
Corporate Benefits to Cash Management Plans: A Deep Dive Into How We Work with Business Owners (Ep. 156)
How can business owners keep their financial strategies effective for long-term success?
In this informative episode of Life Unlimited, host Larry Heller, CFP®, CDFA®, reveals the intricacies of corporate benefits and cash management tailored for business owners. Learn how regularly updating 401k plans, optimizing cash reserves, and leveraging professional networks can alter your business. Obtain actionable insights on attracting and retaining employees, maximizing tax advantages, and implementing successful financial planning strategies.
Watch the Video Version
Listen to the Audio Version
Key Points Covered:
- Enhancing employee retention and tax benefits by updating 401k plans
- Ensuring a robust, tax-advantaged retirement plan to provide the business significant savings while attracting and retaining top talent
- Simplifying employee investment decisions with model portfolios
- Optimizing cash management and utilizing high-yield strategies for better returns
- Saving additional funds through strategic cash balance plans
- Leveraging a network of experts for comprehensive business support
- Larry’s hands-on experience and credible advice for business owners
- And More!
Tune in to transform your business’s financial strategy and achieve long-term success.
Resources:
- An Employer’s Guide to 401k Plans: A Four-Part Series (Part I) (Ep. 144)
- An Employer’s Guide to 401k Plans: A Four-Part Series (Part II) (Ep. 146)
- An Employer’s Guide to 401k Plans: A Four-Part Series (Part III) (Ep. 148)
- An Employer’s Guide to 401k Plans: A Four-Part Series (Part IV) [Ep. 150]
- Using a Cash Balance Plan to Save Large Pre-Tax Dollars with David Yackel (Ep.121)
Connect with Larry Heller:
Transcript:
[00:00:00] Voiceover: Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way for life. Now let’s get into this week’s podcast episode.
[00:00:18] Matt Halloran: Hello and welcome to another Life Unlimited podcast with your host Larry Heller. Today we’re doing a deep dive into how Heller Wealth Management works with.
[00:00:27] Matt Halloran: Business owners. Now there’s a lot of stuff to cover here, Larry. So where do we begin, my friend?
[00:00:32] Larry Heller: Yeah, so you know, just to give everyone kind of a little bit of a background, I mean, we work with individuals and over the years a lot of these individuals were business owners. So one of the things that we kind of looked at and I.
[00:00:44] Larry Heller: And business owners started asking us is, how can we help them on their, on their business side? So that’s grown to a, a nice part of our business and our practice. Um, and there’s really kind of three areas that we kind of look at in adding value to business owners for their, you know, for their business.
[00:01:01] Larry Heller: One is their. Corporate benefits where there’s a lot of different things that you can do and how they set up and why it’s so important how they work. A lot of people put in these 401k plans like 10 years ago and they haven’t looked at it. Um, and the world has changed. Um, so we, so that’s a big part of what we do is helping coming up with the right one for employee retention.
[00:01:25] Larry Heller: Tax, uh, benefits and long-term investing. So we’ll take a [00:01:30] little bit of deeper dive on the corporate benefit side, and the other one is cash management. You know, interest rates have crept back up now, but a lot of businesses that are, you know, have cash in place and wanna have cash in place to make sure that their business continues.
[00:01:45] Larry Heller: Um, uh, losing some opportunities because a lot of the banks they work with, the interest rates there are really low. So how can you improve your cash management and get a little bit of extra return and also make sure that they, it’s, the money is safe. So that’s a another value that we look at. And the third one is really, uh, you know, business professionals.
[00:02:05] Larry Heller: So I will, uh, so I’ve been around a long time, Matt, we just finished 30 years, so yay. We, we have a plethora. Of experts in a lot of different areas. Um, from payroll to HR to um, uh, we just had clients, uh, uh, small law firm, husband and wife looking to sell their practice and we were able to. Connect with, connect them with something, that’s all they do, and they’re able to, looks like they’re gonna have a successful transition.
[00:02:35] Larry Heller: So we have a, a ton of expertise in a lot of different areas that we can help, ’cause obviously attorneys and accountants. So, uh, so we help and we guide along those lines and we get questions, uh, unfortunately sometimes employment law questions or like I said, HR questions and, and we’ve helped guide them.
[00:02:55] Larry Heller: So those are kind of the three areas and we’ll take a little bit. Of a dive into each one of [00:03:00] them.
[00:03:00] Matt Halloran: Alright, corporate benefits. Now we, we have done some podcasts previously on, on 4 0 1 Ks, and you actually brought a specialist on a little while, a couple episodes, uh, on, on the benefits side. So let, let’s start with why are.
[00:03:14] Matt Halloran: Corporate benefits, so vitally important to business owners,
[00:03:17] Larry Heller: right? So there, there’s two parts of it and sometimes some business owners look at one part and not at the other and don’t really value both parts of them. But the, the first part is really kind of an employee retention. And you as the business owner, may not think that it’s that critical to have a retirement plan, but.
[00:03:37] Larry Heller: A lot of times employees, one of the things that they’re asking about is what is the retirement plan? What is the match on this plan? How much is the owner contributing? And if you don’t have one, they may not even come to speak with you. Um, so that’s one of the things is how do you do that? And then how do you.
[00:03:57] Larry Heller: Keep these employees by having a good retirement plan and, and, and either matching or setting up certain vesting and or some type of non-qualified diverted comps. A lot of different ways of keeping these employees kind of. At the firm because any business owner will tell you that trying to replace a valuable employee with somebody new, there’s a huge cost in both.
[00:04:24] Larry Heller: Um, onboarding that person and training that person and finding that [00:04:30] person. So, so if you can retain these by having the correct retirement plan, the correct corporate benefits in there, it’ll make your business so much more valuable and able to grow even more. So that’s kind of one part of the, the corporate benefit, the retirement plan.
[00:04:49] Larry Heller: And the other is devising it so you can be tax advantaged. And a lot of times we’ve actually put a. Plans in place that after the tax deduction, everything they’re giving to the employees is basically free money. ’cause the government is giving them a big enough tax deduction that it’s really not costing any money to, to give some money to the employees, which is helping on employee retention.
[00:05:19] Larry Heller: So, uh, it, it’s, it’s so, it’s so important on there. So, and the first thing is really, you know, the four 401k plan. So a lot of owners will say, oh, I’ll put a 401k plan in place. My employees will be happy, they can contribute money. Um, and they put the plan in place and they don’t do a safe harbor.
[00:05:40] Larry Heller: Contribution or a safe harbor match. And guess what happens at the end of the year? At the end of the year, the government kind of looks at the plan and says, well, you can’t just put a plan in place because that’ll kind of discriminate against the people that make more money. So we don’t want to just have the, um, [00:06:00] higher earning.
[00:06:01] Larry Heller: Uh, employees be able to take advantage of this. So they do some testing and your lower paid people have to contribute enough in order for the higher paid people to be able to maximize what they want to do. So we’ve gone into plans and we take a look at it, and they have this 401k plan and they, the, the key people who are making the more money put away a, a lion’s share, and at the end of the year, they get a little notice.
[00:06:29] Larry Heller: From the actuaries and says, Uhuh, you have to return all this money back because you failed the test. Oh, and so now the key employees are unhappy because they thought they were putting a large amount of money tax deferred, and they’re not able to. They’re not able to pull. Sometimes it could be the whole thing, but sometimes it can be significant amounts.
[00:06:53] Larry Heller: So if you have a safe harbor. So the difference between, again, like Matt said, we have a four part series. Yeah. On the 4 0 1 Ks online that you can go and watch. But if you have a safe harbor contribution, which is a 3% or a safe harbor match, which could be zero, but it could be all the way up to 4%, then you don’t have to worry about failing a testing because as long as you have one of these types of safe harbor in there, you don’t care if they fail, they pass the test, the government says, we don’t worry about that anymore.
[00:07:24] Larry Heller: So making sure that you have the right type of plan in place [00:07:30] is super, is super critical. Yeah. Um, and one a lot of employees are, are not aware of. The other thing is, is we talk about is fiduciary, and again, we touch about this in the, in the previous. Podcast, but sometimes they’ll just name the administrative assistant as the fiduciary.
[00:07:49] Larry Heller: Yeah, yeah. And don’t realize what the liability that that person now is taking on with them. So at Heller Wealth Management, we, we become what’s called the 3 38 and we become the, become the fiduciary. Um, and then finally is the investments. So. So, uh, I’ve talked about this so many different times, and I don’t know why most 401k plans don’t have these type of model portfolios in place, because most people that are in a 401k plan, that’s not their expertise in picking the investments.
[00:08:22] Larry Heller: So a new employee comes on and they go to onboard and they get a list of 20, 30 different investments, and they look at it like. What should I do? And they’re asking their buddy, well, what did you do? Or they’re asking, what, what should they put in? They have no idea. And they look at the returns. Oh, last year this, this, this fund was up 25%.
[00:08:43] Larry Heller: Oh, I’m gonna go into that one. This one last year was down. Oh, I’m not gonna go into that one. And that might not be the best thing to do. So what we do as a firm is we create these model portfolios. From conservative to moderate to aggressive, and we are managing these [00:09:00] model portfolios for them. And guess what Matt, let’s, let’s see if you remember, what percentage of of our participants do you think select one of these model portfolio?
[00:09:10] Larry Heller: Oh.
[00:09:10] Matt Halloran: Oh, it’s astronomical. It’s like 90% or isn’t it not so high?
[00:09:13] Larry Heller: It’s a little under 80%.
[00:09:15] Matt Halloran: I was, uh, I was being optimistic there brother. Sorry about that.
[00:09:18] Larry Heller: It’s a little under 80%. Yeah, but it’s still a big, that’s huge. It’s still a big number, which is telling me that people want this and yet very few plans that we see that we take have these options.
[00:09:30] Larry Heller: They have some other target funds and things like that, which a lot, most participants don’t even understand how, how they work. So those are the, you know, the key things when you’re looking at a 401k plan, and I urge you to go watch the four part series to, to go into a little bit more detail on that. But that’s one of the things that we help with a, with a business owner.
[00:09:51] Larry Heller: Uh, and then that on top of that, and this is the really cool part that we can do some planning and when it is, and based upon. Your census that you may be add, be able to add on what’s called the cash balance plan. So if you have a successful business, and really it depends, it doesn’t work for all businesses, it may, may depend upon what your census is, you could put a plan in place that you may be able to put away hundreds of thousands of dollars more.
[00:10:21] Larry Heller: Hmm. And so few people you, you know about this or, or really, you know, try to find out about [00:10:30] this. I’m gonna give you an example. We, we, we put on a client a few years ago, and the owner was a, um, was a, a, a woman and she, her firm had a lot of part-time employees. And the full-time employees were, um, lower earned and, and younger.
[00:10:47] Larry Heller: And we looked at the plan. The plan was with one of the. Big payroll companies, and we looked at it and said, you’re, you’re killing it. You’re making a lot of money, and you’d have your 401k plan. Do you realize you can put another $250,000 away each year, get a tax deduction for that and accumulate that and basically give the employees very little, of which you’ll get a huge tax deduction for it?
[00:11:15] Larry Heller: And she was like, no, I never knew about that. And her accountant didn’t tell her about it. The big box payroll company didn’t tell her about it, didn’t even realize that. And we’ve now been doing this for five years for her. Mm-Hmm. So looking at that and seeing what the, what that is and understanding that and knowing that opportunity, that possibility, opportunity exists is another way that we look at and we help, we help business owners.
[00:11:43] Matt Halloran: Huh. So did you, did we do a, a, a specific show on the cash balance plans also?
[00:11:52] Larry Heller: We did. Okay. So there is a podcast just on the cash balance plans that, that is, that is there. I don’t remember. Not too [00:12:00] long ago. I. So, but there was on the cash balance one, and I, I’ll make sure they put in the show notes, the, the links to, to all these podcasts.
[00:12:07] Larry Heller: So if you want to go ahead and, and, uh, watch or listen to them, you’ll be able to go ahead and, and do this. Um, and a lot of times you want to coordinate this, you want to coordinate the, the two different plan types. ’cause it gets a little complicated with employee deferral, a safe harbor. Potentially a profit sharing contribution in there that that could also in, um, integrate with the cash balance plans.
[00:12:33] Larry Heller: There’s a lot of ways of slicing these and putting these together to maximizing what you, what you can do. And we work very closely with a lot of actuaries to make sure that this is done, this is done properly.
[00:12:46] Matt Halloran: Alright, so corporate benefits. The next phase of what we’re gonna be talking about in how you work with business owners, and you alluded to this at the top of the show, uh, is cash management.
[00:12:56] Matt Halloran: So let’s dive in there.
[00:12:57] Larry Heller: Yeah. So a, a, again, a, a lot of companies like to keep cash on hand to make sure that they have a. Uh, maybe six months worth of expenses. Mm-Hmm. Maybe even a year worth of expenses so they don’t have to worry about some ups and downs in the market. So they want to be, have secure about that and, but they’re with a, you know, a, a bank and the banks, they’re only paying a small amount.
[00:13:21] Larry Heller: Yeah, they could do maybe a cd, but then you’re locking into a certain timeframe on that. Well, there are a lot of government money markets out [00:13:30] there, which are mostly treasuries that, that you can do, and we can link those. So you can go back and forth from your bank to a. To this money market account. As many times as you, many times as you want.
[00:13:45] Larry Heller: Yeah. It may take a day or two to, to, to sell the money market and to get that transferred back to you. But now just think about it, if you’re keeping a half a million dollars in a, um, cash and you can get an extra 5% on your return. Oh man. I mean, that’s. $25,000 in your pocket just by managing the cash.
[00:14:09] Larry Heller: So we can set up these, this process and procedures to make it real easy for you to transfer it back and forth and to manage your cash. Um, and there’s other things to do if you’ve got a lot more cash. There are other factors out there that we can do that if we wanted to. And you wanted, um. FDIC insurance.
[00:14:30] Larry Heller: There’s some other ways of doing that. For most people, they’re okay with the money market, the government money markets. But if we wanted to do something more, there’s, there’s ways of doing FDIC insurance and doing kind of multiple banks or getting more than the $250,000, um, per bank. So there’s a lot of different ways that we can come up with managing cash.
[00:14:51] Larry Heller: To increase your returns. We’ve actually had clients that we’ve saved them so much on managing their cash more than [00:15:00] offsets our fee. So just by bringing that up, our planning fee, I, I, I joke with them, I said, you’re know, it’s free because we just found you all this extra income for yourself. So, um, so again, you know, doing that, managing the cash, coordinating the corporate benefits, those are kind of really the two big things that we help and assist with our clients today.
[00:15:22] Matt Halloran: Well, I dunno about you, Larry, but, uh, I think we should probably do, uh, a podcast on cash management for businesses. So let’s just kind of put that in our, in our, uh, in our little, uh, parking lot over there because you just opened up. 15 different side questions that I wanna ask you, but that’s not what this, this show is specifically about today because, you know, okay, so, so under understanding, you know, cash management and, and what most people understand is, is corporate benefits is, is really, really valuable.
[00:15:51] Matt Halloran: But I think one of the reasons why business owners really need to reach out to you, uh, and engage your firm is because you have been doing this for so long and you are one of those people who like to play nice in the sandbox with other professionals. Because you have such good deep relationships with these really, really highly expertise level people, um, that you’ve got a really great network.
[00:16:15] Matt Halloran: So let’s dive into that.
[00:16:16] Larry Heller: Yeah. So I mean, if you can have a great team behind you, it, it makes your life better and it’s, um, much more. Attractive to you. So, we’ll, we’ll start with the counts. Um, so we’ve done [00:16:30] numerous podcasts on tax savings ideas. Yeah. Matt, we’ve talked about tax loss, harvesting and Roth conversions.
[00:16:37] Larry Heller: And yes, I’m a former CPA and my staff, uh, CFPs. So we know, we know the tax world out there. Mm-Hmm. Um, but a lot of accountants out there are either doing kind of reactive when they do the tax returns. They’re not proactively looking at tax planning multiple years ahead, not just one year ahead, but trying to figure that, figure that out.
[00:17:04] Larry Heller: So we wanna be able to, when we come up with some of these, we wanna be able to coordinate this with your accountant and make sure that. Everyone’s on the same page and it makes sense for you. So if you don’t have the right accountant, and there are a lot of accounts that we work with that we can coordinate as a team, if you do have one, we wanna work closely together for you, for your benefit.
[00:17:25] Larry Heller: So coordinating your accountant and your. Financial advisor and planner is super, super important. So, uh, so we have a, again, a deep bench of different accounts with different experiences. Mm-Hmm. In different industries, in different, um, accounting sizes. Um, and then there’s. Attorneys for a lot of different reasons, starting with a corporate attorney.
[00:17:51] Larry Heller: Um, you know, we’ve met clients that have multiple partners and then I asked them, well, you know, when was the last time you updated your buy sell [00:18:00] agreement? And they, they said, well, we still haven’t gotten around to that, and the company’s seven years old. Oof. So, so now you know, well, who’s the right person to put a buy sell agreement in there?
[00:18:12] Larry Heller: And I’m like. You know, what happens if one of your partners gets disabled or dies or what happens if you wanna sell, if you have a succession plan in place? So coordinating, you know, coordinating not only with a corporate attorney, but maybe even a, you know, even a state, you know, a state attorney. So those type things we have, um.
[00:18:35] Larry Heller: Numerous clients that have been divorced and they’re about to get remarried. We have one going on right now. Um, he’s divorced. He has his own business. A second marriage, gonna be a second marriage coming up in the fall. Um, he has adult children. His potential wife has adult children. His wife has a business.
[00:18:55] Larry Heller: So I, we basically said to him, a, we, we said. Have you discussed a, a prenuptial um, agreement? No. So now we’ve talked to him about the importance. Yeah. Now he wants to do that. Well. You know, who should I go to? Again, we can recommend certain attorneys. A lot of times we want to have, the prenuptial is done by a matrimonial attorney, but we needed an estate attorney to kind of coordinate what’s gonna happen with some of the assets.
[00:19:23] Larry Heller: So now they need two recommendations on that. And that’s obviously for, this is a business owner that we’re talking about, even you’re not a [00:19:30] business owner. So, uh, a second marriage. So again, our bench of attorneys. In different areas, different locations. We are in multiple locations. Um, we have clients all over the countries and also have resources, uh, belong to certain networks that if I, if they’re in a certain place that we don’t have one, I can go to our resource and find somebody that’s located in there through, through our networking, uh, portal.
[00:19:59] Larry Heller: So, uh, so accountants and attorneys are the biggest ones, but then there’s also insurance. Yeah. Um, you know, you know, property and casualty insurance, life insurance, um, again, numerous different contacts who will do a review for us and give us a, you know, an honest opinion on that, not just to sell some certain products.
[00:20:22] Larry Heller: We’ve have those, um, insurance people in place who will review something and report back, um, or. You know, you, you need something on, um, disability or you wanna put a disability program through your business, what should you do? What should you, now, of course, we’ll help advise on this. Mm-Hmm. As a independent, because we’re not.
[00:20:42] Larry Heller: Getting compensated from any commission, which salespeople do, uh, which insurance people do. But again, we have a, a lot of those people on our, uh, on our, I was gonna, I was gonna use the word Rolodex, Matt,
[00:20:58] Matt Halloran: ah, brother. We’re showing our age with [00:21:00] Rolodex. Man, you scare of people That was brutal.
[00:21:03] Larry Heller: Or people like, what the heck is that?
[00:21:05] Larry Heller: Yeah. So. Yeah. So, uh, so we have that and, and then like I said before, HR people, payroll people, um, you name it, uh, we ha we have, we had a company that unfortunately they might have had a little bit of a, an issue with an employee, so they needed a, um. Um, an employment attorney. Mm-Hmm. Uh, we’re able to connect them and really help them out.
[00:21:28] Larry Heller: So, uh, so those things, you know, it’s one of the things that we help and can pro provide some, some valuable benefit, uh, when working together.
[00:21:37] Matt Halloran: When you have somebody in your corner who, not only, so the other thing, and, and I’m surprised you didn’t say this, and I apologize I didn’t say this earlier, Larry, you’re a freaking business owner man.
[00:21:49] Matt Halloran: Like you walk and talk all of these things. You have a whole team, you have a nationwide presence, you have all of these moving parts. This is not just something that you. know, because you are a financial services professional, but it’s also, this is something deeply personal to you. ’cause you’re fiercely entrepreneurial and you have been running a successful business for many, many years.
[00:22:09] Matt Halloran: Do you wanna kind of wrap the show up with that?
[00:22:11] Larry Heller: Yeah, I mean, that’s a great, that’s a great point, Matt. So, so like, I. Any investment we do, I’m in every one of the investments that we use for our clients. So the same thing here as I’m running a small bus, small business. So all the things that I’ve talked about are all the things that we’ve put in practice.
[00:22:28] Larry Heller: Yeah. For my, for myself and [00:22:30] my business. So we’ve kind of done that. And that’s one part of the reasons why when I look, when I meet a small business owner, I can say, well, you don’t have that. What about this? What about that? Because we’ve already done it for our, for ourselves. So, uh, so yeah, that’s a great, that, that’s a great point, that 30 year expertise in running a business and growing a business and, and adding employees and, um, putting in different types of retirement plans and retention plans and bonus plans.
[00:23:01] Larry Heller: Um, so all that kind of comes into, comes into place.
[00:23:04] Matt Halloran: Yeah, well, it’s just nice that you, you’ve walked the walk. Not only are you a professional and an expert in all of this, but you actually have, you live it every single solitary day. Okay? So if Larry, Larry, if somebody wants to know a little bit more about how you can help their business, uh, and, and not just their business, but also them as the business owner, uh, what should they do and where should they go?
[00:23:23] Larry Heller: Sure they, they can go to our website heller wealth management.com, and you can go right there and you can click on and get an appointment with myself or one of our planners right through our website if you’d like to call us. Feel free to do that. It’s 6 3 1 2 4 8 3600.
[00:23:40] Matt Halloran: Fantastic. And listen, if you know a business owner, uh, or if you are a business owner who has friends.
[00:23:46] Matt Halloran: ’cause as a fellow business owner like Larry, most of my friends are business owners, uh, share this show with them because these are things that, uh, not a lot of people talk about because there are not a lot of people that you have in your corner who can truly help you make informed [00:24:00] decisions that are not only gonna help you as a business owner, but it’s gonna help your business and help you retain the people that you want.
[00:24:06] Matt Halloran: So for Larry, this is Matt Halloran, and we’ll see you on the other side of the mic.