Many business owners and partners are seeking larger tax deductions and accelerated retirement savings. Cash Balance plans may be the perfect solution. Also known as “hybrid” plans, CBs combine the high contribution limits of traditional Defined Benefit plans with the flexibility and portability of a 401(k).
Thanks to recent regulatory and legislative changes, Cash Balance plans have become the fastest growing sector of the retirement plan market, with thousands of professionals, farmers and successful business owners across the country adopting these plans each year.
A Cash Balance plan is a form of a Defined Benefit plan that specifies both the contribution to be credited to each participant and the investment earnings to be credited based on those contributions. When combined with a 401k Profit Sharing plan, the highest allowable tax-deductible limit can be reached.
New Plan Set Up
Establishing a CB or DB plan can be a complex task. At SPS, we strive to ensure the process is as easy as possible. We gather information about the employer to create a study that calculates the maximum or other target contribution and benefit levels, along with calculating the potential required contributions to non-owner employees. SPS will help design the optimal Plan design for the employer’s goals with respect to the employee demographics.
The Plan installation steps are:
- SPS consultation about plan goals with Q&A
- Employer completes questionnaire and employee census request
- SPS creates a plan study
- Employer finalizes plan design
- SPS drafts plan documents
- SPS prepares installation package for employer
Cash Balance & Defined Benefit Plan Administration
Each year, SPS gathers from the employer compensation figures, employee census data, and other relevant business information to calculate a contribution range, complete the actuarial work, and ensure the Plans are in compliance with IRS regulations. These steps include:
- Calculate minimum and maximum contribution range
- Complete compliance tests
- Prepare actuarial valuation report
- Prepare Form 5500 and Schedule SB with attachments
- Prepare participant benefit statements
- Prepare PBGC filing if needed
Request a CB/DB Quote