Background: James Blaine is the owner, president, and sole shareholder of Blaine Foods, Inc., a fast-food franchise. The franchise is operated on land and in a building owned by Mr. Blaine, who leases both to the franchise. Mr. Blaine receives a salary of $150,000 a year and receives $50,000 a year in dividends, interest, and capital gains from his investment portfolio. Blaine Foods is managed by a general manager (earning $65,000 a year) and two assistant managers (each earning $45,000 a year), all between 28 and 34 years old. There are also 10 part-time employees, all high school students earning between $650 and $6,000 (Group A), and 12 full time employees over age 21 who will all earn more than $6,000 (Group B). The total compensation for Group A will be $35,000, while Group B total compensation will be $171,000.

Mr. Blaine currently saves for retirement through an IRA. Blaine Foods does not currently have a qualified retirement plan in place and Mr. Blaine would like to develop and implement one. He would like to maximize his tax-deductible contributions, while minimizing expenses for regular employees, who he believes will only work for the corporation for a short time. Mr. Blaine would like answers to the following questions:

QUESTIONS:

1. What is the maximum contribution that could be made on his behalf if a 2018 qualified profit-sharing plan is established at Blaine Foods?
2. If Mr. Blaine established a 2018 SIMPLE IRA plan, what is that maximum contribution that could be made on his behalf?
3. For Mr. Blaine, what is the primary advantage of establishing a defined benefit plan at Blaine Foods?
4. What retirement vehicles are not an option for Mr. Blaine and Blaine Foods?
5. What type of retirement plan is recommended for Mr. Blaine and Blaine Foods?