Ruth Forsyth

Monday, 22 July 2002 09:55

Taxing end game

Perhaps you can identify with this story:

Joe Carpenter and his wife have worked long and hard to build their contracting business. With a very small investment of money and a very large investment of sweat equity, their business is now quite profitable and provides them with a healthy annual income. Their children have their own careers and no interest in working in the family business. The Carpenters would like to retire and enjoy life, and have found a qualified buyer willing to pay them a fair price.

Sounds like the American Dream, so what’s the problem? Taxes. The Carpenters will owe a substantial amount of capital gains tax if the business is sold outright. That means the cash they will have to invest will be reduced substantially — thus a lower income in retirement.

To add insult to injury, that’s not the end of the tax story. When Mr. and Mrs. Carpenter die, their assets will be subject to federal estate tax (up to 55 percent), as well as Pennsylvania inheritance tax (6 percent to lineal descendants, 15 percent to others). Their children will receive less than half of what they leave behind. Not quite what they had in mind while they were building the business all of these years.

So what’s the answer? The Carpenters might be able to solve their problem by giving their business to a charity.

“Hold on,” you say. “No one likes to pay taxes, but I’m sure not going to give my business away for free.”

Consider :

  • The Carpenters could give their business to a qualified charity of their choice, receiving a significant income tax deduction.

  • The charity (a tax-exempt organization) could then sell the business to the qualified buyer without paying capital gains tax.

  • The charity could invest the proceeds and pay a guaranteed lifetime income to the Carpenters. At their deaths, the remaining asset belongs to the charity.

  • If the Carpenters want to be sure that the value of their business gets passed on to their children, they could set up an irrevocable life insurance trust (ILIT) that is funded with a second-to-die policy. The death benefit of this policy would be based on the value of the business gifted. If set up properly, the proceeds would pass to the children estate tax free.

The Carpenters would have eliminated their capital gains tax, increased their income and avoided federal estate tax. Organizations such as The United Way and The Pittsburgh Foundation can help facilitate this type of arrangement if the charity of your choice is not set up to do so. A financial adviser or estate attorney can analyze the impact that charitable planning can have on your situation and help guide you through the details.

The Carpenters are destined to become philanthropists at their death no matter how you look at the situation. The question is whether they do it voluntarily as outlined above, or involuntarily, by funding social programs with their tax dollars. Ruth Forsyth is a senior account manager and manager of market development with The Acacia Group. She co-hosts the “All Things Financial” radio programs Wednesday nights from 7 to 8 p.m. on KQV-AM (1410). Reach her at (412) 922-4360 or by e-mail at Ruth.Forsyth@Acacia-Pgh.com.

Monday, 22 July 2002 09:40

The education benefit

Whether you are the CEO of a high-growth technology company or the owner of the local hardware store, some challenges remain the same.

How do you retain good employees in this tight market, increase morale and loyalty, and maximize worker efficiency? You may want to consider providing financial education as an employee benefit.

If you come from a large corporate environment, chances are you have experienced some type of employer-sponsored financial education. The popularity of self-funded 401(k) and 403(b) retirement plans has prompted many employers to provide educational programs centered around retirement planning. Not only do these tend to increase employee participation in the qualified plan, they also help the employer comply with regulations defined under Section 404(c) of ERISA (The Employee Retirement Income Security Act) to avoid possible liability for losses in the plan.

An estimated half of all workers are provided some type of financial education at work, most of it focused on retirement. The majority are employees of large corporations, as very few smaller businesses provide this type of benefit. The number of employers providing comprehensive financial education on other topics, such as college funding, estate planning and insurance topics, is much lower.

The question is, why bother? A recent study conducted by Virginia Tech's National Institute for Personal Finance Employee Education (NIPFEE) indicates that financial education and advice have a positive impact on employees' attitudes and behaviors. In other words, good financial wellness and higher productivity are positively related.

Virginia Tech's studies show that, compared to employees with higher financial wellness, workers who were less satisfied with their personal finances have:

  • lower pay satisfaction;

  • poorer health;

  • higher absenteeism;

  • more time wasted at work dealing with personal money issues.

From an employer standpoint, financially savvy employees means lower costs and less time spent in areas such as payroll advances and administering 401(k) loans.

As an employer, how do you provide this type of financial education and how much does it cost? Some firms charge a flat rate based on the presentation or charge per employee participating. Others make the presentation at no charge if given the opportunity to meet with employees individually if they so desire.

How or what you pay for the sessions is not nearly as important as ensuring they are educational. Be sure that no specific products or recommendations will be made. Ask for references from other employers and consider sitting in on a presentation elsewhere. Be sure that the financial adviser you choose is not only an excellent speaker (good advice is meaningless if nobody is listening), but also has the credentials necessary for the advice he or she giving.

Smart employers realize that time and money spent providing comprehensive financial education to their employees will be returned many times over in increased productivity and morale. Smaller business owners can use this benefit as a tool to attract and retain employees and to be competitive with their larger counterparts. In short, any investment in financial education as an employee benefit just makes good "cents."

Ruth A. Forsyth, a certified financial planner, is a senior financial adviser and manager of market development for The Acacia Group. She also co-hosts the radio show "All Things Financial" Wednesdays from 7 to 8p.m. on 1410-AM. Reach her at (412) 922-4360 or at Ruth.Forsyth@Acacia-Pgh.com.

Thursday, 31 January 2002 05:17

A charitable solution

Question: I have owned and operated my family business for 35 years. I started it with very little, but would be able to sell it for more than $500,000.

One of my key employees is interested in purchasing it and has arranged for financing. The problem is that although this is a tidy sum, I would net significantly less after capital gains taxes.

This business is my retirement fund for my wife and I. We have no children and would like whatever is left in our estate to go to charity. Is there some type of planning we could do to make our sale a little less taxing?

Answer: That depends on how your business is owned. If it's C Corp stock, or a qualified partnership, you may want to consider gifting it now to a charitable remainder trust (CRT) that names your favorite qualifying charity as the final beneficiary. The CRT then places the business on the market and entertains bids.

By specifying you want preference given to interested employees, the trustee has some guidance to help meet your objectives and avoid self-dealing issues.

As a qualified charity, the CRT can sell the business without paying capital gains tax, leaving more net proceeds to generate income for you. Since the primary purpose is to make an irrevocable gift to charity and provide income to the donors, the gift achieves all of your objectives now.

You also receive a current tax deduction for the present value of the projected future gift to charity. There are limitations as to how much can be written off in one year, and you will not receive a full deduction for the value of the business because you are retaining a right to the income.

It may be possible the next time somebody asks you to make a gift that, instead of telling them you gave at the office, you can tell them you gave the office. Ruth Forsyth is an investment advisor associate and registered representative with The Advisors Group. Reach her at (412) 922-4360 or at ruth.forsyth@acacia-pgh.com.

Tuesday, 30 October 2001 12:26

A taxing estate

Editor's Note: In our continuing efforts to improve our coverage of financial perspectives, I'd like to welcome our newest columnist, Ruth Forsyth, who is with Acacia. Each month, she will answer your questions about anything related to managing your money. Please send questions in care of Daniel Bates to dbates@sbnnet.com or directly to her at ruth.forsyth@acacia-pgh.com.

I've been hearing a lot about the new tax law, especially the repeal of the estate tax. How does that affect me as a business owner? Is my old estate plan obsolete since I no longer have to worry about my family being forced to sell the business at my death to pay taxes?

Your question really addresses two separate issues: Do you need estate planning as a business owner, and does the new tax legislation mean your family won't have to pay taxes?

First, do you still need an estate plan? Despite popular opinion, avoiding and minimizing taxes is only a small part of the estate planning process. Other issues include how to pass on the business, who is going to run it and how you plan to fairly treat family members who are not actively involved or have no interest in the business.

If the business won't be going to a family member, who will run it until a buyer is found? If you have a buyer in mind, does he or she have the financial capacity to purchase it from your family in a fair and timely manner? It's very important that you have an estate plan.

Second, will your family still have to pay an estate tax? When it comes to taxes, change seems to be the one constant. What's here today won't be tomorrow. Maybe.

The estate tax repeal is not as straightforward as it appears. To gain insight, I spoke with Steven Seel, special counsel to Springer Bush & Perry PC and a specialist in family wealth transfer matters and estate planning.

''The new tax law has lots of changes, many of which are pro-taxpayer,'' he says. ''But the elimination of the estate tax is somewhat illusory. It's only eliminated for one year, in 2010. In 2011, it comes back in with a $1 million exemption. So unless you have a terminal condition or have a life expectancy that's less than 10 years, your planning today has to assume that you will die after 2011 with a $1 million exemption from estate tax.''

While the new tax law gives some money back to the taxpayer, it also has hidden take-backs. In 2004, for instance, the qualified family business exclusion is eliminated. In 2010, with some exceptions, the step-up in basis is eliminated for assets passed on at death. Over the next several years, the credit given by the IRS for death taxes paid to Pennsylvania (or any other state) will be considerably reduced. What you save in estate tax could easily be gobbled up by a tax with a different name.

So how does the new act change your planning choices?

''Flexibility will be the key over the next nine or 10 years,'' says Seel. ''The problem with so many planning techniques is they require the business owner to give up some degree of control. That loss of control restricts the ability to change course in the future.''

Experience proves that creating a successful plan is a process that should involve professionals from financial planning, investment, legal and tax working together in an integrated manner. Only time will tell what our future tax climate will be, but a right-minded planning process will help you reduce current tax risks, meet your personal and professional goals, and retain flexibility to change in an uncertain future. How to reach: Steven Seel, Esq., (412) 281-4900

Ruth A. Forsyth, MS, CFP, CSA is an investment advisory associate and registered representative with The Advisors Group, Acacia's registered investment adviser and broker/dealer. She co-hosts ''All Things Financial'' Wednesdays from 7 to 8pm on 1410-AM, KQV Radio. Reach her at (412) 922-4360 or ruth.forsyth@acacia-pgh.com.

Monday, 22 July 2002 09:47

Golden age, golden handcuffs

Remember when it was hard to find a job? A person felt lucky to have and hold on to one.

An employee quitting to go to the competition was not a real threat to an employer, because it always had five other, more qualified people waiting in the wings to take the spot.

How the tables have turned. With today’s booming economy and record low unemployment rate, attracting and keeping key employees is a challenge facing many business owners. What can you offer that your competitor won’t that will help solidify your employee’s loyalty?

One thing is a nonqualified deferred compensation plan. Unlike qualified plans, which can’t discriminate, nonqualified deferred compensation is designed to be selective. You, as the employer, decide to which employees you wish to offer extra incentive, what that incentive is, and what the vesting schedule is to qualify. This type of arrangement can act as “olden handcuffs by providing a long-term financial incentive to your valued employees to remain with your company.

Here’s an example. Jane, a 50-year-old married woman with two grown children, is your best salesperson. While she has always been a loyal employee, competitors have begun to notice, and you are concerned that she might decide the grass is greener elsewhere. You would like her to stay with your company until she is 60.

So the two of you enter into an agreement: In exchange for Jane’s promise to stay, she will receive an additional retirement or death benefit. This agreement, which can include a noncompete clause, should be drafted by your company’s attorney.

The agreement states that, if Jane stays until age 60, she will receive an additional $15,000 a year of retirement income for 10 years. If Jane dies prior to age 60, her beneficiaries will receive the $15,000 a year. If she dies after the age of 60, the income will continue to her beneficiaries until the 10 years is over.

Your company will informally fund this arrangement by purchasing a $150,000 life insurance policy on Jane’s life that the company owns and controls.

Under this arrangement, you win as the employer because you have increased Jane’s commitment and loyalty. The additional benefits to Jane also may be deductible to the company as an ordinary business expense (depending on how your particular plan is structured). Jane wins because she has an additional source of retirement income.

You can find many ways to creatively structure and fund a nonqualified deferred compensation plan to meet the needs of you and your valued employees. Such a plan could present a golden opportunity for you and your key employee. Think about it.

Ruth Forsyth, CFP, is a senior account manager of market development with The Acacia Group. She co-hosts the “All Things Financial” radio programs Wednesdays from 7-8 p.m. on KQV-AM (1410). Reach her at (412) 922-4360 or by e-mail at Ruth.Forsyth@Acacia-Pgh.com.

Monday, 22 July 2002 09:43

401(k), NUA or IRA?

Joe Entrepreneur decided after working for 15 years with ABC Widget Co. that it was time to start his own business, build a better widget and market it on the Internet.

Thus, Widget.com was born. While working at ABC, Joe contributed the maximum to his 401(k) and ABC generously matched with employer stock.

The balance in Joe’s 401(k) now exceeds $700,000, of which $300,000 is ABC stock with a basis of $75,000. Joe plans to roll over his 401(k) into a self-directed IRA, liquidate his ABC stock and diversify his portfolio. Although Joe already is 60 years old, he loves the widget business and has no plans to retire.

Fortunately, before Joe implemented his IRA rollover, he met with a financial adviser who told him there might be a better way. She explained that it was possible to only pay a 20 percent tax rate on his gain from ABC stock instead of his ordinary income tax rate of 39.6 percent — an option that could save him thousands of dollars. Here’s how it works:

If the employer stock is rolled into an IRA, Joe could sell the stock with no tax consequences and reinvest it however he liked. He would continue to get tax-deferred growth as long as the assets remained in the IRA. However, distributions would need to begin from that account by age 70 1/2, and all distributions would then be taxed as ordinary income.

If the ABC stock is taken as a direct distribution from the 401(k), only the cost basis of the stock ($75,000) is subject to the ordinary income tax rate. The difference between the value of the stock and the basis ($225,000) will be taxed at long-term capital gains rates regardless of when it’s sold.

The difference between the cost basis and the value of the stock at distribution is the net unrealized appreciation or NUA. Any appreciation that occurs after the distribution date would be subject to the short- or long-term capital gains rate, depending on the holding period.

Some things to keep in mind if you own employer stock in your 401(k):

  • Although a direct distribution from the 401(k) would reduce the total amount of taxes owed, it would require paying a tax now instead of in the future. Current cash flow as well as your future tax bracket need to be assessed to determine if this technique is appropriate for you.

  • In addition to the cost basis of the employer stock being subject to tax at the time of distribution, it also is subject to a 10 percent penalty if you’re not yet 59 1/2 when the distribution is made (or 55 if separated from service).

The special tax treatment on net unrealized appreciation could save you thousands of dollars in taxes and provide you with a bigger nest egg for retirement. Whether it makes sense for you is a topic you should discuss with your financial and tax advisers. What’s important is that you make a well-informed decision.

Ruth Forsyth, CFP, is a senior account manager of market development with The Acacia Group. She co-hosts the “All Things Financial” radio program Wednesdays from 7-8 p.m. on KQV-AM (1410). Reach her at (412) 922-4360 or by e-mail at Ruth.Forsyth@Acacia-Pgh.com.

Monday, 18 February 2002 05:44

The 401(k) blues

I offer my employees the option to invest in a 401(k) as a method to save for retirement. To encourage them to invest, I match 50 cents for every dollar that they invest, up to 3 percent of their compensation. When the market was going up, things were great and my employees loved the plan. Lately though, I want to hide in my office on the days that they receive their statements. Some have stopped contributing completely, and others have moved everything to the money market. Even worse, many have started coming to me for advice. I'm very good at running my own business, but I don't feel qualified to offer financial advice to my employees. I'm pretty sure they're making some costly mistakes, but I don't want the responsibility or liability. Any solutions?

If it helps, yours is a common problem. 401(k)s have become the retirement plans of choice in the last few decades over the traditional defined benefit plans. One reason is portability. The days of working for one company for an entire career are long gone. Many employees never stay long enough to become vested in a defined benefit plan, but they are always 100 percent vested in their own contributions that they make to a 401(k). Employer contributions typically are vested over a 5-year period.

The problem is that while 401(k)s are more portable, they place investment decisions in the hands of employees who don't have the knowledge necessary to make these decisions or truly understand the risk involved. During the 1990s, it was pretty easy to make money, and many people confused their own brilliance with what is otherwise known as a bull market.

Investment decisions were made based on which mutual funds had the highest performance and not on what underlying investments were inside the funds. Consequently, an employee may own shares in five funds inside of the 401(k), and in many cases they are five different versions of the same fund -- containing many of the same companies' stocks. That's great for returns when they are all going up but devastating when the market takes a turn in the opposite direction.

If employees stop contributing to their retirement accounts because they fear losing more money, they not only are hurting themselves, but they are severely limiting their future financial security as well. Through financial education -- and I really believe this is your answer -- these employees can understand that they should continue contributing because they are buying more shares at a lower price with their ongoing contribution. In addition, they can learn to properly diversify their portfolios, given the plan choices and their individual time horizons and risk tolerance.

The question is, how do you, the employer, provide this education without sticking your neck out? Many 401(k) providers offer some type of financial education to their participants. Most are willing to conduct some on-site sessions when the plan is first implemented and send newsletters along with the statements. The problem is that most of your employees probably don't read the newsletters or don't know how to apply the information to their personal situations.

Another option might be to bring in a local financial adviser to meet with your employees and offer advice. This could pose a problem if you have operations in several different areas of the city or country. How can you be sure that the message and advice that is given is consistent, and what if an employee has a question when the adviser isn't around?

A better option might be to hire a company whose sole purpose is to provide financial education to your employees as an employee benefit. These companies typically charge a fee per employee and will customize a program incorporating your specific benefits. One such firm, Financial Finesse, offers workshops on-site in addition to interactive online seminars (www.financialfinesse.com) that the employee can work through at their own pace and knowledge level. These topics can range from 401(k) investing to understanding stock options. In addition, they provide a toll free financial help line that is staffed by certified financial planners.

As an employer, you will find it virtually impossible to take the angst out of investing for your employees. The market goes up, the market goes down. That's just the way it is. Unbiased financial education can offer a solution to the employer who is concerned about giving advice but feels responsible for helping his employees succeed. Ruth A. Forsyth, MS, CFP, CSA, is an investment advisory associate and registered representative with The Advisors Group, Acacia's registered investment advisor and broker/dealer. She also co-hosts radio show "All Things Financial" every Wednesday from 7-8pm on 1410 KQV. Reach her at (412) 922-4360 or at ruth.forsyth@acacia-pgh.com.

Monday, 22 July 2002 09:58

Keeping it all in the family

If you own a successful family business, chances are it’s your dream to pass it on to your children and grandchildren. Whether you realize that dream may depend on what type of estate planning you do. Taking the time now to implement a well thought out estate plan could make the difference between whether your business is passed to future generations or lost to the IRS.

Let’s look at three recent examples:

  • Malcolm Forbes, owner and publisher of Forbes Magazine, took the time to do estate planning prior to his death. As a result, his estate was passed intact to his son, Steve — without compromising any of the family’s business holdings.

  • Joe Robbie’s family wasn’t so lucky. Robbie was founder and owner of the Miami Dolphins and Joe Robbie Stadium. His family was forced to sell its share of the team after his death to pay estate taxes estimated at $47 million.

  • William Paley was founder and chairman of the Columbia Broadcasting System (CBS). His estate had to sell its entire block of CBS stock to pay estate taxes. Because the taxes had to be paid within nine months of the date of death, the stock was sold at a significant discount.

CBS was a marketable asset and could be sold quickly. Closely held corporate stock is much less marketable. Here were three very bright and highly successful men whose estate planning efforts brought forth very different results for their families.

The problem faced by Paley and Robbie was not unlike that of most business owners: lack of liquidity. Estate taxes can be as high as 60 percent of the value of your estate and are due, in most cases, within nine months of death.

Malcolm Forbes solved his liquidity problem. He was able to preserve his business because he implemented an estate plan specifically designed to provide liquidity at his death. He took the advice of his consultants and established and funded an irrevocable life insurance trust.

Business owners can — and should – adopt any of a variety of highly effective estate planning techniques. Annual gifting plans, discount planning and grantor and generation skipping trusts are just a few. Most aren’t exclusive of each other.

However, an irrevocable life insurance trust has a unique characteristic. If properly structured, it creates liquid wealth that is exempt from federal estate and federal income taxes.

The use of an irrevocable life insurance trust is part of nearly all large estate planning cases. One compelling reason is leverage. The return on a dollar invested in a life insurance policy per death benefit paid is hard to beat. If you die before your life expectancy, it offers an incredible return. If you live out your life expectancy, it still offers a competitive return with the added advantage that benefits are tax free.

In addition, it provides cash at death, when estate taxes are due. This can prevent a fire sale of assets.

Paying excessive estate taxes is a voluntary act. While it probably isn’t possible to eliminate estate taxes completely, it is possible to reduce them and pay them in an efficient manner.

There is a big difference between tax evasion and tax avoidance; someone once told me it was about 15 years. Judge Learned Hand probably said it best: “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to any more than the law demands; taxes are enforced exactions, not voluntary contributions.”

If you are a successful business owner with more wealth than you need for your financial security and an estate that is still growing, begin your estate planning now. Educate yourself about the possibilities, then implement a plan. Those two steps can help keep your business all in the family.

Ruth Forsyth is a senior account manager and manager of market development with The Acacia Group. She is a certified financial planner with a master’s degree in financial planning. She co-hosts “All Things Financial” on KQV-AM every Wednesday from 7 to 8 p.m. Reach her at (412) 922-4360 or by e-mail at Ruth.Forsyth@Acacia-Pgh.com.

Monday, 22 July 2002 09:36

Family ties

Many small businesses are family owned and run. After all, that's the American Dream.

What parent hasn't dreamed of turning a good idea and hard work into a booming business and passing it on as his or her legacy to children and grandchildren? Unfortunately, these stories don't always end happily ever after.

Family ties and relationships can frequently cloud critical business decisions and make them more difficult.

According to Cindy Iannarelli (known to most as Dr. Cindy), founder and director of the Center for Family Business at Indiana University of Pennsylvania, every family business has issues, but many don't want to deal with them. It's not uncommon for families to look at facts and figures and plan accordingly, but completely avoid other critical issues.

For example, passing a business from one generation to another while minimizing taxes is one factor. Another is how to ensure that the business is passed to the people who have the right skills and knowledge to continue to run it profitably.

Iannarelli consults regularly with family business owners in helping them to address these concerns. She frequently sees businesses, large and small, making the same mistakes. Among the mistakes:

Treating all children the same by leaving an equal percent of the business to each one. The reality is that children have different skills and interests.

It's just as unfair to burden a child who is uninterested in the business with the responsibility as it is to hinder the child who has always been active in the business with having to deal with his or her siblings when making decisions. Treating your children fairly doesn't always mean treating them equally.

One solution is to pass the company stock only to the children who are interested in the business and pass other assets to those who aren't.

Leaving the business to a spouse who has not been actively involved in the business. This is frequently done so that the surviving spouse doesn't lose control of what is probably the family's largest asset and doesn't have to look to the children for support. Unfortunately, this can cause confusion and resentment during a time of critical transition.

More attractive solutions include forming a board of directors involving key employees and family members or developing a buy/sell agreement that would enable a child to purchase the business.

If passing a business from the first generation to the second is difficult, it only becomes more so as time goes on. Consider a couple with three children which needs to deal with the personalities and opinions of all three and their spouses. Now imagine each of those three children has three children of their own and they are passing the business on 30 years later.

When developing a succession, it's important to work with a facilitator or adviser who not only will address the financial issues but the emotional issues as well. Legal, financial and tax issues need to be balanced with what you're actually trying to achieve.

Saving on taxes seems insignificant if the business is closed and the family is torn apart. The Center for Family Business offers quarterly programs in Indiana as well as Monroeville. You also may want to attend the Distinguished Family Business Day honoring the Howard Hanna family Nov. 6. For details regarding these programs, call (724) 357-2106 or visit www.drcindy.com.

Ruth Forsyth is a certified financial planner with The Acacia Group. She co-hosts "All Things Financial" every Wednesday from 7 to 8 p.m. on KQV Radio, 1410 AM. Reach her at (412) 922-4360 or at ruth.forsyth@acacia-pgh.com.

Thursday, 28 March 2002 11:00

A bigger nest egg

Question: I am self-employed and the only employee of my business. While this affords me a lot of freedom and an above average income, I'm not able to invest as much for retirement as I'd like. I've been contributing the maximum to my SEP but would like to put away more on a tax-favored basis. Any suggestions?

Answer: You're in luck. The new tax law provides a jackpot for one-person businesses.

You probably already know the new law provides increased contribution limits to IRAs and 401(k)s for everyone and catch-up provisions for those over 50. But you may not know that businesses that employ only the owners and their spouses can stash even higher amounts into a 401(k).

In the past, a 401(k) has not been the retirement plan of choice for the self-employed because of higher set-up fees and more complicated IRS filing requirements. SEP and Simple IRAs were easier to establish and offered the same investment limitations, for the most part.

With the advent of the new rules, you'll begin to see special 401(k) programs designed for you. Pioneer Funds offers a "Uni-K" for a $100 annual fee and signature-ready IRS 5500 preparation for $250 per year, a small price for the additional investment it allows.

Under previous rules, there was a 15 percent-of-pay cap that an employee and employer (you are both) could contribute on as much as $170,000 of compensation. That increased to 25 percent of $200,000 in 2002 for an incorporated business, 20 percent for one that is not incorporated.

The bigger change is that in 2002, employee contributions won't be counted toward the 25 percent cap. That means you can make a large contribution as an employer and still contribute the maximum of $11,000 as the employee.

Over 50? You'll be able to contribute an extra $1,000 as an employee to your 401(k) or $500 to a Simple IRA. If you're not incorporated, your percentages will be slightly less. The combined employer and employee contribution cannot exceed $40,000 in 2002.

Ruth Forsyth is an investment advisor associate and registered representative with The Advisors Group. Reach her at (412) 922-4360 or at ruth.forsyth@acacia-pgh.com.