Overview

Scenario #1

Spam Inc. has a quickly growing workforce of 200 full time employees.Spam has a consistent cash flow for a relatively new company.In order to attract and retain good employees, Spams management wants to install a qualified retirement plan.The Spams CFO is concerned with administrative costs and would like to keep the costs to a minimum.Spams HR head wants a plan that is easily understood and communicated for recruitment purposes.So far, Spam has had little turnover of employees but it is almost too early to tell if that will be an issue.

Scenario #2

Brian is a self-employed public speaker.His business has recently started to grow significantly and he is making a lot of money.He has 12 full-time employees.He is paying a lot in taxes as he is single, without children, and has no mortgage.In addition, his business recently failed to receive 501(c) charitable status.He would like to share a significant amount with his employees (Brian is a charitable soul) and save a good deal for himself (tax relief is Brians first concern).So far, Brian has had no turnover of employees.

Scenario #3

Lumberjacks Inc. has 10 full-time workers year round.In addition, they have a significant workforce that is seasonal (typically 50-100 workers/summer).These seasonal employees typically work less than 300 hours/year and only last 1 or 2 years tops due to the grueling lifestyle.The CEO wants to make sure to provide for the full-time employees but would like to exclude the season employees to whatever extent is possible.He also has some concerns about flexibility of making contributions every year.

Scenario #4

Waffer Thin Inc. produces a high-end edible treat.While they have been in business for years, they have no qualified plans in place.Of their 5000 employees, less than 20 have the important trade secret and can actually produce the product.The management of Waffer Thin Inc wants to tie these employees to the company for fear of them selling secrets to the competition.If this can be done as a part of a retirement plan, they would like to do so.Management would also like to provide some benefit to the rest of the employees, but would like this to be of minimum, consistent, and foreseeable cost.This plan does not need to adequately provide for retirement income for these employees.

Scenario #5

Shrubberies Inc. has 14 full-time employees and has been in business 2 years.Cash flow is not consistent for Shrubberies Inc. just yet.Shrubberies Inc. would like to contribute the employees retirement, but only if they are contributing themselves.Also Shrubberies would like to be able to budget for the contributions and be able to decrease contributions during bad years.Shrubberies Inc. does not want to be responsible for selecting investment vehicles for the individual employees.Stability of the workforce has been consistent to date, but may vary as a competing company has moved into the area.

Scenario #6

Flying Circus INC. has six owners and several full time employees.The company has plenty of cash.The owners/key employees are looking to provide the maximum retirement income for themselves.Administrative costs arent ideal, but will be tolerated.The owner/key employees are significantly older than the rest of the employees.Sheltering significant income is definitely a bonus.The owner/key employees are also looking to eventually pass on ownership to the employees and/or potential buyers.

Action Items

Read all scenarios 1 to 6 in the Overview andcomplete the following:

Select a qualified and/or nonqualified plan type for each business described.

Provide a detailed explanation about why this plan type you chose is suitable and/or more suitable than other options for this business.

Discuss alterations you may make to a standard plan to benefit your client in the given fact pattern (e.g., vesting, participation, etc.).