a Straight Defined Benefit Plans, a Target Benefit Plans, an ESOP, a SIMPLE, a SEP, a 401(k), a 403(b), a Profit Sharing Plan, or a Money Purchase Pension Plan.
An optometrist has a private practice in a medium-sized town. They specialize in unique eyewear. They are the only place within 75 miles where a consumer can find Lacoste and Gucci frames. This doctor is doing well for himself. He has decided that he wants to provide a retirement benefit for all of his employees. He has three full-time employees and four part-time employees that fill in during either busy or evening shifts. He also wants the contributions to have a discretionary nature on the chance that either competition or consumer tastes change his profitability. His employees have been very loyal workers and does not have any desire to use vesting schedules to enhance employee retention. However, the doctor has one employee who has a significant problem with overspending. He does not want to encourage this trend and therefore does not want to offer plan loans. What plan type is best for this potential client?
What kind of retirement plan would be best?
A profit sharing plan along with 401K plan sounds perfect for this type of potential client.
Here employees with profit sharing plans do not make their own contributions, But the client can offer a 401(k), along with a profit-sharing plan. If the client doesn't want any vesting period for the employees retention and also wants the contributions to have a discretionary nature on the chance that either competition or consumer tastes change his profitability then profit sharing plan with 401 k is the best option as 401k does not have any vesting period. Further if client does not make profits then he has the discretion not to contribute in the retirement fund for that particular period and employee can continue with 401k. Further one of his employees like to overspend and he does not want to encourage such thing then plan loans on profit sharing plan is not possible.
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