How does this work?
A cash balance plan combines the best features of defined contribution and defined benefit plans, offering flexibility, cost efficiency, portability, and ease of understanding. It allows for tax-deductible contributions, maximizing benefits for key employees.
- Annual contributions go to participant hypothetical account balances
- At retirement, the balance can be paid as a lump sum
- Investments are pooled and conservatively managed to track interest credits
- Combine the 401k or profit-sharing plan with a cash balance for enhanced benefits
Maximize Your Plan Design
Use a Cash Balance Combo to get the best of both worlds. The following Combo Design example illustrates the benefits of this premium plan design.
| Age | Salary | 401k/PS | CB | Totals | |
|---|---|---|---|---|---|
| Owner | 55 | $265,000 | $59,000 | $135,000 | $194,000 |
| Employee 1 | 38 | $60,000 | $4,500 | $0 | $4,500 |
| Employee 2 | 37 | $50,000 | $3,750 | $0 | $3,750 |
| Employee 3 | 36 | $40,000 | $3,000 | $750 | $3,750 |
| Employee 4 | 35 | $30,000 | $2,250 | $750 | $3,000 |