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Retirement Plans

Cash Balance Plan

A cash balance plan (CBP) is a defined benefit plan that specifies the benefit as a hypothetical account balance. CBPs are popular in professional service corporations because they allow larger tax deductions and increased savings for highly compensated employees. The annual allocation limit in a CBP depends on age and is generally larger than in a defined contribution plan. For example, the maximum annual allocation for someone age 50 is more than $140,000.

Retirement Plans

Cash Balance Plan

A cash balance plan (CBP) is a defined benefit plan that specifies the benefit as a hypothetical account balance. CBPs are popular in professional service corporations because they allow larger tax deductions and increased savings for highly compensated employees. The annual allocation limit in a CBP depends on age and is generally larger than in a defined contribution plan. For example, the maximum annual allocation for someone age 50 is more than $140,000.

Cash Balance Plans
With Watkins Ross

High-income earners that have been maxing out their profit sharing or 401(k) contributions but want to save more for retirement are good candidates for a CBP:

  • Professional Service Groups (Ex. Medical Practice Groups)
  • Multi-Generational Family Owned Businesses
  • Single Member S-Corporations Taking Large S-Corporation Distributions

In a CBP, the hypothetical account is credited with a principal credit and an interest credit each year, as defined by the plan document. Since these are pension plans, CBPs are required to allow an annuity form of payment, but the standard payment form is a lump sum equal to the participant’s hypothetical account balance.

Watkins Ross has been designing and administering cash balance plans to provide strategically targeted benefits and increased tax-deferred savings since 1999. We allocate resources specifically to cash balance administration and make it a primary focus of our business including personnel, technology and education resources.

Our Cash Balance Plans Brochure includes additional information. Our expert team can help you determine the best plan design to achieve your corporate goals and better prepare your employees for retirement.

Contact Watkins Ross if you have questions or would like help determining if you should implement a Cash Balance Plan.

Financial & Management

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Is Your Business A Good Candidate for a Cash Balance Plan?

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Cash Balance Plan Considerations

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Cash Balance Plans

To start your cash balance plan today or for additional questions regarding your cash balance plan, please contact:

 

David Paauwe

President