CASH BALANCE CASE STUDIES

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CASE 1: NATIONAL LAW FIRM MAXIMIZES TAX DEDUCTIONS

This specialty law firm wanted to increase partners’ tax deductions without increasing staff costs. We worked with the firm to maximize each partners’ profit sharing contributions and cash balance pay credits with no change in staff contributions. Here’s how the plan looks in 2010:

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This firm adopted the plan shortly after the repeal of the §415(e) combined defined benefit/defined contribution individual limits. A cash balance plan was ideal for them, because staff profit sharing contributions were already at the 7½% needed to satisfy the IRS “gateway” for cross-testing — and because senior partners could afford to make big cash balance contributions every year.

CASE 2: BIG TAX DEDUCTION FOR RETIRING BUSINESS OWNER

The owners of this husband and wife business had delayed saving for retirement until they were ready to sell the business. They wanted to make substantial retirement contributions for both themselves and their long-service employees, with no contributions required after the sale. Here’s how the plan looked:

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CASE 3: SOFTWARE COMPANY ADAPTS CASH BALANCE PLAN TO BUSINESS GROWTH

This software company is currently enjoying a booming business. But they know it may not last. We designed a cash balance/profit sharing combination to maximize current tax deductions, with the knowledge that they may need to freeze the cash balance plan after a few years. Here’s how the plan looks in 2010:

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If the boom ends, they will reduce cash balance pay credits to zero. The 4½% profit sharing contributions may continue, or may be reduced. The 3% “safe harbor” 401(k) contributions for employees will continue as long as they are needed to support the owners’ maximum 401(k) deferrals.

These are just a few examples of how cash balance plans can meet the needs of business owners and their employees. Each plan is different, and we can customize them to meet your objectives.

For a free consultation, call us toll free at 888.596.5960 or email us at cashbalance@vaniwaarden.com.

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