For many successful entrepreneurs, the annual 401(k) contribution limits just don’t cut it. CB plans were designed to maximize retirement savings and tax deductions for business owners and targeted employees. CB plans can help accelerate retirement savings by allowing generous contributions that increase with age. Many business owners can put away upwards of $200,000 annually in pre-tax funds when cash balance and 401(k) profit sharing contributions are combined. THAT’S RIGHT, MORE THAN $200,000!
WHAT IS A CASH BALANCE PLAN?
Cash Balance (CB) plans are considered hybrid plans. They combine the high contribution limits of traditional Defined Benefit (DB) plans with the flexibility and portability of a Defined Contribution (DC) plan. The benefits include:
» Tax advantages
» Accelerated retirement savings
» Attraction + retention of top talent
» Flexibility + portability
» Protection from creditors
WHO IS BEST SUITED?
Professional groups including doctors, dentists, lawyers, architects, and high-tech companies are prime candidates for CB plans. If any of the following statements are true, a CB plan may be right for you and your company.
» You have regular, positive cash flow.
» Owners, or targeted key employees, make at least $200,000 annually.
» Owners, or targeted key employees, want to save more than $50,000 to their retirement accounts.
» You already contribute 3-4% to our employees.
» You are comfortable with advanced plan design.
» You have a qualified administrative partner for support.
CB plans can help you and your key employees Save upwards of $200,000 per year for retirement! If you are looking for larger tax deductions and accelerated retirement savings; a Cash Balance Plan may be a perfect solution for you.
MORE BANG FOR YOUR BUCK
Tax deductions are hard to come by; however, Cash Balance plans offer tremendous tax advantages:
» Contributions directly reduce your taxable income
» Significant deductions at the time of contribution
» Contributions grow tax deferred year after year
» Contributions are “above the line” deductions
WHAT’S THE CATCH?
No catch. Just a few items that are unique to this type of plan design:
» Annual funding is required
» Changes in plan demographics may impact contribution requirements
» Plan must be set up with the intention of being permanent (minimum 3-5 year commitment)
» Administration, compliance & actuarial fees can be deducted from plan assets
Balance in Action
The chart below exemplifies how much owners, or targeted key employees, can benefit from the implementation of a CB Plan.
