Masonry Magazine April 1961 Page. 8
HOW TO MAKE THE MOST OF A PENSION PLAN FOR MANAGEMENT
By I. Austin Kelly III
President National Employee
Relation Institute, Ine.
The need to attract and hold key men and desire for tax-free dollars for the owner are among major reasons for the mounting interest in pension plans. In this, the first of three articles, I. Austin Kelly III, nationally-recognized consultant tells how mason contracting firms may innaugurate pension programs to maximum benefit of all concerned.
* "What special opportunities does a good pension plan for management offer companies in the mason contracting field?"
* "Is it true that a company owner can more than double the number of dollars he can siphon off from surplus profits by using a pension?"
* "Is it possible to install a plan which does not require a fixed annual deposit?"
* "What are some of the practical ways to reduce the annual cost of a pension plan?"
These are just a few of the many questions which I encounter often in my across-the-desk talks with owners and executives of firms in your industry. The answers? I'll come to them in a moment. But first, let's take a quick look at the reasons for this sudden rash of interest in pensions.
Primarily, I think, it breaks down to two logical points, particularly for the small or medium-sized firm, and both spring from today's tax pattern: (1) The need to attract and hold key men the top-level executives, the scientists, designers, superintendents, supervisors, salesmen, and others who play a major role in a firm's succcess and progress.
With personal income tax rates removing much of the individual's incentive to earn higher and higher salaries, they are particularly vulnerable to outside offers which are tied to tax-free deferred compensation, Sure, there are always a few persons willing to change jobs just to up their annual income a couple of thousand dollars or so, but most key people realize that their big problem today is saving money. Between their high tax brackets and the high cost of living, few are able to put away any substantial sum For the future. More salary alone in the solution, because it simply brings higher taxes.
However, when a competing firm can offer them a pension plan which makes this saving automatic without touching their regular income-it's often too attractive to turn down. Obviously, this also works in reverse. If it's your firm that has the pension plan to offer, you're in a position to do the wooing. You also have a real lever to apply with your own key people. No
"THE AUTHOR-1. Austin Kelly, Ile
president of the National Employe
Relation Institute, Inc., a national or
ganization with headquarters in New
York City, was graduated from th
Massachusetts Institute of Technolog
and did graduate work at Harvar
University and at Ozford Universit
in England. He is currently a consu
tant on executive compensation for w
merous national trade associations o
well as for many of their individue
members. Over the past quarter cem
tury, his organization has installe
executive compensation plans for hum
dreds of companies as well as for the
national associations. At the prese
time, his firm handles the administre
tion of over 400 such plans throughom
the country.
Because of his wide experience
this field and the insight he has gaine
of the special compensation problem
which confront companies today. M
Kelly has been in wide demand as
speaker before national conventions
trade associations. He is the author
many articles on various phases
executive compensation which have a
peared in a broad range of publicatio
for business and industry.
one wants to give up his pension benefits.
(2) Tax-free dollars for the owner himself This is a natural, and oft primary, reason for installing a pension plan. After all, it's his business he's certainly entitled to any extra income he can get.
For example, picture the owner of a successful small or medium-size company a man say, in his early 50 who has continually put most of his surplus back into a hungry, growing business. He's reached the point where he wants to enjoy some of the frum of his efforts. Yet, when he seeks to withdraw additional cash, his accountant wags a warning finger at him and gives him the sad facts of taxes.
"Boss," he says, "you may be entitled to this money, but you're not going to be happy about how little of it you get."
Then, as the accompanying chart illustrates, he proceeds to show how after corporate and personal taxes this owner will be fortunate if he realizes as much as 25% of the original sum.
It's right at this point that the idea of pensions usually comes up. Perhaps a suggestion from the accountant. He demonstrates how, instead of losing as much as 52% through corporate taxes, this owner can put the sum into a good pension plan which is fully deductible as a business
MASONRY - APRIL, 19