2010 was a year that most businesses and business owners found themselves paralyzed because they had no idea what was coming. There is still quite a bit of uncertainty out there, but business can ill afford to continue to be paralyzed by that. So, what is known about the retirement plan industry and what should businesses do to plan for it?
Benjamin Franklin noted that "in this world nothing can said to be certain, except death and taxes." At this time in our country this seems more true than many times in history. The good news is that you can use a retirement plan to help plan for both of these certainties.
Death - Unfortunately you cannot avoid death. However, with a well-funded retirement plan along with life insurance, you can ensure you will be able to leave those assets to your loved ones helping them get through the expenses related to your death as well as provide them with some security. If you cheat death long enough you can then use those assets to provide yourself with a comfortable retirement.
Taxes - It appears as though the there will be an increased tax burden in future years as the U.S. Government looks to get its financial house in order. How does one plan for this? Create and use ways to shield some of your income from these taxes. If you have a retirement plan look for ways to allow yourself to put more into this account on a pre-tax basis. As a business owner, you are probably not an expert on the rules and regulations that govern these plans. That is why there are experts out there that can assist you in this endeavor. First, let's get the doom and gloom out of the way; then look at ways to avoid them.
The IRS has stepped up monitoring retirement plans. They believe that many 401(k) Plans are administered incorrectly and an additional source of revenue will be to audit these plans and look for errors that they can use to leverage excise taxes and penalties on the plan sponsors. Also to this end the DOL hired more than 1,000 additional agents in 2010 with the sole purpose of auditing retirement plans.
The only way to combat this is to ensure your plan is administered within the laws and is still set up to benefit you to the extent you need it to. Make sure your TPA firm has been administering your plan correctly over the years and will continue to do so. You can do this by having you plan reviewed by an independent consultant. This will give you peace of mind that if your plan IS picked for an audit you will not be fined, penalized, or worse you plan disqualified.
If you do not currently have a 401(k) plan and you are a business owner or are self-employed you can partner with a TPA firm and/or consultant to help you set up a plan that meets your goals while still operates within the law. Be wary of any TPA firm or consultant that appears to be trying to sell you something rather than looking out for your best interests.
If you follow this simple advice you should be well prepared to keep your plan working the way it is supposed to into perpetuity.
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