Company Name





New York

Employee Headcount



There’s no doubt that a “dollar and a dream” is a direct reference to the opportunities that lie in becoming an American success story. For most, it means providing for themselves, their loved ones and building up a nest egg to enjoy the comfort of older age. Individuals working for large fortune 500 organizations tend to have the tools and resources they need to set themselves up for retirement, but business owners need to consider a more careful approach to their finish line. In consideration of the various options, a business must evaluate the costs, benefits and limitations associated each strategy. Some plan options are simple to set up and administer, while others require careful oversight and governance. Education is the cornerstone of determining a proper direction and working with an advisory team could provide the guidance needed.


A small New York based architecture firm had provided the owner with a comfortable
lifestyle for many years. It provided him with many years of profits capable of purchasing
a beautiful home, raising and educating his children, and frequent travel. The company
was providing the owner and employees the opportunity of putting funds away in a Safe
Harbor 401(k) retirement plan, one of the many options available (Exhibit 1). At 61,
however, the limitations of the plan were proving insufficient for the owner’s long term
retirement planning needs.

In addition to a clear need for retirement planning, the company’s 2019 profits were
higher than ever. The company, structured as an LLC taxed as a partnership, needed to
evaluate its year end tax liability. After a meeting with the company’s CPA, it was
determined that without any additional planning, the owner would have to pay taxes on
approximately $1,000,000 of profit. This would be taxable directly to the owner at
regular income tax rates, which between Federal, State, and payroll taxes would
amount to nearly 45.15%. The CPA then suggested meeting with an advisor to
evaluate options for planning.


After meeting with the owner and CPA, it was determined that expanding the employer sponsored retirement strategy was a good idea. Bona Vita Benefits reviewed the firm’s goals
and provided guidance on plan options, introducing the resources of a third-party administrator. After a few design presentations, it became clearer that the plan providing the most
deduction and deferral opportunity was the Safe Harbor 401(k) with Profit-Sharing Plan and Cash Balance Pension Plan.

The company was currently providing a Safe Harbor 401(k) which eliminates some of the year end testing traditionally found on regular 401(k) plans. These tests could preclude key
employees or highly compensated employees from maxing out their deferrals. The company’s planned contribution for 2019 was a total of $51,135, allocating only 16.43% or
$8,400 of that sum toward the owner. To recall our earlier discussion, any amount deducted from company profits would reduce the owner’s tax liability.


By adding the Profit-Sharing Plan and Cash Balance Pension Plan, the owner was able to increase his retirement plan contributions to $287,389 (excluding employee deferrals).
This increase in contribution was available provided he contributed an additional $122,845 toward the employees plans. This increased contribution would require employees meet
a six-year graded vesting schedule which provides the business some protection in the event an employee was terminated prior to fully vesting.

As part of the owner’s initial interests, he wanted to find a way to prepare for retirement within ten years while also reducing his company’s tax burden. By updating the company
retirement program, the owner was able to deduct $452,969 against his company’s 2019 profits, yielding a tax savings of $204,515.


This experience may not be representative of the experience of other clients.  This experience is no guarantee of future performance or success.

ReadPrevious Post
ReadNext Post