Cases 5 to 8
401(k) Plan Restructuring
This company had 250 employees in three locations including Puerto Rico.
A privately held company, it wanted an incentive based long term compensation plan for all employees and a special plan for top management.
BMI designed a 401(k) for the client but recommended the top twenty people withdraw from the plan. This group was placed in a non-qualified supplemental plan. The plan targets a tax free benefit comparable to their projected 401k benefit. In addition, BMI restructured the ownership transition plan for the two owners. Restructuring included a redrafting of the buy/sell to resolve the estate tax problem faced by the founding shareholder. BMI was able to save significant income and estate taxes for the company and family.
Case No. 5
Case No. 6
The Leveraged ESOP
A national service company with 3,500 employees in multiple locations. Management consisted of 250 executives with 60 performing administrative and top management functions.
The company needed to raise capital to fund a holding company to purchase other entities. In addition, the client wanted to reward top management for long-term service.
BMI structured a leveraged ESOP to fund the holding company. By law, the plan included all full-time employees. BMI provided complete administrative services including arranging for the annual appraisal. In addition, the ESOP purchased liquidity to fund the purchase of additional stock in the event the major shareholders died before the plan was completed.
A tax deductible, long-term incentive plan was established for top management to provide a base of retirement income. A deferral plan was also implemented along with an executive disability plan for the same group. The company also created a 401(k) for the entire company to provide additional tax deductible savings.
An Incomplete Business Plan
A small software company with strong national distribution system.
Company was in the process of raising capital from a venture fund and had not put any compensation plan for top management in the business plan. Company needed to determine salary levels and long term incentive plans commensurate with company’s projected growth and value.
BMI arranged for an appraisal and completed a comprehension compensation study for the venture fund. In addition, BMI arranged for keyman coverage to cover fund liabilities in the event one of the company founders died. BMI recommended a tax deductible synthetic equity plan for top management.
Case No. 7
Case No. 8
Reducing Estate Taxes
A petroleum/land company having existing drilling operation with 125 employees.
Owner was facing a significant estate tax liability based on fair market value of land and mineral rights. Client wanted to pass the company to his son who was an executive in the company and to equalize inheritance to the non working children while values were depressed.
BMI arranged for a current appraisal of existing FMV and created a gifting program to the children to be funded over the next several years. In addition, the client separated the company into two entities and sold stock to the son using the depressed valuation. To guarantee the preservation and equalization of the estate, client agreed to fund the tax liability with discounted dollars through an estate tax free zero coupon bond yielding 10% with a maturity at death.