Looking past the recession

In a time of increasing economic uncertainty, why would anyone willingly increase employer expenses?

That’s exactly what J.R. Glenn, president of Biltmore Personal Fitness Centers, is doing these days — and he couldn’t be more excited about the direction his business is heading.

Biltmore Personal Fitness Centers, a one-on-one and small-group fitness training facility in Powell, recently underwent a $50,000 remodeling project to enhance the services it offers to clients. Now Glenn wants to provide additional benefits to his employees as well, so he’s adding a qualified retirement plan.

Despite the additional $4,000 to $5,000 per year it will cost to fund employee retirement accounts, he feels it is as much an investment in the company as it is in his employees’ future retirement.

His timing in starting a plan is fairly good. Dollars can buy more — and, therefore, help reduce the overall cost of ownership — in a time of falling stock prices. In addition, providing employees with a retirement plan option can add a sense of comfort and stability in these volatile financial times. That can help retain and reward employees.

As with any retirement plan analysis, it’s important to assess the status of your company.

* What is the company’s commitment to sponsoring a retirement plan? Is the employer willing and able to take on additional expenses to offer this benefit?

* What are the cash flow history and projections for the company? Some qualified plans require mandatory employer contributions while others offer more flexibility. A look at the history and expected cash flow can yield valuable insight as to the employer’s ability to adopt plans that require greater employer contributions.

* Are there industry-specific issues that must taken into consideration? In Glenn’s case, the personal fitness industry is in the growth stage for the Midwest and Central Ohio in particular. The increased competition his fitness center faces makes having a retirement plan to offer employees a smart move.

Once you’ve narrowed down the type of plan that seems most suitable for your situation, consider your objectives, both as an employer and as a business owner. Is the plan being set up to maximize personal retirement and tax benefits for the owner? Or, is there greater emphasis on using the plan as a tool to help reward and motivate valued employees, enhance recruiting efforts, reduce turnover and increase overall employee satisfaction?

In the case of Biltmore Personal Fitness Centers, Glenn’s goal was to reward his employees. Therefore, he decided to adopt a SIMPLE IRA plan. It’s easier to administer than a traditional 401(k) plan and offers immediate vesting of all mandatory employer contributions — something Glenn felt would demonstrate his commitment to his staff. With an Oct. 1 plan adoption deadline, he will have time to measure the results of Biltmore’s expanded services and devise a bonus structure so staff can share in Biltmore’s successes.

Investing in the market for the first time — especially at a time of tighter budgets and economic uncertainty — can be scary. Just remember: It’s time in the market, not timing the market, that will best help you in the long run. Pierre Bigby ([email protected]) is a certified financial planner with Vawter Financial Ltd. in Columbus.