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Cash Balance Plans

Cash Balance Plans in Fairfield, CT

A cash balance plan is a pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest credits.

Accelerate retirement savings for Owners and Key employees while the company experiences large tax deductions.

Cash Balance Plans for businesses in Fairfield, CT

A cash balance plan is a pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest credits. 

Easy to understand, straight forward hypothetical account balance is established for each participant as follows: Beginning Balance + Contribution Credits (usually defined as a % of pay) + Interest Credits (defined in plan document, guaranteed interest) = Ending Balance.

Cash Balance Plans Allow Six Figure Contributions

Most people can contribute to their 401(k) without worrying about exceeding the annual contribution limit. If you’re under 50 years old, that’s $19,500 a year. If you’re 50 or older, it’s $25,000.

But a small and important segment of the population has the ability – and desire – to contribute significantly more to their retirement account. If you’re looking to save even more on taxes and put up to six figures per year into your retirement account, a Cash Balance plan may be the right choice.

This video below introduces Cash Balance plans, a retirement plan design that allows significantly higher contribution limits and drives faster asset accumulations than a 401(k). Watch this month’s video and read our blog on Cash Blalance Plans to learn more. If you’re intrigued, let’s chat and see if your situation and goals might be a good fit.

Advantages of a Cash Balance Plan for Plan Sponors in the Fairfield, CT area:

  • Large tax deductions
  • For the company, money contributed to the plan is tax deductible now.
  • For participants, taxation on benefits is deferred until received as income.
  • Accelerated retirement savings for Owners and Key employees
  • Can vary contribution by owner or Key employee.
  • Employer’s liability is easily defined

Related to: Third Party Administrator in Fairfield, CT, TPA in Fairfield, CT, Retirement Plan Consultant in Fairfield, CT, Employer Retirement Plan Consulting in Fairfield, CT, Actuarial Consulting in Fairfield, CT, Pension Consultant in Fairfield, CT, Actuarial Services in Fairfield, CT

Cash Balance Plans Videos

Cash Balance Plans Allow Six Figure Annual Contributions

Frequently Asked Questions

How does a Cash Balance Plan work?

Each participant has an account which grows annually in two ways: first, a contribution and second, an interest credit, which is guaranteed rather than dependent on the plan’s investment performance.


Can Cash Balance plans be offered in addition to 401(k) Profit Sharing plans or other plans?

Yes, the employer can offer a combination of qualified retirement plans in order to produce a larger contribution.


What are the distribution options upon retirement or if leaving the employer?

Any vested account in a Cash Balance Plan can be paid as a lump-sum distribution or annuity. Lump sums are usually rolled over to an IRA.


Can Cash Balance contributions change?

Yes, but with restrictions. Cash Balance plans can be amended periodically to permit different contribution levels. Any changes must be made before any employee works 1,000 hours during a plan year. In addition, a plan can also be frozen or terminated.


Must everyone participate equally in the Cash Balance plan?

No. Each participant can have a different amount contributed for them.


Is the plan subject to IRS nondiscrimination testing?

Yes, like any other qualified plan, a Cash Balance Plan is subject to nondiscrimination testing. Employers can anticipate contributions in the range of 5% to 7.5% of pay for staff. The exact percentage required for employees depends on the results of nondiscrimination testing.


How do design and administrative costs compare with 401(k) Profit Sharing plans?

They are higher than a 401(k) plan because the plan is maintained by an actuary who needs to certify each year that the plan is in compliance with the Internal Revenue Code.

Resources

401(k) and Retirement Plan Limits for the Tax Year 2024

401(k) and Retirement Plan Limits for the Tax Years 2018 through 2024.

Reviews

We look forward to working with TPS Group next year

We look forward to working with TPS Group next year

As another year ends, I want to express my sincere gratitude and appreciation to you and TPS Group for assigning us Krista Blier. Krista provides exceptional customer service and has been a major asset to me and Lynch, Traub, Keefe & Errante, P.C. She is extremely knowledgeable and always accessible. Always on top of the RMD’s, giving me an explanation on form 5500-SF to present to Mr. Keefe & keeping us updated with any account changes as well as specifics. It is a relief knowing I have full faith in Krista and can turn a blind eye to our account. I cannot tell you how many vendors/brokers I have to stay on top of and babysit to make sure our deadlines are met and to perform their job duties. Krista is a pleasure to work with and we look forward to working with her and TPS Group next year.

- Michael Panela

Contact us about Cash Balance Plans in Fairfield, CT

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