THE BIG CHALLENGE THAT MID-SIZED FIRMS HAVE WITH EMPLOYEE PENSIONS
GE’s official reasoning was a focus on slashing debt and reducing the billions of dollars in future pension obligations weighing down its balance sheet. But the underlying culprit was surely the unaffordability of these expensive plans.
What matters most is customizing any package to ensure that it works for your organization over the long term. The last thing you want is for a potentially beneficial talent-attraction and employer branding tool to turn into a financial albatross. Work with your accounting team to find a solution that makes sense—and be ready to embrace alternative pension options.
If your business has reached the medium-sized threshold and is agonizing over whether to introduce (or sustain) an employee pension program, ask a few basic questions: Can you afford to maintain it given current cash flow and revenue projections? Is it a relevant tool for attracting and retaining top talent? Is it in alignment with your competitors’ entitlement offerings? If yours is an industry such as professional services or tech, where organizations are clamoring to hold on to precious talent, then perks and benefits are a critical part of our compensation package. If you operate in an industry with a glut of available professionals, then offering a lavish pension plan may not be as important.
Armando Iannuzzi is a tax partner at KRP LLP, a Markham, Ont.-based accounting firm for entrepreneurs.