Often times we encounter retirement plan sponsors who either want to defer more into their retirement plans or who could be getting more out of their current retirement plan.

Enter Cash Balance Plans:

A Cash Balance Plan, is a type of retirement plan that belongs to the same general class of plans known as “Qualified Plans.” A 401(k) is a qualified plan. These plans “qualify” for tax deferral and creditor preferred treatment under ERISA.

In a Cash Balance Plan each participant has an account. The account grows annually in two ways: first, as a contribution and second, an interest credit, which is guaranteed rather than being dependent on the plan’s investment performance. Any guarantees are based on the claims paying ability of the insurance company.

Many owners and partners are looking for larger tax deductions and accelerated retirement savings. Cash Balance Plans may be the perfect solution for them. The 2006 Pension Protection Act (PPA) and the Cash Balance regulations issued in 2010 and 2014 have made these plans even more flexible and easier to administer, making them an increasingly popular choice for successful business owners.

 

Cash Balance Plans are more complex than most traditional employer sponsored retirement plans. However, they can provide significant benefits to both the employer and the employee when used in the right situations.

For more information on cash balance plans please contact us or visit https://www.cashbalancedesign.com/resources/cash-balance-101/

2016 Contribution Limit Table

Age 401(k) Profit Sharing Cash Balance Total
65 24,000 35,000 245,000 304,000
64 24,000 35,000 250,000 309,000
63 24,000 35,000 256,000 315,000
62 24,000 35,000 262,000 321,000
61 24,000 35,000 248,000 307,000
60 24,000 35,000 235,000 294,000
59 24,000 35,000 223,000 282,000
58 24,000 35,000 211,000 270,000
57 24,000 35,000 200,000 259,000
56 24,000 35,000 190,000 249,000
55 24,000 35,000 180,000 239,000
54 24,000 35,000 170,000 229,000
53 24,000 35,000 161,000 220,000
52 24,000 35,000 153,000 212,000
51 24,000 35,000 145,000 204,000
50 18,000 35,000 137,000 190,000
49 18,000 35,000 130,000 183,000
48 18,000 35,000 123,000 176,000
47 18,000 35,000 117,000 170,000
46 18,000 35,000 111,000 164,000
45 18,000 35,000 105,000 158,000
44 18,000 35,000 100,000 153,000
43 18,000 35,000 94,000 147,000
42 18,000 35,000 89,000 142,000
41 18,000 35,000 85,000 138,000
40 18,000 35,000 80,000 133,000