Cash Balance Plans

We can help you set up a Cash Balance Plan for your key employees

While Cash Balance Plans have been around for 15+ years, it is only recently that IRS and DOL guidance has cleared up a few of the rules. As a result, Cash Balance Plans are now one of the fastest growing retirement benefits, particularly among employers with high wage earners (>$200k/yr).

We assist Plan Sponsors in the design and portfolio management of Cash Balance Plans, with a goal of maximizing benefits and funding flexibility, while minimizing costs and underfunding risks.

Benefits

• Significant tax savings for high wage earners (ability to annually shield as much as $200k of additional income, relative to normal 401(k)/Profit Sharing limits)
• ERISA protection of assets from litigation, bankruptcy and creditors
• Assets are also insured against employer default by the Pension Benefit Guarantee Corporation (PBGC)
• 401(k) style benefit accrual with regular participant statements showing a lump sum that never decreases
• Unlike most pension plans, this accrued balance is completely portable and may be rolled over into an IRA if changing employers
• Unlike 401(k) plans, Cash Balance Plans are typically designed only for key employee groups

Other Factors to Consider

• Cost varies depending on choice of recordkeeper, TPA, investment advisor, ERISA attorney and actuary
• Contribution rates can not be changed often, but a smart plan design can significantly increase funding flexibility, allowing for larger contributions during the good years and smaller contributions during the lean years
• Contribution rates can not be set at the individual level, but employee groups can be created with different contribution rates
• Employees may opt out (once), if so desired
• Crediting rate typically reflects a bond market rate, but a smart plan design can offer the possibility of also participating in the equity markets.

401(k) IPS can help you to evaluate if a Cash Balance Plan would be a good fit for your firm.