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- Cash Balance Plans
Cash Balance Plans in Western NY
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 Western NY
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 Western NY 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 Western NY, TPA in Western NY, Retirement Plan Consultant in Western NY, Employer Retirement Plan Consulting in Western NY, Actuarial Consulting in Western NY, Pension Consultant in Western NY, Actuarial Services in Western NY
Further Reading: Cash Balance Plans
- SECURE 2.0: Key Provisions
- Choosing A Retirement Plan For Your Small Business
- Cash Balance Plan Presentation
- Creative Plan Design Presentation
- Action Doc: Cash Balance Plans Allow Six Figure Annual Contributions
- CARES Act Summary-TPS Group
- How the CARES Act Applies to Your Retirement Plan
- Action Doc: Did You Know You Are a Fiduciary
- Action Doc: Advantages of an Unbundled Platform
- Action Doc: Financial Wellness Is Essential to Saving for Retirement
- Action Doc: Maximizing a Business Owners Retirement Benefit
- Action Doc: Understanding Plan Audits
- How a Cash Balance Plan Works
- Action Doc: Your World Evolves and Your Retirement Plan Should, Too
- Action Doc: It’s Time to Restate Your Defined Benefit Plan Document
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
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
Highly impressed with their level of expertise and outstanding customer service.
I highly recommend TPS Group and their quality third-party administration for our 403(b) plan. During our long relationship with TPS Group, we have never failed to be impressed with their level of expertise and outstanding customer service. They keep their promises and it’s easy to work with them. Having our own rep Lauren McNabb is a plus!
- Don Senecal
"Extremely Helpful to Our Business"
Malinda deserves special recognition. She is prompt, courteous, and professional. We find her to be extremely helpful to our business.
- Angela Simino
"Wonderful To Work With"
My go to professional is Des. A wonderful person to work with. We can count on him to handle all of our needs.
- Andrea Blakeslee
"Answers All Of My Questions In A Clear Manner"
Our case administrator, Susan, has been absolutely wonderful and is a joy to work with. She is very knowledgeable, patient, answers all of my questions in a clear manner, and is professional.
- Kathy Townsend
Extremely Valuable to Myself and Our Company
Kathleen has helped me gather info and understand text so many times and is extremely valuable to myself and our company.
- Elizabeth Robison
They are a pleasure to work with and we highly recommend their services.
For many years we’ve relied on TPS Group’s extensive knowledge and industry expertise to keep us in compliance with state and federal regulations as well as changes in the law. Their attention to detail is just what we need to keep our business operations running smoothly. They are a pleasure to work with and we highly recommend their services.
- Dan Neal
Dependable, experienced, and professional
Dependable, experienced, and professional, our TPS Group recruiter was an invaluable resource, helping us locate and vet quality talent.
- Tyler R. Vunk
