Cash Balance Plans
Great for those that are already maximizing their 401(k) plan contributions and still want to save more.
LARGER TAX DEDUCTIONS
The higher the contributions, the higher the tax deduction.
No contribution or investment decisions for employees.
GREATER BENEFIT PAYOUT
Higher contributions lead to higher payouts at retirement.
Big Savings.
Small Risk.
Cash balance plans are the modern evolvement of traditional defined benefit plans. But unlike defined benefit plans, cash balance plans promise a certain account balance instead of a monthly benefit payout. Each eligible employee’s account is credited based on pay and an indexed interest rate. Contributions are employer-funded and are held in a pooled trust account.
And just like a traditional defined benefit plan, cash balance plan contributions are also protected by the Pension Benefit Guarantee Corporation (PBGC).
Today
Thousand
Pre-Tax Contributions
Per Person for 2020
After 15 Years
Million
Retirement Savings
Assumes 6% Annual Return & $0 Starting Balance
Cash Balance Plan Example
How it works.
| Age | Salary | 401(k) Deferral | Profit Sharing | Cash Balance | Total | |
|---|---|---|---|---|---|---|
| Owner 1 | 55 | $285,000 | $26,000 | $37,500 | $247,950 | $311,450 |
| Owner 2 | 50 | $285,000 | $26,000 | $37,500 | $210,900 | $274,400 |
| Employee 1 | 45 | $50,000 | $5,000 | $2,500 | $700 | $8,200 |
| Employee 2 | 40 | $45,000 | $3,000 | $3,700 | $700 | $7,400 |
| Employee 3 | 35 | $40,000 | $1,500 | $3,330 | $700 | $5,530 |
| Employee 4 | 30 | $35,000 | $500 | $3,590 | $700 | $4,790 |
| Employee 5 | 25 | $30,000 | $0 | $2,220 | $700 | $2,920 |
| % to Owner | 83.5% | 99.2% |
Hypothetical illustration only. Actual results may differ.
LARGE CONTRIBUTIONS
You’re seeking contributions over the 401(k) and profit sharing limits.
STEADY CASH FLOW
Your business has steady cash flow and is able to meet funding requirements.
DEMOGRAPHICS
Your employees’ demographics are favorable for this design.
RETIREMENT BENEFIT
Both lump-sum and annuity payment options are available.