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How Could Two Little Retirement Plans Have Such Big Problems?

A free white paper by Madison Pension Services, Inc.

An advisor who I have known for many years called me for help. His client has a problem with their retirement plans and the IRS. The company that sponsors the plans consists of four employees: a father (the business owner), his spouse, his son and his daughter in law. They maintain two plans: a defined benefit pension plan and a profit-sharing plan. The retirement plan consulting firm that set up the plans had the father covered by the defined benefit plan with the other employees waiving out of that plan. The profit-sharing plan covers the other three employees. The father waived out of profit-sharing plan. Their goal was to give the father a large benefit in the defined benefit pension plan and have the other employees receive smaller benefits from the profit-sharing plan. I have not seen the waivers but I was assured that the signed waivers exist.

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