
He cited a typical scenario for starting up an alternative 401K retirement plan.
"A small company with plans for rapid, future growth should look into starting
up a 401K plan. While limits are lower than with a SEP, the owner does not have
to fund the employees' plan too.
"The percentage of income an owner may contribute to his/her own plan is
predicated on the level of participation by lower-paid employees. Adding 25 or
50 cents to every dollar they contribute and offering financial education
seminars can increase participation and work to the owners' advantage."
Fenton can be reached at 508-366-3606; www.atlanticfinancial.com/ (website).
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