What Is a Cash Balance Plan?
✅ A Cash Balance Plan is a type of defined benefit plan that combines features of a 401(k) and pension plan.
✅ Employers contribute on behalf of employees, with pre-set interest credits and guaranteed growth.
✅ Contributions are based on salary, age, and IRS limits, allowing significantly higher tax-deductible contributions compared to a traditional 401(k).
Key Benefits of a Cash Balance Plan
💰 Tax Deductions: Reduce taxable income with large, deductible contributions.
📈 High Contribution Limits: Contributions often exceed 401(k) and profit-sharing plan limits.
👥 Ideal for Business Owners: Attract & retain top talent with strong retirement benefits.
🔄 Portability: Funds can roll over into an IRA upon retirement or plan termination.
Who Should Consider a Cash Balance Plan?
A Cash Balance Plan is ideal for:
✅ Business owners, physicians, law firms, and high-income professionals
✅ Companies with stable cash flow looking for tax-efficient retirement solutions
✅ Entrepreneurs seeking to catch up on retirement savings
How a Cash Balance Plan Works
1️⃣ Employer sets up the plan and contributes annually.
2️⃣ Each participant has an account with contributions + interest credits.
3️⃣ Plan is managed actuarially to meet IRS requirements.
4️⃣ Upon retirement or exit, funds can be rolled over into an IRA.
Setup & Administration
🔹 Plan Design: Custom-tailored to business needs
🔹 Annual Contributions: Must meet funding rules
🔹 Compliance: Must follow IRS and DOL regulations
🔹 Tax Advantages: Reduces corporate & personal tax liabilities