Wealth Management

We offer our clients a comprehensive approach to effective financial planning, asset growth and asset protection management.
G.R. Reid Wealth Management Services, LLC, offers you a talented, experienced team of professionals that have a broad range of financial expertise and complimentary market specific experience, necessary to help you achieve your financial goals.

  • Our Mission

    The G.R. Reid Mission


    Our firm mission is to provide effective service, based on an in-depth understanding of our clients and their needs. We provide a comprehensive approach to effective financial planning, asset growth and asset protection management. Whether for your business or for your personal investments, we offer our clients a talented, experienced team of professionals with the specific market experience necessary to help you achieve your financial goals.

    Knowing and understanding you, your current financial needs and planning for your future financial objectives is an ongoing process. We will work to deliver and assist you in attaining financial security for you and your family. We will design a tailored investment program to meet your objectives. Our Financial specialists will take into account your risk tolerance, cash flow needs, tax considerations, time horizons and any other relevant personal financial issues.


    Since we are already your tax advisors with knowledge of your financial needs,
    we are starting on a solid foundation.


    Our focus is to understand and determine what return on your investments you will require to achieve your goals. We know and ongoing evaluation of your ever-changing financial position is critical in delivering an effective plan. We are committed to a process that will work to fulfill that plan.

    Since we are already your tax advisors with knowledge of your financial needs we are starting on a solid foundation. We understand that a significant aspect of your financial stability is in the most cost efficient and effective management of retirement plans, whether for you as an individual or for your business. We pride ourselves on our ability to provide you with personal, individualized attention and a wide range of expertise from our diverse staff of in-house professionals including wealth management and insurance experts, risk management specialists and CPAs.

  • G.R. Reid Wealth Management Services

    Because your situation is unique, G.R Reid Wealth Management Services, LLC will offer you the best of both worlds – close personal attention and the expertise to select the most strategic investment vehicles for you. We will continue to provide you with dedicated and responsive personal service and unlimited access to your account information. When you call with a question, concern or request, you will always be able to speak with a knowledgeable professional who knows your particular situation.


    You will receive monthly reports, and as a G.R. Reid client,
    your account information is available to you online at any time via
    our broker dealer’s interactive website.


    Through our broker/dealer, American Portfolios Financial Services Inc., American Portfolios Advisors, Inc., we help our clients achieve gained wealth and financial security through a robust and impartial advisory platform. Our complete open architecture philosophy ensures our delivering to you, our trusted client, the best of technology and financial solutions to fulfill your needs.

    We will take the time to ensure that you not only fully understand, but are in agreement with our approach before we implement a strategic financial plan on your behalf. We monitor every aspect of your current position and will re-evaluate strategies as your needs change.

  • Our Approach

    We align your objectives with the financial services best suited to meet your needs throughout your lifetime.

    G.R. Reid Wealth Management Services, LLC, offers you a comprehensive approach to effective financial planning, asset growth and asset protection management. Whether for your business or for your personal investments, we offer our clients a talented, experienced team of professionals that have a broad range of financial expertise and complimentary market specific experience, necessary to help you achieve your financial goals. Knowing and understanding you, your current financial needs and planning for your future financial objectives is an ongoing process.


    We will work to deliver and ensure financial security
    for you and your family.


    Once we have identified your individual unique goals, we will design a tailored investment program to meet your objectives. Our financial specialists will take into account your risk tolerance, cash flow needs, tax considerations, time horizons and any other relevant personal financial issues.

    We will take the time to ensure that you not only fully understand, but are in agreement with our approach before we implement a strategic financial plan on your behalf. We monitor every aspect of your current position and will re-evaluate strategies as your needs change.

  • Firm Structure

    We Offer A People-Driven Solution ››


    The G.R. Reid & IPC Platform vs. Mutual Funds ››


    G. R. Reid Wealth Management Services


    Comprehensive Business, Estate and Financial Planning
    Local Presence, Identification of Objectives
    Investment Services

    Independent Portfolio Consultants


    Works with G.R. Reid FInancial Advisor to develop objectives, appropriate asset decisions and manager selection
    IPC provides manager due diligence, monitors and reports the performance of investment accounts independent of the portfolio managers


    Broker Dealer | Custodian


    Execute trades based on manager direction
    A brokerage branch office is located within IPC’s operation
    Provides custody and safekeeping of investible assets

    Professional Money Managers


    Macroeconomic outlook and research
    Equity/Taxable & Municipal fixed incomes analysis and portfolio construction
    Identification of investment securities for individual account inclusion



    We Offer A People-Driven Solution

    • One-on-one interviews leading to ongoing, personal relationships with managers
    • Customized portfolio construction based on a client’s specific objectives
    • A detailed Statement of Investment Policy covering their assets
    • Highly effective professionals to handle the transition onto platform
    • An ongoing consulting team that monitors client objectives and expectations

    Some Key Client Concerns

    Investor profiles do not tell the whole story...
    Personal goals and reference points matter more than abstract questionnaires.

    Investors need to get the big things right first...
    Asset allocation should come before manager selection. Focus on avoiding big mistakes.

    Investment costs matter over the long term...
    Costs of investing include: fee structure, transparency, liquidity, taxes, etc.

    Accountability makes a difference...
    Investment knowledge, separation of responsibility independence, timeliness, longterm trust all affect the quality of an investment experience.



    The G.R. Reid & IPC Platform vs. Mutual Funds

    Platform Differentiators

    Client Service
       - Direct Contact with Portfolio Managers
       - Ongoing Communication
       - Quarterly Reviews
       - Third-Party Performance Assessment
       - Written Investment Policy Statements
       - Ongoing Tax Planning & Consultation

    Customized Individual Portfolios
        Portfolios are individually tailored to reflect client-specific parameters such as risk tolerances,
        Objectives, tax status, and time horizon.

    Realized Gains
        Client’s tax liability is based on the gains that the client’s portfolio has incurred.

    Due Diligence
        Client assets are protected by IPC’s strict initial and ongoing due diligence of the managers
        offered on the IPC Platform.

    Expenses
        IPC’s fee is very competitive, all inclusive fee that is often lower than no-load mutual funds

    No Redemptions
        Most mutual fund managers are required to meet fund-holder redemptions that could affect their
        ability to take advantage of buying opportunities. At IPC, managers have no such requirement.

    Optimum Stock Selection
        IPC’s independent managers construct new client portfolios by purchasing only their best
        current investment ideas. Mutual funds often contain securities that the fund manager is holding,
        but would not currently purchase with new money.

    Appropriate Diversification
        IPC uses sophisticated quantitative tools to appropriately guide asset allocation in terms
        of client objectives. Unlike many mutual funds, our independent managers aim to purposely
        diversify in order to mitigate unsystematic risk while avoiding over-diversification.

    Mutual Funds
      ✗ No contact with portfolio managers
      ✗ No customization
      ✗ Standard investment objectives
      ✗ Commingled portfolios
      ✗ No tax considerations
      ✗ Security losses stay within the fund
      ✗ Investors track fund performance

    Independent Portfolio Consultants (IPC)
      ✓ Direct contact with portfolio managers
      ✓ Customized portfolio – no models
      ✓ Client-specific investment policy statement
      ✓ Individually managed portfolios
      ✓ Tax sensitivity
      ✓ Ability to harvest losses
      ✓ Third-party performance monitoring and reporting

  • Alliances

    The G.R. Reid Alliance With Independent Portfolio Consultants ››



    G.R. Reid works with Independent Portfolio Consultants to develop objectives, make appropriate asset decisions, and to assist in manager selection.

    IPC provides G.R. Reid with valuable manager due diligence while monitoring and reporting the performance of our client’s investments with each money manager. The monitoring and performance reporting is independent of the money manager’s reporting system and helps us maintain a system of checks and balances.

    G.R. Reid and Independent Portfolio Consultants follow a fundamentally sound philosophy that delivers customized investment solutions through a time-tested process.

    • Integration of investments into an overall financial plan
    • Independent and objective assessment and monitoring of the investment portfolio
    • Direct initial and ongoing interaction with senior portfolio managers
    • Customized tax management and portfolio transition
    • Accurate and timely account reporting


    Our Proactive Approach
    A Dedicated Ongoing Consulting Team
    Responsible for reviewing client performance and providing independent advice with the objective of reaching client-defined goals as market conditions change.

    IPC Approaches Manager Review From Two Main Perspectives:
    The Investment Management Firm
       - IPC’s Due Diligence Department conducts initial and ongoing review of the firm

    Client’s Results With The Investment Firm
       - IPC’s Ongoing Consulting Department evaluates each client’s individual results



    The G.R. Reid Alliance With Independent Portfolio Consultants
    Comments on Financial Scandals and IPC’s Due Diligence:
    While it is impossible to know for sure if you are dealing with a scandalous firm, IPC’s Operational Structure and Due Diligence process go a long way in helping to avoid what has happened to individuals invested with scandalous firms. Here is how both are employed at IPC.

    Operational Structure
    Perhaps the single most important aspect of some massive frauds was that there was no system of checks and balances to keep the firms “honest.”


    A client’s relationship with IPC involves at least three different functional organizations:

    • Investment Management selects the securities to buy/sell
    • Actually holds, buys and sells the securities
    • IPC-independently monitors the activity of both functions


    1 | IPC does not generally provide investment managers with the opportunity to manage an IPC client account and maintain the custody of the assets as well. The client’s assets are generally custodied away and held separately from the manager so that the client assets can not be legally removed from the account by the manager.

    2 | IPC utilizes data feeds and performance measurement systems to monitor the managers’ trading activities. IPC has electronic data feeds with the various brokers and/or custodians utilized by IPC. IPC imports client transaction data daily into its portfolio management system. Additionally, IPC uses two independent security pricing services to verify security valuations. All the data IPC receives should match the data the manager receives. Since IPC is receiving data from sources independent of the investment manager, this provides IPC the ability to monitor client accounts and calculate performance independently of the investment manager. One of the uses of this information is to compare the investment manager’s advertised performance returns to the client’s performance calculated by IPC. So, if IPC does not initially recognize a well-concealed fraud, the performance discrepancy would likely trigger a review with the manager. All-in-all, this process and systematic review would enable IPC, and then the client, to discover early in the investment process that the investment manager was not living up to the hyped returns.

    3 | Some firms have been reluctant to discuss their investment style and philosophy in-depth, according to reports in the press. Transparency is necessary. IPC believes this is crucial if one is to appropriately evaluate the historical performance results of the firm. Without such information, one fails to understand the nature and the extent of the risk taken to achieve the published performance results.

    4 | IPC utilizes computer models into which we input manager performance data to see how the firm’s historical track record was obtained. This is a good way to confirm or disaffirm a manager’s strategy and investment style. Over various market cycles, management styles have similar characteristics in relationship to asset classes or indices. While computer models are not perfect they do provide insight and further information for discussion purposes with managers to review their investment strategy in relation to their claimed results from that strategy.

    5 | IPC also requires investment firms, approved to manage client accounts on the IPC platform, to claim compliance with the Global Investment Performance Standards (GIPS®). This is an industry-wide set of voluntary performance measurement and presentation standards that firms can comply with so as to enable comparison of firms and their performance track records on an apples-to-apples basis. Perhaps the two most important features of these standards involve the calculation methodology and the use of composite results. Believe it or not, there is more than one-way to calculate performance, and depending on how it is done can result in very different figures. Theoretically, two firms can have the exact same buys and sell, and depending on how they calculate performance, can have two sets of results. By following these standards, performance calculation is one factor that is kept constant. The required use of a composite of all accounts managed to the same strategy is perhaps the single most insightful requirement of the standards. It provides valuable insight into the consistency of results across client accounts, and assures that the firm is not advertising only their “BEST” accounts. Most of the firms IPC works with also have their claim of GIPS® compliance voluntarily verified by notable independent firms.

    6 | Mandated Due Diligence Review on an ongoing basis. Not only does IPC evaluate investment management firms prior to accepting them to manage client’s assets, but we also subject them to thorough ongoing due diligence.

    Not only does IPC evaluate investment management firms prior to accepting them to manage client’s assets, but we also subject them to thorough ongoing due diligence.

  • Money Manager Selection

    Investment Process ››



    The Money Managers you select are dedicated professionals providing expertise and specialization within equities and fixed income markets.
    Money managers specialize in various investment styles and strategies. For large cap and fixed income managers (Primary Asset Class Managers), IPC requires a higher level of service and customization including:
    Personal interaction among the client, advisor and a senior portfolio manager responsible for managing the client account both at the point of sale and on an ongoing basis.
    Customized investment management as directed by client objectives including tax constraints, socially responsible investor or other client specific parameters.


    Investment Strategies & Styles Offered

    Equity Asset Classes

    • All Cap
    • Large Cap
    • Mid Cap
    • Small Cap
    • International
    • REITs


    Equity Investment Styles
    • Growth
    • Core Growth
    • GARP
    • Core
    • Value
    • Yield Value
    • Relative Value
    • Tactical Allocation Management

    Fixed Income Asset Classes

    • Municipal
    • Government I Agency
    • Corporate


    Fixed Income Styles
    • Short Duration
    • Intermediate
    • Core
    • Total Return



    Investment Process

    Quantitative
    Considerations


    Historical Returns Versus Benchmark
    Volatility of Returns
    Risk Adjusted Performance
    Dividend Yield
    Correlation Between Managers

    Qualitative
    Considerations

    Investment Philosophy
    Client / Manager Interaction
    Investment Time Horizon
    Risk Tolerance
    Financial Objectives
    Broad Market Conditions

    Suitable Money Manager Alternatives

  • Business Services

    G.R. Reid Wealth Management Services, LLC, offers a full suite of financial and wealth management services

    Investment Management
    Implement Qualified Retirement Plans:
      - Simplified Employee Pension (SEP) ››
      - SIMPLE IRA ››
      - Profit Sharing ››
      - Age-Weighted / Comparability Profit Sharing Plans ››
      - 401(k) Profit Sharing ››
      - Safe-Harbor 401(k) ››
      - Owner Only / One-Person 401(k) ››
      - Defined Benefit Pension ››


    View Retirement Plan Comparison Chart:

    or



    Simplified Employee Pension (SEP) Plans
    A Simplified Employee Pension plan is an employer sponsored retirement plan that, unlike a traditional qualified plan, has minimal IRS reporting and disclosure requirements for compliance. The employer deposits contributions into the IRA of each plan participant, not into an employer trust account, thereby simplifying the accounting process. Any type of business entity, including a sole proprietorship, partnership or corporation, as well as certain tax-exempt organizations, can establish a SEP plan for its employees. The plan must be in place and funded by the date the employer’s tax return is due, including extensions. Most SEP plans are established using the IRS Model 5305-SEP form.

    Eligibility
    An employee who is at least 21 years old and has worked for the employer in any three of the preceding five years is eligible to participate. A SEP contribution must be made in the current year on his or her behalf, provided the employee earned in excess of the minimum indexed compensation amount ($550 in 2012). The employer may set less restrictive age or service requirements, but the eligibility rules must be applied on a consistent basis to all employees, including owner-employees.

    Contributions
    A SEP plan is funded by the employer on a discretionary basis. The contribution limit for a SEP plan is the lesser of 25% of an individual employee’s compensation (up to $ 250,000) or $50,000 (indexed for 2012) and is generally allocated on a uniform percentage of salary basis. Social Security integration is allowed in SEP plans, but increases the administrative complexity and cost, and is available only when a prototype SEP plan document is used.
    The primary difference between SEP and profit sharing plan contribution limits is that the 25% SEP limit is applicable to each individual participant, whereas the 25% profit sharing limit is applicable to the employer contribution as a percentage of the company’s eligible payroll.

    Advantages
    A SEP plan is easy to set up. It is comparable to an employer establishing and funding a "company provided IRA" for the benefit of each employee. There are no requirements for a separate employer trust document and administrative costs are minimal. Employers sponsoring SEP plans are not required to file annual plan returns (Form 5500) like those employers sponsoring qualified pension or profit sharing plans. In addition, the SEP plan offers tax planning and contribution flexibility. An employer can establish a SEP plan up until its tax-filing deadline, unlike qualified pension or profit sharing plans, which must be in place no later than the last day of the plan year.



    SIMPLE IRA Plans
    Many small business owners are looking for a retirement plan that allows employees to defer a portion of their salaries, without the complexity and the administrative requirements of a 401(k) plan. A SIMPLE IRA plan, which works much like a 401(k) plan but without the administrative cost, may be the solution. Any type of business entity, including a sole proprietorship, partnership or corporation, as well as certain tax-exempt organizations, can establish a SIMPLE IRA plan for its employees. A SIMPLE plan can also be established as a SIMPLE 401(k) trust account, but is not utilized in this format very often. For that reason, the information provided in this section is specific to the SIMPLE IRA format.

    Eligibility
    An employer maintaining a SIMPLE plan may not maintain any other qualified plan in which the employees currently receive benefits. An eligible employer is defined as having 100 or fewer employees. Employees must be eligible if they receive at least $5,000 in compensation during any two preceding years and are expected to earn at least $5,000 in the current year. A less restrictive eligibility requirement may be utilized. There are no minimum participation requirements.

    Contributions
    Employees may defer up to $11,500 (indexed for 2012) or ($14,000 if 50 or older) , with no set maximum percentage of compensation.2 The employer must make a mandatory contribution as either a matching dollar-for-dollar contribution on the first 3% elective deferral or a 2% uniform contribution to all eligible employees, regardless of whether they made an elective deferral. (The employer can elect a lower matching contribution in two out of five consecutive years.)

    Advantages
    A SIMPLE plan is not subject to nondiscrimination tests or top-heavy requirements. If the SIMPLE IRA format is used, there is no requirement to file a Form 5500. As a result, there are minimal plan administration costs, and highly paid or owner-employees are not restricted in their ability to defer as a result of low participation by the lower-paid employees.

    2 (Employees age 50 and older may make a catch-up contribution of $2,500 for 2012.)



    Profit Sharing Plans
    Profit sharing plans offer both design flexibility and discretion as to making contributions. Company contributions are determined by the employer and can be allocated in a number of ways. If the company makes little or no profit during a year, no contribution is required, although low profits don’t restrict the contribution level. A profit sharing plan can include an option allowing the company to make contributions even if the company has no profit.

    Eligibility
    Typically, the eligibility provisions require an employee to have one year of service and be at least 21 years of age. A two-year service period may be imposed if full immediate vesting is provided. For most plans, a year of service is defined as working 1,000 hours in a plan year.

    Contributions
    An employer’s maximum deduction is limited to 25% of the annual compensation paid to eligible employees. The individual maximum contribution limits for employees applied to all defined contribution plans are the lesser of 100% of eligible compensation or $50,000 (indexed for 2012). Depending on the allocation formula in a profit sharing plan, the contributions for individual employees may exceed the 25% level as long as the aggregated employer contribution does not exceed the 25% maximum employer contribution limit.

    Advantages
    The employer can make a discretionary contribution each year, which can be subject to a vesting schedule. A profit sharing plan may be integrated with Social Security or may utilize one of the allocation methods described in a later section of this brochure.



    Age-weighted or Comparability (cross-tested) Profit Sharing Plans
    These plans utilize allocation methods that base contributions on both the age and compensation of eligible employees, similar in concept to a defined benefit pension plan, but with discretionary contributions. Treasury regulations adopted in 1991 allow profit sharing plan nondiscrimination testing under Section 401(a)(4) to be based on anticipated benefits at retirement, similar to defined benefit plans, as opposed to the level of contributions made in that particular year, as defined contribution plans had been required to do in the past.

    Eligibility
    Employee eligibility requirements for age-weighted or comparability profit sharing plans are the same as those for regular profit sharing plans.

    Contributions
    In an age-weighted plan, the participant’s age, or length of time until retirement, is factored into the allocation formula on an individual basis, so older participants receive a larger proportionate share of the contribution. The comparability plan allows the employer to select classes of employees that provide for different contribution allocation levels for each group. If the nondiscrimination tests are met, the employer can allocate a larger proportionate share of the company’s contribution to specific employees the employer wishes to benefit the most.

    Advantages
    An age-weighted plan may be appropriate if a business wants to favor older, highly paid participants. Comparability plans allow an allocation that benefits a specific class of employees. If the favored group is, on an aggregated basis, older than other classes of employees, the allocation formula is likely to pass the required nondiscrimination tests.



    401(k) Profit Sharing Plans
    A 401(k) plan is a type of profit sharing plan that includes an elective salary deferral provision. The employer typically has the ability to make a matching contribution that is tied to the elective salary deferral, as well as a profit sharing contribution that is allocated to all eligible participants. Plan participants usually have the ability to select their own individual asset allocations from various investment alternatives available to the plan.

    Roth 401(k) Profit Sharing Plans
    A Roth 401(k) plan is a new feature of a 401(k) plan that permits participants to make after-tax salary deferrals into a 401(k) plan. If the employer elects to offer the Roth 401(k) provision, participants will have a choice of making pretax or after-tax salary deferrals.

    Eligibility
    Employee eligibility requirements for 401(k) plans are typically one year of service and age 21.

    Contributions
    The three common 401(k) contribution types are:

    • Elective salary deferral – the employee can defer up to $17,000 for 2012. (This is an indexed amount subject to cost of living adjustments and may change each year.)
    • Employer matching – the employer can make a discretionary contribution based on a percentage of the employee’s elective salary deferrals.
    • Profit sharing – can be allocated in any method available to regular profit sharing plans.


    An employer’s maximum deduction is limited to 25% of the annual compensation paid to eligible employees.3 In addition, the employer must meet several nondiscrimination tests, which may further limit the amounts deferred by certain highly paid employees.
    Employees age 50 and older may make a $5,500 catch-up contribution, which does not count against their individual maximum annual additions limit of the lesser of $50,000 or 100% of compensation.

    Advantages
    A 401(k) plan allows both employer and employees to contribute toward retirement while reducing the current tax burden of both. Because employees are actively involved as participants, 401(k) plans typically have a high visibility level in terms of the employee’s perception of the benefit being provided by the employer.

    3 (Only employer matching and profit sharing contributions.)



    401(k) Safe-harbor Plans
    A Safe Harbor 401(k) plan is not subject to nondiscrimination tests, therefore all employees have the opportunity to maximize deferrals.

    Eligibility
    Employee eligibility requirements are the same as those for a 401(k) profit sharing plan.

    Contributions
    Contribution types and limits are the same as those for a 401(k) profit sharing plan, with a "safe harbor" exception. To qualify for the exception, the employer must make a 100% vested contribution of either:
    3% of compensation for each eligible employee or
    A matching contribution of up to 4% of compensation.

    The safe harbor then permits the owner and other highly compensated employees to defer the maximum without regard to the deferral levels of the Non-Highly compensated employees.

    Advantages
    In addition to the advantages offered by a 401(k) profit sharing plan, the Safe Harbor 401(k) avoids the nondiscrimination testing that may limit the amounts the highly compensated employees may defer.



    Owner Only/One-person 401(k)
    A recent tax law permits the owner/partner/shareholders of a small business, and their spouses, to maximize contributions if net compensation is less than $200,000 (indexed for 2012).

    Eligibility
    You an contribute 25% of your $200,000 income up to $50,000 plus up to $17,000 (the maximum employee contribution) to reach the $50,000 limit. A person 50 or older can contribute an additional $5500.00 catchup contribution.
    Employee eligibility requirements are typically limited to attainment of age 21.

    Contributions
    Contribution types and limits are the same as those for a 401(k) profit sharing plan, including Roth 401(k) salary deferrals.

    Advantages
    Filing a Form 5500EZ is not required until either the total plan assets exceed $250,000 (for plan years beginning in 2007 and later) or an employee other than an owner/partner/shareholder or their spouse enters the plan. Additionally, discrimination testing is not required until an employee other than an owner/partner/shareholder or their spouse enters the plan.



    Defined Benefit Pension Plan
    A defined benefit pension plan is designed to provide a specific benefit amount at retirement. This is the traditional pension plan in which the employer bears the risk of providing the promised level of retirement benefits to participants.

    Eligibility
    Employee eligibility requirements for a defined benefit plan are the same as those for defined contribution plans.

    Contributions
    Unlike the defined contribution plans previously discussed, the defined benefit plan limit is based on the benefit to be received at retirement, not on the annual contribution. Each year the plan’s actuary determines the required annual contribution based on several factors such as age, salary level and years of service, as well as interest rate assumptions. The maximum annual benefit for which a plan may fund is the lesser of 100% of the participant’s compensation up to $200,000 (indexed for 2012).

    Advantages
    For participants closer to retirement, contributions to a defined benefit plan may exceed the 100% or $50,000 limit imposed by defined contribution plans. This may be advantageous to a business owner who is approaching retirement age, has never started a retirement plan and wishes to put away as much money as quickly as possible. A defined benefit plan can also be advantageous for an employer wanting to provide a fixed benefit or to favor older employees.

  • Individual Services

    We offer the following services for our individual clients:

    • Investment Management
    • Retirement Planning – IRAs, SEPs Roths
    • College Education 529 Plans
    • Personal Financial Planning
    • Estate Planning
    • Charitable Gift Planning
    • Cash Flow Forecaster
    • Design of Structured Products for Principal Protection
    • - Quantitative Market Neutral Survey
      - Passive Long/Short Strategy
      - Diversified Universe of Market Sectors
      - Tax Efficiency
      - Daily Liquidity
      - Transparency
      - Tax Efficiency


    • Design of Equity Risk Management Solutions (Individuals and Corporations)
    • Customized Cash Management Solutions
    • Design of Asset Management Strategies
    • Trust Services
    • Institutional Fixed Income and Equity Money Managers
    • Customized Fixed Income Portfolios
    • Customized Income Protection Portfolio Strategies

  • Qualified Retirement Plans

    Basic facts about the different types of retirement plans ››

    Features and key points of the different types of retirement plans ››

    Summary of the rules of the different types of retirement plans ››



    Choosing the Right Retirement Plan for Your Business


    Many business owners today are faced with an increasing need to provide a retirement benefit for themselves and their employees. At G.R. Reid Wealth Management Services, LLC, listening to you and helping you and your employees plan for retirement are top priorities. Selecting the right retirement plan for your business is a crucial step and providing one has many benefits:

    • Contributions to a retirement plan today can help you meet tomorrow’s goals of financial security.
    • Establishing a retirement plan may provide tax advantages.
    • Eligible contributions are deductible expenses to your business, and all contributions grow tax-deferred until withdrawn.1
    • Create positive employee relations, helping to attract and retain quality employees, while reducing turnover.


    1 (Additionally, eligible small employers will receive a tax credit equal to the lesser of $500 or 50%
      of the start-up costs associated with the plan.)



    Basic facts about the different types of retirement plans
    Two general categories are available:
      - Defined contribution plans:

    Defined contribution plans, define the contributions to be made each year the plan is in operation. An allocation formula specifies a percentage of compensation to be contributed on behalf of each participant. The monies grow tax-deferred until withdrawn from the plan.


      - Defined benefit plans:

    Defined benefit plans, define the benefits to be received at retirement. The employer determines, within IRS limits, the level of benefits, such as a fixed monthly payment or a certain percentage of compensation. Contributions are made annually to fund these benefits based on certain actuarial assumptions and the benefit formula stated in the plan document.


    Plans listed on this page are considered defined contribution plans. All, except SEP, SIMPLE and Safe Harbor 401(k) plans, allow employer contributions to be subject to a vesting schedule that requires a certain number of years of service to become fully vested.


    Most employer sponsored retirement plans are required to file a Form 5500 with the IRS, which discloses specific plan activities during the year. The preparation and filing of this annual report adds to the administrative expense of maintaining the plan.
    Employee withdrawals from a retirement plan made before the age of 59 ½ or normal retirement age may be subject to an IRS penalty for early withdrawal, in addition to being subject to ordinary income tax.



    Features and key points of the different types of retirement plans:
      - Simplified Employee Pension (SEP) ››
      - SIMPLE IRA ››
      - Profit Sharing ››
      - Age-Weighted / Comparability Profit Sharing Plans ››
      - 401(k) Profit Sharing ››
      - Safe-Harbor 401(k) ››
      - Owner Only / One-Person 401(k) ››
      - Defined Benefit Pension ››


    View Retirement Plan Comparison Chart:

    or



    Simplified Employee Pension (SEP) Plans
    A Simplified Employee Pension plan is an employer sponsored retirement plan that, unlike a traditional qualified plan, has minimal IRS reporting and disclosure requirements for compliance. The employer deposits contributions into the IRA of each plan participant, not into an employer trust account, thereby simplifying the accounting process. Any type of business entity, including a sole proprietorship, partnership or corporation, as well as certain tax-exempt organizations, can establish a SEP plan for its employees. The plan must be in place and funded by the date the employer’s tax return is due, including extensions. Most SEP plans are established using the IRS Model 5305-SEP form.

    Eligibility
    An employee who is at least 21 years old and has worked for the employer in any three of the preceding five years is eligible to participate. A SEP contribution must be made in the current year on his or her behalf, provided the employee earned in excess of the minimum indexed compensation amount ($550 in 2012). The employer may set less restrictive age or service requirements, but the eligibility rules must be applied on a consistent basis to all employees, including owner-employees.

    Contributions
    A SEP plan is funded by the employer on a discretionary basis. The contribution limit for a SEP plan is the lesser of 25% of an individual employee’s compensation (up to $ 250,000) or $50,000 (indexed for 2012) and is generally allocated on a uniform percentage of salary basis. Social Security integration is allowed in SEP plans, but increases the administrative complexity and cost, and is available only when a prototype SEP plan document is used.
    The primary difference between SEP and profit sharing plan contribution limits is that the 25% SEP limit is applicable to each individual participant, whereas the 25% profit sharing limit is applicable to the employer contribution as a percentage of the company’s eligible payroll.

    Advantages
    A SEP plan is easy to set up. It is comparable to an employer establishing and funding a "company provided IRA" for the benefit of each employee. There are no requirements for a separate employer trust document and administrative costs are minimal. Employers sponsoring SEP plans are not required to file annual plan returns (Form 5500) like those employers sponsoring qualified pension or profit sharing plans. In addition, the SEP plan offers tax planning and contribution flexibility. An employer can establish a SEP plan up until its tax-filing deadline, unlike qualified pension or profit sharing plans, which must be in place no later than the last day of the plan year.



    SIMPLE IRA Plans
    Many small business owners are looking for a retirement plan that allows employees to defer a portion of their salaries, without the complexity and the administrative requirements of a 401(k) plan. A SIMPLE IRA plan, which works much like a 401(k) plan but without the administrative cost, may be the solution. Any type of business entity, including a sole proprietorship, partnership or corporation, as well as certain tax-exempt organizations, can establish a SIMPLE IRA plan for its employees. A SIMPLE plan can also be established as a SIMPLE 401(k) trust account, but is not utilized in this format very often. For that reason, the information provided in this section is specific to the SIMPLE IRA format.

    Eligibility
    An employer maintaining a SIMPLE plan may not maintain any other qualified plan in which the employees currently receive benefits. An eligible employer is defined as having 100 or fewer employees. Employees must be eligible if they receive at least $5,000 in compensation during any two preceding years and are expected to earn at least $5,000 in the current year. A less restrictive eligibility requirement may be utilized. There are no minimum participation requirements.

    Contributions
    Employees may defer up to $11,500 (indexed for 2012) or ($14,000 if 50 or older) , with no set maximum percentage of compensation.2 The employer must make a mandatory contribution as either a matching dollar-for-dollar contribution on the first 3% elective deferral or a 2% uniform contribution to all eligible employees, regardless of whether they made an elective deferral. (The employer can elect a lower matching contribution in two out of five consecutive years.)

    Advantages
    A SIMPLE plan is not subject to nondiscrimination tests or top-heavy requirements. If the SIMPLE IRA format is used, there is no requirement to file a Form 5500. As a result, there are minimal plan administration costs, and highly paid or owner-employees are not restricted in their ability to defer as a result of low participation by the lower-paid employees.

    2 (Employees age 50 and older may make a catch-up contribution of $2,500 for 2012.)



    Profit Sharing Plans
    Profit sharing plans offer both design flexibility and discretion as to making contributions. Company contributions are determined by the employer and can be allocated in a number of ways. If the company makes little or no profit during a year, no contribution is required, although low profits don’t restrict the contribution level. A profit sharing plan can include an option allowing the company to make contributions even if the company has no profit.

    Eligibility
    Typically, the eligibility provisions require an employee to have one year of service and be at least 21 years of age. A two-year service period may be imposed if full immediate vesting is provided. For most plans, a year of service is defined as working 1,000 hours in a plan year.

    Contributions
    An employer’s maximum deduction is limited to 25% of the annual compensation paid to eligible employees. The individual maximum contribution limits for employees applied to all defined contribution plans are the lesser of 100% of eligible compensation or $50,000 (indexed for 2012). Depending on the allocation formula in a profit sharing plan, the contributions for individual employees may exceed the 25% level as long as the aggregated employer contribution does not exceed the 25% maximum employer contribution limit.

    Advantages
    The employer can make a discretionary contribution each year, which can be subject to a vesting schedule. A profit sharing plan may be integrated with Social Security or may utilize one of the allocation methods described in a later section of this brochure.



    Age-weighted or Comparability (cross-tested) Profit Sharing Plans
    These plans utilize allocation methods that base contributions on both the age and compensation of eligible employees, similar in concept to a defined benefit pension plan, but with discretionary contributions. Treasury regulations adopted in 1991 allow profit sharing plan nondiscrimination testing under Section 401(a)(4) to be based on anticipated benefits at retirement, similar to defined benefit plans, as opposed to the level of contributions made in that particular year, as defined contribution plans had been required to do in the past.

    Eligibility
    Employee eligibility requirements for age-weighted or comparability profit sharing plans are the same as those for regular profit sharing plans.

    Contributions
    In an age-weighted plan, the participant’s age, or length of time until retirement, is factored into the allocation formula on an individual basis, so older participants receive a larger proportionate share of the contribution. The comparability plan allows the employer to select classes of employees that provide for different contribution allocation levels for each group. If the nondiscrimination tests are met, the employer can allocate a larger proportionate share of the company’s contribution to specific employees the employer wishes to benefit the most.

    Advantages
    An age-weighted plan may be appropriate if a business wants to favor older, highly paid participants. Comparability plans allow an allocation that benefits a specific class of employees. If the favored group is, on an aggregated basis, older than other classes of employees, the allocation formula is likely to pass the required nondiscrimination tests.



    401(k) Profit Sharing Plans
    A 401(k) plan is a type of profit sharing plan that includes an elective salary deferral provision. The employer typically has the ability to make a matching contribution that is tied to the elective salary deferral, as well as a profit sharing contribution that is allocated to all eligible participants. Plan participants usually have the ability to select their own individual asset allocations from various investment alternatives available to the plan.

    Roth 401(k) Profit Sharing Plans
    A Roth 401(k) plan is a new feature of a 401(k) plan that permits participants to make after-tax salary deferrals into a 401(k) plan. If the employer elects to offer the Roth 401(k) provision, participants will have a choice of making pretax or after-tax salary deferrals.

    Eligibility
    Employee eligibility requirements for 401(k) plans are typically one year of service and age 21.

    Contributions
    The three common 401(k) contribution types are:

    • Elective salary deferral – the employee can defer up to $17,000 for 2012. (This is an indexed amount subject to cost of living adjustments and may change each year.)
    • Employer matching – the employer can make a discretionary contribution based on a percentage of the employee’s elective salary deferrals.
    • Profit sharing – can be allocated in any method available to regular profit sharing plans.


    An employer’s maximum deduction is limited to 25% of the annual compensation paid to eligible employees.3 In addition, the employer must meet several nondiscrimination tests, which may further limit the amounts deferred by certain highly paid employees.
    Employees age 50 and older may make a $5,500 catch-up contribution, which does not count against their individual maximum annual additions limit of the lesser of $50,000 or 100% of compensation.

    Advantages
    A 401(k) plan allows both employer and employees to contribute toward retirement while reducing the current tax burden of both. Because employees are actively involved as participants, 401(k) plans typically have a high visibility level in terms of the employee’s perception of the benefit being provided by the employer.

    3 (Only employer matching and profit sharing contributions.)



    401(k) Safe-harbor Plans
    A Safe Harbor 401(k) plan is not subject to nondiscrimination tests, therefore all employees have the opportunity to maximize deferrals.

    Eligibility
    Employee eligibility requirements are the same as those for a 401(k) profit sharing plan.

    Contributions
    Contribution types and limits are the same as those for a 401(k) profit sharing plan, with a "safe harbor" exception. To qualify for the exception, the employer must make a 100% vested contribution of either:
    3% of compensation for each eligible employee or
    A matching contribution of up to 4% of compensation.

    The safe harbor then permits the owner and other highly compensated employees to defer the maximum without regard to the deferral levels of the Non-Highly compensated employees.

    Advantages
    In addition to the advantages offered by a 401(k) profit sharing plan, the Safe Harbor 401(k) avoids the nondiscrimination testing that may limit the amounts the highly compensated employees may defer.



    Owner Only/One-person 401(k)
    A recent tax law permits the owner/partner/shareholders of a small business, and their spouses, to maximize contributions if net compensation is less than $200,000 (indexed for 2012).

    Eligibility
    You an contribute 25% of your $200,000 income up to $50,000 plus up to $17,000 (the maximum employee contribution) to reach the $50,000 limit. A person 50 or older can contribute an additional $5500.00 catchup contribution.
    Employee eligibility requirements are typically limited to attainment of age 21.

    Contributions
    Contribution types and limits are the same as those for a 401(k) profit sharing plan, including Roth 401(k) salary deferrals.

    Advantages
    Filing a Form 5500EZ is not required until either the total plan assets exceed $250,000 (for plan years beginning in 2007 and later) or an employee other than an owner/partner/shareholder or their spouse enters the plan. Additionally, discrimination testing is not required until an employee other than an owner/partner/shareholder or their spouse enters the plan.



    Defined Benefit Pension Plan
    A defined benefit pension plan is designed to provide a specific benefit amount at retirement. This is the traditional pension plan in which the employer bears the risk of providing the promised level of retirement benefits to participants.

    Eligibility
    Employee eligibility requirements for a defined benefit plan are the same as those for defined contribution plans.

    Contributions
    Unlike the defined contribution plans previously discussed, the defined benefit plan limit is based on the benefit to be received at retirement, not on the annual contribution. Each year the plan’s actuary determines the required annual contribution based on several factors such as age, salary level and years of service, as well as interest rate assumptions. The maximum annual benefit for which a plan may fund is the lesser of 100% of the participant’s compensation up to $200,000 (indexed for 2012).

    Advantages
    For participants closer to retirement, contributions to a defined benefit plan may exceed the 100% or $50,000 limit imposed by defined contribution plans. This may be advantageous to a business owner who is approaching retirement age, has never started a retirement plan and wishes to put away as much money as quickly as possible. A defined benefit plan can also be advantageous for an employer wanting to provide a fixed benefit or to favor older employees.



    Summary of the rules for the different types of retirement plans
    The following summary is designed to help you in clarifying the ideas relative to the plan selection.

    • For employers with a long time horizon to fund a plan for their employees, defined contribution plans work well.
    • For sole proprietors or small business owners wishing to minimize administrative costs, a SEP or SIMPLE may be the best choice.
    • For small business owners without employees wishing to maximize contributions, a One-person 401(k) may be the right plan.
    • Profit sharing is appropriate if discretionary contributions or a vesting schedule are important.
    • For employers with older key employees, defined benefit or age-weighted plans may be more appropriate.
    • For employers who wish to have their employees fund a portion of the retirement cost, a SIMPLE or 401(k) plan may be most suitable.


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