Over the years in the small business arena, when retirement is mentioned, the discussion usually focuses on programs like 401k, Profit sharing, SEP’S, and Simple Plans.
They are all very good plans and every business should offer one of them to their employees for the purpose of having a benefit plan where employees can save for their retirements.
However, not every employer wants to take on the burden of funding retirement for their employees for many reasons. The reasons range from a lack of cash flow, employee groups who would rather take the money home.
In situations where the employer feels they would like to use their company to create a benefit for themselves, and not the employees, they should look into an executive compensation plan called the CEEP (Corporate Executive Equity Plan). The CEEP is a hybrid of a few types of benefit plans used for the higher paid group in companies and for the owners.
The term “non-qualified “, refers to a plan that normally is not used for the masses, but used for a selected group of people. As an example: Employer A can decide that they want to put a plan in for employee B, C but not employees D-Z. In most cases the plan itself would not be tax-deductible as a “plan”, however, it can be tax deductible under certain conditions.
How the CEEP works!
Mr. Jones owner of the Big Dip Donut shop decides that he wants to allocate $25,000 a year into a retirement plan for himself and no other employees of the company. For the most part, he can’t have a qualified retirement plan without offering it to the employees. Even a “Simple Plan”, which is the easiest to implement would have drawbacks. Continue reading “A Great Benefit Every Business Owner Should Be Aware Of! “