Why a Cash Balance Plan is a Huge Tax Strategy

Managing Director,
Wealth Management
Pollard & Associates
Vice President
Pollard & Associates
Tuesday, January 21, 2020 from 11:45 AM to 1:00 PM EST
*Lunch will be served 
BWFA Offices
5950 Symphony Woods Rd.
Ste. 600
Columbia, MD 21044

(Driving Directions Link)
Baltimore-Washington Financial Advisors and Pollard & Associates invite you to a discussion on “Why a Cash Balance Plan is a Huge Tax Strategy”.
The tax law changes which has eliminated many exemptions have led to increased popularity of Cash Balance Plans. These plans are an effective tool for important tax savings while simultaneously providing an additional retirement plan funding vehicle for small to medium-sized business owners. 

Implementing and funding a Cash Balance Plan could substantially increase tax-deductible contributions resulting in significant tax savings to business owners. Under a 401(k) profit sharing plan, the 2019 maximum deductible contribution for an individual is $56,000 (or $62,000 for individuals over the age of 50). However, when a Cash Balance Plan is combined with a 401(k) plan, the deductible contribution for an individual can exceed the 401(k) plan maximum by a sizeable amount – up to $150,000+ for individuals age 50 or older.

The maximum contribution to a Cash Balance Plan is dependent upon an individual’s age, generally increasing with the age of the individual, but at all ages the total maximum contribution available is always higher with the addition of a Cash Balance Plan. In addition, a Cash Balance Plan can offer greater flexibility in annual contribution funding if there are multiple owners, principals, or key individuals by offering tiered benefit levels. This is especially attractive for partnerships and professional groups that have varying levels of ownership, compensation or interest in retirement planning. And although there is a commitment to maintain the plan for a minimum of 3 years, there can be flexibility in contribution levels depending on cash flow and tax planning.

Although a Cash Balance Plan is a defined benefit plan, it looks and feels like a defined contribution plan to the plan participant. A hypothetical account is maintained for each participant, the plan sponsor makes annual contributions and interest is credited to the account. On an annual basis, each participant receives an individual account statement, similar to their 401(k) plan statement, which is easier to understand and more meaningful to participants when compared to the annuitized benefits typically reported under a traditional defined benefit plan.

A Cash Balance Plan may be ideal for employers that are:
  • Highly profitable companies of all types and sizes
  • Closely-held or family businesses
  • Sole proprietors that are high earners and have significant cash flow
  • Law firms and medical & dental practices of all sizes
  • Professional firms including: CPAs, Engineers, Architects, Doctors, Management consultants and Many others
  • Older owners who have previously delayed their retirement plan savings
  • Already providing an employer contribution to staff of 5 percent to 8 percent of compensation
  • Wanting to enhance their benefits for select executives/key employees
  • Aiming to attract and/or retain high caliber employees
A Cash Balance Plan may be an approach that helps to mitigate negative tax impacts while enhancing the retirement benefits of business owners and other key employees.
We look forward to seeing you there!

Robert Carpenter
President and CEO

For questions or help registering please contact,

Eve Kennedy
Client Associate