Question

Ed started his business a year ago and has two employees. He has been steadily increasing his revenues and feels comfortable offering a retirement benefit plan for him and his two employees. His employees wish to make voluntary contributions. Ed is concerned about future cash flows in the event of a business downturn, as well as growing pains that may accompany future expansion. Ed has asked you to recommend a retirement plan for his business. Develop a recommendation for Ed among SIMPLE, Keogh, SEP and Money Purchase/Targeted Plan in

Answer 1

Since the employee is worried about the consistent profits of the company so I will be advising him in order to enter money purchase targeted plan, because it will be helpful for him in order to to manage the profits when payments for the retirement are done because these money purchase pension plans are profit sharing plans and they would be requiring the employee to sharing the profits out of the overall company so this is a contingent kind of plan which is based upon the profits generated by the company so the employees retirement benefits are majorly dependent upon the profits of the company and hence employed should not be worried about the inconsistency and fluctuations in the profits by adoption of the money purchase plan.