Your Guide to Cash Balance Plans

Your Guide to Cash Balance Plans

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Blending the best features of traditional pensions and 401(k) plans, cash balance plans offer predictable retirement income, tax advantages, and investment flexibility. That said, navigating the setup and administration of these plans can be complex. That’s where we come in. The WPWealth team will guide you through every step, ensuring compliance, optimizing benefits, and aligning the plan with your financial goals. Continue reading for further insights.

An Overview of Cash Balance Plans (CBP)

Should Your Company Consider a Cash Balance Plan?

Your company may be a good candidate for a cash balance plan if it meets the following criteria:

  • High need for tax deductions
  • Excess cash and stable cash flow
  • Wants opportunities for employees to save beyond a 401(k) plan
  • Has a small number of key employees (not required)
  • High, stable earnings from year to year

Cash Balance Plan Example 2024

Characteristics of a Cash Balance Plan

The contribution is specified within the Plan Document

More flexibility allocating benefits to different employee groups

Contributions placed in a “Hypothetical Account” for participants yearly

Fixed Annual Credit and Fixed Annual Interest Credit on the account

Plan guarantees a benefit amount, providing security

The plan offers you significant tax-deferred savings opportunities

Allow for significantly larger contributions than a 401(k) plan alone

Plan sponsor bears investment risk, not employees

Contributions must be Fully Vested after three years

Should be maintained for 5 years, per Permanency requirements

Plan Assets are pooled and trustee-directed

What are the Characteristics of a Cash Balance Plan?

The contribution is specified within the Plan Document

More flexibility allocating benefits to different employee groups

Contributions placed in a “Hypothetical Account” for participants yearly

Fixed Annual Credit and Fixed Annual Interest Credit on the account

Plan guarantees a benefit amount, providing security

The plan offers you significant tax-deferred savings opportunities

Allow for significantly larger contributions than a 401(k) plan alone

Plan sponsor bears investment risk, not employees

Contributions must be Fully Vested after three years

Should be maintained for 5 years, per Permanency requirements

Plan Assets are pooled and trustee-directed

Get in Touch

We will work closely with you to tailor cash benefit plans, maximizing their potential benefits and aligning them with your long-term financial goals. Reach out to Matt Magee, Wealth Manager, to see how we can help you make your retirement goals reality.

Additional Resources

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Brochure

Get in Touch

We will work closely with you to tailor cash benefit plans, maximizing their potential benefits and aligning them with your long-term financial goals. Reach out to Matt Magee, Wealth Manager, to see how we can help you make your retirement goals reality.