Cash Balance Plans – Accelerate Savings, Maximize Tax Deductions

Cash Balance Plans are a great design for employers seeking to fund much larger contributions than permitted under a 401k and Profit Sharing Plan.

  • How Do Cash Balance Plans Work?

Type of Defined Benefit Plan – Cash Balance Plans are a type of Defined Benefit Plan, but they offer some of the best features of Defined Benefit Plans and Defined Contribution Plans.

Hypothetical Account – Participants have a hypothetical “account” that is credited with a pay credit (i.e., 5% of pay) and an interest credit (index-based).

Retirement Benefits – Are usually expressed in the form of a lifetime annuity, but lump sum payment is permitted.

Pooled Investments – Trustees make all investment decisions and generally invest in assets that track the plan’s stated interest credit.

Required Contributions – Employer contributions are required, and the annual amount is determined by an actuary. If assets are invested conservatively, contributions generally do not fluctuate widely from year-toyear as long as the plan remains adequately funded.

Combo Plans – A Cash Balance Plan can be paired with a 401k Plan to allow for even higher savings.

Federal Guarantee – Benefits are usually insured by the Pension Benefit Guaranty Corporation (PBGC).

  • Is a Cash Balance Right for Me?

A Cash Balance Plan may be a good if:

Seek Large Contributions – You seek contributions and tax deductions> $69,000.

Profitable Business – Your business has strong profits and reliable cash flow.

Prepared to Contribute – You are prepared to contribute at least 7.5% of employees’ salaries each year.

Time to Catch Up – You have used cash to build your business and postponed retirement savings.

Learn more about Cash Balance Plans.

Cash Balance + 401k Illustration

This is a hypothetical example dependent on specific assumptions and used for illustrative purposes only. Plan is assumed to have PBGC coverage; otherwise combined plan limits may apply. Full amounts may not be tax deductible in the first plan year.

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Cash Balance Plan Marketing and Prospecting

April 25, 2024

Learn how to best position and sell cash balance plans to plan sponsors. Our presenter Brian Smith, JULY’s Senior Institutional Sales Director, is a plan design and marketing expert. This session covered a refresher of cash balance basics, sales and prospecting tips, marketing resources, and more.