Copyright 2001, Lawrence Journal-World. Used by permission.

Thursday, July 5, 2001

Retirement Network enhances benefits

Lawrence compensation planner aims to retain executives

By Mark Fagan

Top executives and some of the region's biggest companies are counting on Joe Jones to help build their retirement plans.

One tax advantage at a time.

"We design plans to attract, reward and retain - all on a pretax, nonqualified basis - a company's key talent," said Jones, principal for the Executive Benefits Network."The most important factor for companies today is keeping and retaining key talent, and the only way to retain key talent and honor the shareholder is to provide benefits on a very cost-effective basis."

The company creates deferred-compensation plans for top-tier employees, from human relations managers to chief executive officers. The network currently has $400 million of assets and liabilities under management.

Its clients include companies such as Farmland Industries, Butler Manufacturing and Johnson Controls.

Last week, the network - Jones and his partner, David Fritz Jr., in Milwaukee - landed Midwest Express Airlines as a client. "I'm in a niche market, a very narrow niche," said Jones, who started in the business 12 years ago with The Todd Organization, a global compensation firm in St. Louis. Jones and Fritz left the organization to start their own firm, and tapped into their client list.

"There are only a few companies and a few individuals in the world that do what I do," Jones said. "(And) the need for these plans is growing." Because traditional company-sponsored pension plans and 401(k) retirement accounts are capped at certain income levels, he said, companies and their top executives need to find ways to sock away money without encountering massive tax bills or income liabilities.

That's where the network comes in.

Take an executive who earns $100,000 a year. Current laws would cap an annual 401(k) contribution at $10,500, Jones said, but that may not be enough to properly finance a retirement.

The company, therefore, might agree to hold back another $9,500, and guarantee that the employee would receive that money upon retirement with a minimum rate of return - say, one tied to the return on a particular mutual fund, he said.

The executive would avoid taxes on the deferred compensation until retirement, while the company would avoid carrying a debt until it had to pay off - usually from cash on hand at the time of the employee's retirement.

"It's, in effect, an I.O.U. between the company and the executive," Jones said.

Such compensation packages often serve as an "entry fee" for people considering employment offers, said Holly McCoy, vice president for human resources at Farmland in Kansas City, Mo. If the offer isn't competitive, a potential employee may look elsewhere. "You need to provide something that is in the ballpark," she said. "It's a basic thing that is expected by an employee - a benefits package to satisfy their needs. If you didn't have that, it would be a barrier."

Jones said that it takes a network to manage a company's ongoing liabilities. A company like Butler might have 90 executives with such packages in place, each requiring separate accounting and investments to keep up with the promises made.

This year he teamed up with WealthSense, of Chicago, to provide a framework for creating and administering such plans through the Internet. The system allows a company's benefits manager to adjust holdings on a daily basis, with real-time input from Jones or others from the network.

Jones already is making plans for growth. Robert Schehrer, a longtime Lawrence accountant who retired a few years ago, will join the network later this year to handle financial planning and estate planning efforts.

Business editor Mark Fagan can be reached at 832-7188.

Mark Fagan
Business Editor, Lawrence Journal-World
800.578.8748, ext. 7188
(fax) 785.843.4512