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On Interactive Site, Employer Can Create Individualized Retirement Plan

September 13, 2000|JUAN HOVEY

If you run a growing company, you know that a good retirement plan is key to attracting and keeping good employees--and that choosing the right plan for your business and your employees can be a daunting task.

As outlined in this space last week, the most popular of the many retirement plans now available under federal pension law is the 401(k) plan, which gives employees a say in deciding how much to set aside and where to invest it.

A 401(k) plan is not the best option for every business, however. When it comes to retirement plans, one size does not fit all. Federal pension law makes many other options available to businesses of all kinds, ranging from the sole proprietorship to the corporation with public shareholders. The question is not whether you can find a plan to fit your needs but how to go about it.

Help is available at a new Web site ( launched as a joint effort of the U.S. Chamber of Commerce, Merrill Lynch, the U.S. Small Business Administration and the Department of Labor.

Unlike the Web sites on 401(k) plans described here last week, this one doesn't allow the do-it-yourselfer actually to build a retirement plan. Instead, it takes you through a clear and well-organized discussion of the options available to the employer who wants to set up a plan, including detailed outlines of the different kinds of plans and their advantages and disadvantages.

Written in plain English, the Web site also offers:

* A guide to retirement planning for business owners and employees showing how to predict income needs, set goals and calculate how much the employee must put aside to reach those goals.

* A resources page with links to other Web sites devoted to the ins and outs of retirement plans.

For the employer, the two most useful pages on the Web site respectively offer an overview of all the retirement plans available and guide you to a specific kind of plan reflecting your needs and your business situation.

The first of these, the overview page, walks you through the basics of the different retirement plans available under federal pension law, ranging from 401(k) and 403(b) plans to SEP-IRA and Simple-IRA plans to defined benefit, money-purchase and profit-sharing plans. The overview details:

* What kinds of business entities can offer each plan.

* The advantages and disadvantages specific to each type of plan--for example, the flexibility offered by profit-sharing plans, which allow employers to vary their contributions.

* The complexities and expenses involved in each kind of plan.

* The limits on loans, vesting, and in-service withdrawals.

For the employer ready to proceed, the interactive page asks how many employees you have, what legal form you have given your business, how you want to fund the plan, and what you want to do about such things as employee participation, vesting and loans.

Once you answer those questions, the site recommends a specific plan reflecting your answers and describes it in detail, including the advantages and disadvantages peculiar to the plan.

The Web site does not, however, actually put a plan together. Instead, it offers a checklist of things to do to get your retirement plan in place, including discussing your plan with your accountant, getting professional help in actually drawing up a plan, selecting appropriate investments for the plan and, last but not least, making your employees aware of the plan.

The last is crucial. Pension law requires that you run your pension plan for the benefit of your employees, not yourself or your managers, and as noted in this space last week, there are many, many details to observe.

It takes work to put a pension plan in place--often more work than the harried owner of a growing small or mid-size business wants to devote to it. But the payoff is huge. There is no surer way to get your employees to share your vision of the future than to give them a stake in it in the form of a solid retirement plan, and the sooner you put one in place, the faster that future comes about.


Recent Financing and Insurance columns are available at Juan Hovey can be reached at (805) 492-7909 or

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