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SOURCE:  Wall Street Journal

Note:  The following story was based exclusively upon original research by Parish & Company

How Jeb Bush's Pension Cut His Taxes

Mark Maremont, Wall Street Journal

July 7, 2015

In the tax returns he released Tuesday, GOP presidential candidate Jeb Bush reported large deductions for payments to “pension and profit-sharing plans.” The payments averaged $350,000 a year for the past five years, far more than most people could contribute to an individual retirement account or 401(k) plan.

Other documents Mr. Bush has filed show that he used a little-known but perfectly legal tax strategy to establish a pension plan for two people working for his consulting firm, Jeb Bush & Associates LLC. Attorneys who work with such plans say one of them was almost certainly Mr. Bush himself and the other was likely his son, Jeb Bush Jr.

The strategy has allowed Mr. Bush to defer paying hundreds of thousands of dollars in income taxes since he established the plan in 2007 and to rapidly build up a large retirement-plan balance, the attorneys say.

Details of Mr. Bush’s pension arrangement are found in filings by Jeb Bush & Associates with the U.S. Labor Department. The filings, not released by the Bush campaign, show that the firm’s pension plan had assets of $2.4 million as of the end of 2013.

“By virtue of being predominantly a family business, the Bushes were able to plan for their retirement through Jeb Bush & Associates,” said a campaign spokeswoman. She declined to provide the names of the two persons covered by the company pension plan and didn’t respond to other detailed questions.

The consulting company had a separate 401(k) plan covering five unnamed individuals, the filings show. It is possible Mr. Bush also participated in this plan, attorneys said.

In a blog posting, Bill Parish, a Portland, Ore., investment adviser, called Mr. Bush’s pension plan “aggressive,” in part because the defined-benefit plan assumes a retirement age of 62. That allowed Mr. Bush, who turned 62 in February, to contribute more money more quickly than if the plan had assumed retirement at 65. Mr. Bush’s election as president wouldn’t have any impact on the retirement plans.

In releasing 33 years of his tax returns on Tuesday, Mr. Bush told reporters he made a commitment not to take a public pension when he was elected Florida governor.

“Had I taken my pension I would have started getting it this year,” he said. “Someone asked about this and I had totally forgotten that I had not taken the pension and I would instead be receiving something like $29,000 a year. I just never felt it was that important to do.”

Mr. Lax, the employee-benefits attorney, said tax rules would allow Mr. Bush to roll over any balance in his pension fund into an IRA upon reaching the planned retirement age, which he did this year. Mr. Lax said that is what his typical client does.

Mr. Bush’s pension isn’t nearly in the same league as the IRA held by Mitt Romney, the GOP’s 2012 presidential nominee, who in filings reported his retirement fund held between $20.7 million and $101.6 million.

Jeffrey S. Ashendorf, a benefits attorney at Ford & Harrison LLP in New York, said Mr. Bush probably didn’t put the maximum amount possible into the pension arrangement, based on his rough calculations from reviewing the Jeb Bush & Associates filings.

Tax rules this year allow ordinary wage earners under the age of 50 to shelter $18,000 in a 401(k) plan.

For those in the over-50 category, like Mr. Bush, the maximum that could go into a 401(k) plan this year is $59,000 including the employer’s contribution and the current limit on IRA contributions is $6,500.

The strategy used by Mr. Bush follows rules for traditional pension plans. They allow employers to contribute much larger sums to build up a kitty that could provide a pension of as much as $210,000 a year for a retired employee’s expected lifetime.

Mr. Bush, as owner of Jeb Bush & Associates, acted as the employer in funding the pension plans, which reduced his taxable income from the company. In 2013, for example, Mr. Bush reported $7.5 million in gross receipts for his business, and $254,000 in payments to pension and profit-sharing plans.

From 2007 to 2010, the percentage of his business income sheltered through the pension arrangement was much higher, ranging between 10% and 13%. In 2008, for example, Mr. Bush reported his company made gross receipts of $2.4 million and paid $323,000 into pension plans.

Bill Parish
Parish & Company
4800 Meadows Road Suite 300
Lake Oswego, Oregon 97035

Tel:  503-643-6999 

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