Underfunded Retirement Plans at CPA Firms
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Source: Partner’s Report—the Monthly Update for CPA Firm Owners Underfunded retirement plans is one of the most significant reasons CPA firms are sold. Future partners contemplating the financial burden of payments to retiring partners may view underfunded plans as an obstacle. Firms should prepare forecasts 10 years out showing the effects of retirement payments under various scenarios. Some firms create different retirement benefit schedules for current and future partners, which is generally viewed as inequitable. There should be one plan for all. Payments should be fixed at the time of retirement. Retired partners should not retain equity or payments based on income. It may be acceptable to have better terms for those nearest to their retirement dates, since they have less time to make other preparations for retirement. Qualified plans may provide only a portion of the benefits partners need in their retirement, but they can be set up to comply with nondiscrimination rules at a modest cost for staff benefits. From Partner’s Report—the Monthly Update for CPA Firm Owners, October 2005, p. 4. |
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