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Flexible Pension Solution™
We create retirement plans that maximize your tax-deductible benefits while simultaneously minimizing employee costs. Using sophisticated analysis tools, we prepare simplified modeling scenarios that illustrate contributions to owners and highly compensated employees. After designing an appropriate strategy, we coordinate plan administration and provide access to turnkey investment* solutions that provide the vital information necessary for regulatory compliance.

The end result is a solution that creates improved confidence for all participants.

Plans include:

  • Coordinating Qualified and Non-Qualified Benefit Plans
  • 401(k)
  • Defined Contribution
  • Profit Sharing
  • Target Benefit and Age Weighted
  • Defined Benefit
  • 412i
  • 419 Welfare Benefit Trust
  • Employee Stock Ownership Plan (ESOP)
  • Prevailing Wage Maximization

Case Study:

Facts and Circumstances:

A profitable Southern California manufacturing company had grown from 3 to more than 30 employees in a few short years. Through it all, they maintained their original SEP IRA plan: one that required immediate 100% vesting to employees…and required that all contributions be equally distributed based on a percentage of the payroll. The company wanted to significantly increase their deductible contribution level as well as provide a long-term incentive to their employees.

Planning Strategy:

Financial Diligence Partners recommended that the company begin to review alternative deductible plan designs by utilizing The Flexible Pension SolutionTM process. Upon receiving current employee census data, several viable plans emerged -- including one that maximized the deductible amount and tended to provide higher benefits to the company’s owners and key employees.

Ultimately, a tiered plan approach was adopted. It included a 401(k) base plan, along with a profit sharing and defined benefit component. The three components worked together to provide a $300,000 deductible contribution -- with the lion’s share allocated to the owners and key employees. Additionally, a new seven year vesting schedule on plan benefits was added, thus contributing to employee retention and reduced plan costs.

Plan administration was outsourced to a third party administrator and all plan assets were invested in a turnkey web-based solution.

  • Employee enrollment meetings were held at the employer’s facility.
  • Plan participants made their own investment choices for the 401(k) and profit sharing values.
  • The employer selected an institutional investment program for the defined benefit plan assets.
  • The pension plan administrator reconciled all of the plan benefits on an annual basis.

    The Payoff:

    The company realized a significant tax deduction, while shifting retirement dollars into credit-proof financial vehicles. The cash flow savings generated by the new deduction allowed the company to add dollars to their bottom line and increase employee job satisfaction and loyalty.

    Prevailing Wage Optimization Case Study:

    Facts and Circumstances:

    A southern California underground contractor was consistently running at approximately $20M in annual revenue. Approximately half of their jobs were subject to the Davis Bacon Act and mandated wages paid at prevailing wage levels. The company had a standardized 401(k) plan in place with a modest matching contribution. This family owned business was founded by the father and currently had one son and daughter actively working in the business. There was also one additional son that worked outside of the business. This business has a good reputation in the industry along with stable cash flows. The business had typically
    put all of the “fringe” dollars on the employee’s check and paid all associated payroll taxes as a result. Financial Diligence Partners in combination with Fringe Insurance Services reviewed the client’s current arrangement and implemented a plan that produced significant bottom line results.

    Planning Strategy:

    As a result of an analysis of the prevailing wage payroll dollars, it was determined that this company was incurring approximately $100,000 of unnecessary payroll tax burden and other associated costs. The Prevailing Wage Optimization PlanTM restructured the company’s 401(k) plan so that fringe dollars were redirected into a combination of employee medical and retirement programs that were not subject to payroll taxes or worker’s compensation premiums. The net savings was then redirected to provide a “golden handcuffs” plan for the top three key people at the company and provide the cash flow to adequately fund a business continuity insurance policy that guaranteed that the business would successfully transition to the next generation. Of course, this client could have also taken the savings and utilized those dollars to reduce future bids and obtain more work.

    By utilizing the planning strategy, the client was able to provide an additional $100,000 directly to the bottom line without having to bid a job, purchase equipment or hire any additional employees. For this client, the result was equal to having an additional $1M in annual revenue.

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