Cases 1 to 4
Incentive Based Compensation
Profile:
A Mega Auto Dealership owned by a holding company. Multiple entities including a Bank, a Real Estate Development Company and seven auto dealerships.
Problem:
Ownership wanted to reward key personnel with an incentive compensation plan based on competitive pay practices in the area. A study included all facets of executive fringe benefits including group life and disability recommendations.
The BMI Solution:
BMI prepared a comprehensive study and report of pay practices in the geographic area. The report pointed out the need for a meaningful equity/retirement benefit to attract and retain top talent. BMI recommended a mini/max non-qualified pension which would be tied to performance. In addition, BMI installed a discriminatory group life plan which provided a portable benefit at retirement and a disability program for top management.
Case No. 1
Case No. 2
401(K) Contributions
Profile:
Client was an international distributor with facilities in 16 major cities throughout the United States and Canada.
Problem:
Company has 5,000 employees including 45 senior management. Company recently terminated their pension plan and installed a 401(k). The inability for top management to contribute more than the 415 limit created a gap between the pension benefit and what was possible in the 401k. In addition, management wanted to upgrade their disability coverage and life insurance for this group. While fact-finding, BMI discovered there was a deferral plan in place. There was no protection for this plan from change in control or a sale of the company. Another concern was the funds were invested by a local brokerage house and accumulations were taxable to the company.
BMI Solution:
BMI recommended the deferral program be placed in a special trust to protect the capital from any change in management objectives. The trust was also used to shelter the accumulations from tax at the corporate level. The plan was expanded to include the 401(k) excess contributions and it provided a portable life insurance benefit to supplement the existing group life. BMI also designed an executive disability plan for the senior executives dsigned to pay the benefits income tax free upon disability.
Stock Repurchase
Profile:
A recreation employer with 90 full time personnel but 1,000 seasonal employees.
Problem:
Company had too many shareholders and wanted to offer a tax wise program to redeem the stock and reduce the shareholders. In addition, the company wanted to offer a deferral program for the full time personnel.
BMI Solution:
BMI reviewed the employee census and shareholder problems with the client. The most tax wise solution was an employee stock option plan. BMI worked with the advisors to educate and implement the plan. In addition, the company offered limited benefits because of discrimination rules. BMI designed a non-qualified deferral program for the top hat employees which included a death benefit only provision for beneficiaries. The plan was elective, however the DBO benefit was non-contributory.
BMI also designed an additional incentive compensation plan for top management as well as enhancing their disability coverage through a carve out program.
Case No. 3
Case No. 4
The Retiring Senior Partner
Profile:
A civil engineering firm with 12 partners ranging in ages from immediate retirement of the majority owner to newly admitted owners in later years.
Problem:
The senior partner wanted to retire within the year and the partners wanted to offer a reasonable buyout alternative.
BMI Solution:
BMI recognized there was a significant difference between the buy/sell value and the true fair market value of the firm. After performing an appraisal, BMI recommended using an employee stock option plan to buyout the majority partner. The feasibility study showed a significant savings to the firm if they used the current valuation. Because the future stock was controlled by the ESOP, BMI recommened a supplement, tax deductible compensation benefit for the top hat executives.