
Companies that have maxed out their 401(k) plans but still have discretionary incomeand steady cash flow available for retirement benefits may want to consider a cash balance pension plan.“A cash balance pension plan is technically a defined benefit pension plan which has features that resemble a defined contribution plan,” explains Tom Sigmund, firm director and chair of the Employee Benefits & ERISA practice at Kegler, Brown, Hill & Ritter. “Like a traditional defined benefit pension plan, the employer bears all responsibility for funding and investing, and the value of the assets do not impact the promised benefit. However, the benefits are depicted as an account balance.”
Sigmund says that a cash balance pension plan is an especially popular tool for professional practices.
“If they have not maxed out their 401(k) plan, we recommend that they do so prior to establishing the cash balance pension plan. In combination, these two plans can enable the organization to cost effectively meet a variety of goals relative to the principles of the practice.”
The cash balance plan design is best suited for organizations will strong steady cash flow. Not only will be able to deduct significantly more, it will help you attract and retain talented employees.
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