EXAMPLE 2
01.Core Concepts
Marie, the sole shareholder in Marie’s Pastries, is contemplating establishing a qualified plan. Marie, a long-time widow, has always treated the employees like her family and the company has experienced very low turnover. She would like to use the retirement plan to assist her in transferring ownership interest to the employees as she is ready to retire. She has a strong preference for avoiding and deferring taxes. She is opposed to mandatory funding and indifferent to integration. For this example, ignore the cost of plan startup and administration. Which plan would be appropriate for Marie given the corporation’s employee census is as follows: Length of service Ownership Compensation Age Employee 30 Years 100% $200,000 55 Marie 20 Years $45,000 38 Frank 14 Years $28,000 42 Ray 11 Years $24,000 34 Debra 100% $297,000 Total The company experiences very low turnover.