Chapter 1: Designing the Right Retirement Plan OVERVIEW This chapter provides an overview of the process of designing a retirement plan for a business client. It is intended to provide a framework for the detailed discussions ofeachtype of retirement plan described in the "Retirement Planning" part of this book. The process of designing the "right" retirement plan for a business can be divided into three broad steps: Step 1: Gather the relevant facts. The most important factual information is (1) an employee census (i.e., a list of all employees with their compensation levels, ages, and years of service for the employer); and (2) information about existing and past retirement plans, if any, that the employer has maintained. These are essential; but many other details about an employer's business may be important in various cases.Appendix Dof this book contains a detailed Fact Finder developed by The American College for its Advanced Pension Planning courses. Step 2: Identify employer goals and objectives. In addition to factual information, the planner must develop with the client a list of objectives (broad objectives that can be promoted by a retirement plan, as well as specific goals that will affect plan selection) and their priorities with the employer. Step 3: Choose plan features that promote the employer objectives. This chapter is a preliminary guide to matching objectives with plan design features. Once the design process has zeroed-in on specific plans or design features, later chapters will provide the necessary details. ADVANTAGES FOR THE EMPLOYER The planner must begin with an overall idea of the broad employer objectives that can be promoted by a retirement plan. There are two kinds of employer objectives in this context: (a) broad objectives that favor having some type of retirement plan, such as recruiting the best employees (described below), and (b) narrower goals that will distinguish the benefits of one type of plan from another (explained at "Factors Affecting Plan Selection," later in this chapter). If it is properly designed and implemented, a retirement plan can promote many employer and employee objectives, the most important of which are listed here. While not every one of these objectives can be met with a single plan—in fact, some are conflicting—it is useful to begin this chapter by noting what pension planscando. 1.Help Employees with Retirement Saving. This is the most fundamental reason for retirement plans and it should not be overlooked. Most employees, even highly compensated employees, find personal savings difficult. It is difficult not merely for psychological reasons, but also because our tax system and economy are oriented toward consumption rather than savings.
