Cash Balance plans allow owners and executives to contribute significantly more than a standard 401(k) plan, but they are not right for every situation.

 

So, how do you know when a CB plan is the correct choice for your client? First, have they expressed a desire to contribute more to their retirement plan? If you don't know, ask as they may not even be aware they can contribute more.

 

If the answer is yes, determine if they fit the four profiles for using a CB plan.

 

1. Business Profile: The business should have a healthy cash flow and a positive outlook. Typically, the business will be privately held with approximately 10-50 employees.

 

2. Ownership Profile: The owner is usually a baby boomer, age 45-60. If there are multiple owners, the plan can be designed so they can each contribute different amounts.

 

3. Census Profile: The company should have the right mix of employees in regards to age and compensation, with some employees being younger and lower paid.

 

4. Contribution Profile: The owner(s) must be willing to contribute at least $60,000-$70,000 per year, and make employee contributions of 7.5%.

 

For more information on CB plans, visit our website or YouTube channel to view our Cash Balance Plan video series. Or, contact Trinity today.