Posts Tagged ‘pension’

Government Pensions, Social Security & the “WEP”

August 3, 2014

If you’re a participant in a government sponsored pension plan and looking to collect Social Security in retirement, you may find yourself subject to the “Windfall Elimination Provision” or “WEP”.  This mainly applies to workers in government jobs hired before 1984 whereby they didn’t pay into Social Security during their government employment, but may have accrued Social Security credits for other income over their career.  The idea behind the WEP is to avoid retirees “double dipping” into both their government pension plan and Social Security and will therefore reduce the Social Security benefits that would have otherwise been payable.  The reduction in Social Security benefits will never be more than 50% of your monthly pension benefit.

If you’d like to see how it impacts your particular situation, there is an online calculator on the Social Security website at to allow you to see it’s impact.  Also, f you have 30 or more years of “substantial earnings” covered by Social Security, the WEP would not apply where “substantial earnings” are defined as $21,750 in 2014.  – See more at:


Can an Employee Stock Ownership Program (“ESOP”) work for you?

July 16, 2014

As a small business owner, you may have considered selling your business to a competitor or shopped it via a business broker.  One option you might wish to consider is selling it to your employees via an Employee Stock Ownership Plan (“ESOP”).  While every idea has pros & cons, for the business owner an ESOP allows them to sell the company over time rather than all at once – allowing them to remain in control while the company transitions.  Additionally, if the owner sells at least 30% of the company to the ESOP, they can defer capital gains taxes on the proceeds while they remain invested in another company.   From the employee standpoint, this is a retirement benefit and can engender greater employee involvement, retention and motivation. 

These types of plans don’t work for all industries or situations so you will want to talk to both your tax advisor and business consultant.  However, it can be a great tool to allow the owner to transition to the next phase while protecting and rewarding the employees who helped you succeed.


New PBGC Premium Due Date Rule Impacts Small Plans

July 16, 2014

For those defined benefit (“DB”) pension plans covered by the Pension Benefit Guaranty Corporation (“PBGC”), the PBGC has adopted a new uniform rule for premium due dates.  This new rule is applicable for the 2014 and later plan years.  Under the current rules, DB Plans covering less than 100 participants (i.e., small plans) have been able to pay their PBGC premiums as late as 4 months after the end of the year for which they are payable.  Under the new rules, all DB plan sponsors will see premium payments due 9 ½ months after the beginning on the plan year for such they are payable.  As such, this will accelerate the due date for small plans by 6 ½ months. Avoid penalties with awareness of these changes and proper planning.

Good article on Cash Balance Plans

January 6, 2009

The January 2009 edition of the Journal of Accountancy has a great article about the cost/benefits of Cash Balance retirement plans (  I promise it’s not too long or overly technical, but it shows why these plans can provide great tax benefits and the ability to save for retirement in amounts well beyond the $49,000 annual limit in traditional defined contribution plans.  And, you can maintain your existing investment relationships as there is no requirement to “bundle” the design & administration of the plan with the investments.

I’m happy to share more about why a cash balance or other retirement plan does or does not benefit your business, but figured this provides a unbiased view and some basic education.  While your retirement plan  may have suffered during 2008, this provides you a vehicle for far greater retirement funding & tax deductions.