The largest expense is my taxes and I feel I pay more than my fair share, can I reduce them?

SITUATION: It seems that every year my taxes get higher. My tax man says there is little I can do to lower my taxes. I hate spending money on things I don’t need just to lower my taxes. What else can I do?

Like you said, taking deductions you don’t need will not improve your long-term financial health. Every employer has the right to set up retirement plans that can provide the maximum benefit to the employer. In our experience, high- income earners with a relatively small number of employees have the best opportunity to take advantage of certain pension plans that few advisors understand.

  • The most basic plan is a 401k which allows salary deferrals of up to 18K with an additional 6K for those over the age of 50, according to the IRS  A discretionary profit sharing plan can allow the employer to increase his/her contributions for up to 59K with the assumption a small contribution must be made for the employees.  Another option called a cash balanced defined benefit plan can allow an employer to contribute additional funds beyond the 59k max.  In our experience, we have seen contributions in the amount over $300k, while making a modest contribution to the employees.

The profit sharing and cash balance plans require actuarial tests. Some employers feel the added cost of the tests exceed the benefit of the plan. However, an illustration can clearly inform the employer of the savings net of employee contributions, administrative cost and tax savings that could exceed 50% of the contribution. This would require a full employee census including age, salary, duties, and start date. With this information, an illustration can be prepared.

Will my retirement plan pass the new DOL rules?


SITUATION: I heard about a local employer who is being sued for excess 401k fees by his employees. What do I need to do to determine if my retirement plan meets the requirements of the new DOL rules?

It is good that you are proactive in this area because the new DOL rules for retirement plans have been called the Obamacare of Retirement Plans. It contains 1,100 pages of regulation that was not presented to congress before it was implemented. Lawyers are sifting through these pages looking for opportunities to levee lawsuits against unsuspecting employers.

An employer should seek the advice of a fiduciary advisor who can carefully access the total cost levied against the plan, if there are any self-dealing attributes of the plan and if the advisor of the plan is fulfilling the duties required of the administrator that ultimately fall upon the employer.

Corrective action should be taken should there be any recommended improvements. The new rules may cause some employers to abandon their retirement plans due to unmeasurable liabilities. If an employer chooses to close his/her plan, employees would simply roll their money to an IRA.