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About Mark Clark

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2017 Cash Balance Retirement Plan Guide

The information provided herein is for quick reference only. All ERISA, IRS and DOL rules and requirements are complex and require additional data not included here.


Cash Balance Plans for Larger Firms

Cash balance plans can be great solutions for small firms trying to save on their income tax bill and boost retirement savings. However, if certain criteria are met, cash balance plans can also be effective for larger firms. In order for a cash balance plan to make sense, regardless the size of the firm, it is important to have


Cash Balance Plans

Many owners desire larger tax deductions and accelerated retirement savings. Implementing a cash balance plan may be the best solution for such owners. Recent legislation encourages more and more professionals and successful business owners to adopt this type of plan.

In a cash balance plan, a “theoretical” account balance (or “TAB”) is maintained on behalf of each participant. Thus, each participant in the cash balance plan has a TAB that resembles those in a 401(k) or profit sharing plan


Defined Benefit Plans, Explained in Plain English

Defined benefit retirement plans enable successful business owners to significantly increase their retirement savings, while lowering their current income tax liability. Defined benefit plans allow for substantially higher annual contributions for business owners, as compared to other types of retirement plans.

Traditional Defined Benefit Plans

In a traditional defined benefit (or “DB”) plan, the plan defines the benefit that will be paid at retirement age (or earlier separation from employment). An actuary determines the annual amount that must be deposited into the DB plan on an annual basis to provide the benefit called for under the terms of the plan. In addition to the benefits to be paid, the actuary takes into account an expected rate of return and other factors (e.g., mortality) when determining the required contribution each year. The actual investment results can serve to cause the required contribution to increase or decrease from year to year based on whether or not they exceed projected returns. The investment results do not alter the benefit the employee receives.

A Tale of Two Dentists

A Cash Balance Case Study

Joe and Tom, partners in a dental practice, came to us looking for help. Joe had owned the practice for several
years, while Tom was a new owner. Both were interested in accumulating wealth for retirement, but they
recognized that they were in different places in life.

Scenario 1

We started our discussion with their existing Safe Harbor 401(k) profit sharing plan. By defining each individual as their own “group” we could allocate the maximum to both Joe and Tom. Since Joe is over 50 years old, he is allowed a catch-up contribution of $5,500. The cost is 7.5% of compensation to the employees. This resulted in 81% of all employer money allocated to Joe and Tom