Case Study #2, ESP

XYZ, Inc

Case Study #2

Goal:

Determine additional contribution vehicles for the Sponsors so that taxable corporate income is lowered, and assets can be redirected to Owner/Sponsor accounts instead to taxes.

Background:

XYZ, Inc. is a profitable company. As a result, there were taxes to pay, and they were looking for ways to reduce that obligation. The CPA suggested asking ProEast (the Advisor) what recommendations could be discussed to make that happen.

Process:

When the retirement plan was established a Profit Sharing (PS) component had been added, though never used. Working with the Third Party Administrator (TPA), calculations were made to maximize contributions to the PS component of the Plan. Upon review, the CPA and the Sponsor agreed that if there was a way to contribute additional funds to the retirement pool, they wanted to see it. Working with the TPA, a Cash Balance (CB) Plan was established for that specific purpose.

Results:

Objective met. Between the PS an CB Plans, a combined addition of nearly $175,000 was made to the accounts of the Sponsors. Of the total contribution made, approximately 80% of the funds went into the accounts of the Owners/Sponsors, with the remaining funds shared between the other 5 employees.

Today:

A full and robust retirement plan remains in effect. Annually close to $200,000 is deposited to the Owner/Sponsor accounts between all contribution vehicles – individual deferrals, as well as matching, profit sharing, and cash balance plan contributions from the Company checkbook.

Case studies may not be representative of the results of all clients and are not indicative of future performance or success. Tax advice not provided. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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