What is a Cash Balance Plan?

A cash balance plan shares some similar to a traditional pension plan. Similar to traditional pension plans, a cash balance plan provides employees with the option of a lifetime income.

The difference between pensions and cash balance plans is a cash balance creates an individual account for each employee enrolled with a specified lump sum. Establishing a cash balance plan offers potential tax savings for employers.

Find out of a Cash Balance Plan is right for your business.

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what is a cash balance plan

Advantages of Cash Balance and 401(k) Plans

  • Business owners can contribute to their cash balance retirement account 3x or 4x times what they can to other types of retirement plans
  • Contributions and fees are deductible business expenses generally saving the owner tens of thousands of dollars in annual taxes
  • Cash Balance Plans contribution amounts can be higher for business partners 
  • Business Owners can set different “classes” and contribution levels for  specific employee groups which provides for more flexibility in bonus employee benefits
  • Retirement account contributions on behalf of employees are limited and established during plan design. Changes in company personnel will impact required contributions from the business owner.
  • Retirement account investments grow tax deferred, building wealth faster
  • When an individual retires or terminates the plan, assets in both the Cash Balance and the 401(k) plans are rolled into Traditional IRAs to continue to grow tax-deferred until withdrawn
  • Clients can select any equities, mutual funds, bonds, annuities or other marketable securities to fund their plans
  • Turnkey administration by Specialists who design plans tailored to meet each business owner’s objectives and handle all paperwork related to plan set-up and ongoing government compliance and reporting.
tax advantages of a cash balance plan