PENSION AND SAVINGS PLANS

We have substantial experience in various Retirement Plan matters such as: drafting plans, tax planning regarding distributions, allocating plan interests in divorce, and pursuing claims for benefits. The following principles may be helpful in understanding this area of the law.

• Federal law favors use of pension and savings plans. They can be very good tax shelters.



• At the same time, employees’ rights under these plans are protected by extensive federal legislation (the “Employee Retirement Income Security Act”). Fiduciaries who hold or control plan funds must consider these rules.



• Tax and other laws in this area are complicated. Advice from a professional is particularly important.



• Savings plans under Section 401(k) and discretionary profit sharing plans are more common since they are relatively easier to operate.



• If you qualify for a “Roth IRA,” it is probably favorable for you.



• Defined benefit plans may allow larger amounts to be set aside tax free. They usually are undesirable because they are complex and hard to terminate.



• Federal law favors using stock as compensation both inside “qualified plans” such as Employee Stock Ownership Plan (or “ESOP’s”) and also outside such plans (such as Incentive Stock Options or “ISO’s”).



• Technical defects and errors commonly arise in plan administration. The IRS has implemented relatively flexible policies regarding correcting defects.