Good Candidates for Adopting a Cash Balance Plan
1) Professionals who desire to contribute more than $50,000 annually to their retirement accounts.
Many professionals neglect their personal retirement savings while they are building their practice and often have a need to catch up on years of retirement savings. Adding a Cash Balance Plan allows rapidly accelerated savings with pre-tax contributions that can range from $100,000 to $220,000, depending on the demographic mix of eligible participants.
2) Businesses already contributing 3-4% of compensation to employees and willing to contribute more.
While Cash Balance Plans are often established to primarily benefit key members of the practice or other highly compensated employees, the plan normally requires a minimum contribution of between 7% and 9% of compensation pay for staff in the Cash Balance Plan or a separate Profit Sharing 401 (k) plan.
3) Business Practices that have demonstrated consistent profit patterns
Because a Cash Balance Plan is a pension plan with required annual contributions, a consistent cash flow and profit is important to its continuation.
4) Professionals over 50 years of age who desire to “catch up” or accelerate their pension savings
Contributions allowed for partners and required for employees in Cash Balance Plans are dependent on the demographic mix of eligible employees, and work best with the majority of eligible employees being relatively younger than owners. Therefore, older owners generally accelerate their retirement savings faster.
Does it sound like you might be a good fit for a Cash Balance Plan? If so, it’s vital that you have the right guidance. The Robin Weingast & Associates team of enrolled actuaries and certified pension and employee benefit consultants are essential partners who can help you develop and get the most out of a Cash Balance Defined Benefit Plan as part of your retirement program. Contact us today for more information.