Question: 1. As a retirement plan specialist in a financial planning firm you are approached by companies (or business owners) for recommendations in selecting a retirement plan that fits their needs.You are expected to deliver a written proposal to the company (or owner) describing the retirement plan you recommend.
Factors to consider include but not limited to:
Who will the plan benefit and why?
Why does this plan do better in accomplishing the stated goals than other plans?
How does the plan retain employees?
Does the plan encourage early retirement?
Is employer contribution mandatory?
Who will fund the plan?
Who will bear the investment risk?
Will the company contribute stock or cash?
What are the potential costs to employers?
What are downsides of using this type of retirement plan?
What are the eligibility, vesting, contribution rules that you recommend the company to use? And why?
2. Choose a plan for the man in the scenario below.
Mike Smith is the sole shareholder of Craft Manufacturing. Throughout the past years, his company has flourished due to the hard work and loyalty of his employees. The company (total stock) is valued at approximately $5,000,000. Mike would like to retire, but has not found a suitable buyer for the business. Craft does not currently have a retirement plan in place, so Mike would like to explore his options of retirement plans in hopes of finding a plan that will allow him to retire. Mike's objectives are:
1. Fund his retirement in as short of time as possible.
2. Have employees bear investment risk.
3. Willing to contribute company stock or cash.