When considering retirement planning for a closely owned business there are many opportunities and challenges. There may be non-owner Key-Employee(s) who are important to the success of the company that may consider employment opportunities with other companies or competitors. There may be management personnel being developed for future company positions. In addition the owner(s) may have little time to investigate their all the options available because they are continually focused on the day to day operation of their company. There comes a time when the owner(s) must consider what is going to happen to the business when they are no longer active in the company for any number of reasons and if it is efficient to have to business end or continue.

Regardless of all other considerations, the owner(s) must set aside money that will be able to work and generate income when they are unable or unwilling to work and generate income. Because of government regulations, it is important to determine what is the most cost efficient and effective program available to do this. This may include qualified and or non-qualified retirement program as well as personal planning options.


Qualified – Retirement Plan Options

  • SEP – Solo Employer/Employee Plan
  • Solo 401k Plan
  • Defined Benefit Plan
  • Fully Insured Defined Benefit Plan
  • SIMPLE plan – Less Than 100 Employees
  • IRS Sec 401k plan Plan With and/or Without Match
  • Defined Contribution Plan PS (with or without 401(k) option)
  • Age-Weighted Profit Sharing Plan
  • Multi-Employer 401(k) Plan

Installation Services

  • Individual Plan Design
  • Plan & Trust as One Document
  • Summary Plan Description (SPD)
  • Social Security Integration
  • Attorney Plan Review
  • IRS Determination Letter (when necessary)
  • Master Trust Account Record Keeping
  • Employee Sub Account Record Keeping
  • Employee Information and Education Meeting(s)


Yearly Administration Services

  • Allocation of Plan Assets Among Participants
  • Allocation of Employee Contribution
  • Allocation of Employer Contribution
  • Allocation of Terminated Participant Forfeiture
  • Annual Report Summary to Employer/Trustee(s)
  • Annual Employee Benefit Statements
  • Completion and Electronic Filing of All Required IRS Forms
  • Semi-Annual Employee Information & Education Meetings

Non-Qualified – Owner / Executive Planning

  • Wage Continuation Program

In order to continue income to a company owner, partner, shareowner or key executive without it being consider a non deductible business expense and have it characterized as deductable employee income, the company is recommended to have a written wage continuation document on file. Many companies utilize a disability income insurance policy to provide all or part of the specified wage continuation. When owned by the company the premiums may be eligible as a business deduction and when payments are made they will be taxable to the executive as ordinary income.

  • Non-Qualified Deferred Compensation

This is a written agreement between the company and a key-employee that provides a promise that the company will continue to compensate the key-employee’s for a set number of years in the future or to their family if they die. There are no tax implications until the payment of the compensation at which time the company receives a tax deduction for the payments and the key-employee or their family receive taxable income.

  • Top Hat Plans

This plan is an employee-paid deferred compensation to selective key executives, typically upper management, shareowner and owners.

With a top-hat plan, key executives who are in a high tax bracket get the benefit of deferring their income until retirement, when they most likely will be in a lower tax bracket. The economic benefit of this deferral is significant, especially if funds are deferred for a substantial period of time.

  •  Selective Executive Retirement Program (SERP)

These programs are similar to the Top Hat Plans, however are usually an employer-paid program.

  • Personal Retirement Program (PRP)

These are programs specifically funded with life insurance and use the tax-deduction available as salary bonus (IRS Sec.162) to pay the premiums. If the double bonus method is used the costs are funded completely through tax deductions.


Income Planning In Retirement

Income planning in retirement takes into consideration all available sources of assets through the company as well as personal resources. Care must be taken regarding how and where the income is generated. It may be prudent to start the income stream in retirement through non-qualified investments and allow the qualified assets (IRA, Company Plan, etc.) to continue to grow tax deferred, or to have the qualified funds distribute initially and position the non-qualified for future income.

It is becoming more difficult to simply use an investment account, bond account, certificate of deposits (CD) or any one program to accomplish retirement goals.

Many retirees have arrange a portion of their funds to be distributed over a set number of years (3 to 5 years) at which time that pot of money is gone. Have another portion of their assets generate income without invading the capital and reinvesting these fund every 3 to 5 years or longer, (CD, Bonds, REITs, etc.). Additionally have a portion in an investment account, with the intention of growing this pot in order to continue the income for as long as needed. This type of planning must be reviewed on regular intervals in order to make certain all components are preforming as intended and adjust as needed.




*Variable products are subject to investment risk, including possible loss of principal. Before investing, carefully consider the investment objectives, risks, limitations, charges and expenses of the product and its underlying investment options. This information can be found in the product and investment option prospectuses. Prospectuses can be obtained by calling my office. Please read carefully before investing.


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Securities and investment advisory services are offered solely through Ameritas Investment Corp. (AIC). Member FINRA/SIPC. AIC and A.J. Pettola & Associates are not affiliated. Additional products and services many be available through Anthony J. Pettola, Jr. or A.J. Pettola & Associates that are not offered through AIC. Securities products are limited to residents of STATES; Pennsylvania, New Jersey, New York, Delaware, Maryland, Florida, Indiana, Massachusetts, New Mexico, Kentucky, North Carolina, Virginia and West Virginia. This is not an offer of securities in any jurisdiction, nor is it specifically directed to a resident of any jurisdiction. As with any security, request a prospectus from your Registered Representative. Read it carefully before you invest or send money. A representative from A.J. Pettola & Associates will contact you to provide requested information. Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.