Finding the optimal plan design for a law firm

Client Description

An urban law firm with a 401(k) profit sharing plan with 35-40 participants

Problem/Issue

The Partner in charge of the firm’s 401(k) profit sharing plan was concerned that the plan did not have an optimal design and was no longer up to date. In search of a plan that would provide better savings opportunities for the law firm’s partners, he asked BerryDunn’s Retirement Plan consultants to review the plan and determine the best course of action.

BerryDunn's Solution/Approach

BerryDunn consultants ran detailed contribution projections as part of a Comprehensive Plan Review (CPR) for the law firm’s plan using the existing design. They compared the projections to two other customized plan design alternatives to determine if the firm could gain any advantages by altering the plan’s design.

Outcomes

• The review determined that the law firm’s demographics were such that a customized cross-tested design would not provide any net contribution benefits to the firm’s partners.  After reviewing the alternatives, all parties agreed that the plan’s current design was still optimal, allowing the firm to gain confidence that the Partners were not missing out on any pre-tax contribution potentials.
• BerryDunn’s experts also scrutinized the plan documents and found inconsistencies that would likely be challenged in an IRS audit. The law firm was able to rectify the inconsistencies at minimal costs and bring their plan up to date. This greatly reduced the risk of significant IRS penalties in the event of a future audit.