Defined Benefit Cash Balance Plans

A defined benefit plan is an IRS-approved retirement plan that allows qualifying small business owners to make significant tax-deductible contributions each year. Cash balance plans are a type of defined benefit plan. The contribution amount for these plans is calculated based on a number of factors:

  • Current age — the older the client, generally, the larger the allowed contribution
  • Years of employment in the business
  • Compensation, which can be the average of the client’s 3 highest years
  • Planned retirement age — usually at least 5 years from the year the plan is adopted
  • A formula that takes into account what percent of compensation the business owner wants to receive as a benefit in retirement and how much of current income they can comfortably afford to contribute to the plan. We work with you to make sure this amount will be appropriate for the next several years.
  • And, in subsequent years, the calculation takes into account the accumulated balances in the Trust’s investment account

These plans must be opened by end of the fiscal year, generally December 31st and contributions are required each year.

How Much Can You Save?

Defined Benefit Plans allow clients the largest yearly retirement contributions — averaging $120,000 in 2015 — while saving huge amounts in taxes. This unique program is designed for small businesses with 1 to 5 employees. Depending on the situation, business owners may be able to save over $2 million for retirement in just 10 years. The plan’s open architecture allows assets to be invested in mutual funds, bonds, equities, annuities, or any other marketable securities that you and your clients choose.

Defined Benefit Plans for Businesses with Employees

Quick Eligibility Checklist for OwnersPlus Cash Balance Plan + 401(k) Retirement Program

OwnersPlusTM is a retirement program for partnerships, professionals and business owners with 2-10 employees. By combining a cash balance defined benefit plan and a safe harbor 401(k)/profit sharing plan, OwnersPlus gives business owners the potential to make very large deductible contributions for themselves — often $150,000 or more annually — while limiting the total cost of benefits for employees

Cash balance plans aren’t right for everyone. OwnersPlus works well for business owners who are:

  • Owners of profitable businesses with 2-10 employees, Professionals with small practices, or Partnerships
  • Age 40+
  • Interested in making larger contributions than allowed in SEP-IRA or 401(k)
  • Likely to have cash flow to make contributions for 5+ years
  • Willing to make limited contributions for employees

Key Advantages of OwnersPlus Cash Balance +401(k) Plans

  • Owners potentially can contribute three or four times what they can to other plans
  • Contributions and fees are deductible business expenses generally saving the owner tens of thousands of dollars in annual taxes
  • Partners can receive different contribution amounts
  • Owner can set different “classes” and contribution levels for employee groups which provides for more flexibility in allocating employee benefits
  • Contributions on behalf of employees are limited and established during plan design. However, changes in personnel will impact required contributions.
  • Investments grow tax deferred, building wealth faster
  • At retirement (or at plan termination), assets in both the Cash Balance and the 401(k) plans are rolled into IRAs and continue to grow tax-deferred until withdrawn
  • Clients and their advisors can choose any equities, mutual funds, bonds, annuities or other marketable securities to fund their plans
  • Turnkey administration by Specialists who design plans tailored to meet each business owner’s objectives and handle all paperwork related to plan set-up and ongoing government compliance and reporting.