Benetech
Superior Retirement Plans since 1974
Candidates
Sole Proprietors, Partnerships or
Corporations, in such fields as
manufacturing, architecture,
engineering, marketing, law,
physicians, dentists, wholesale or
retail sales, and others.
Client wants a retirement plan
that will maximize contributions
to owners, while minimizing
contributions to other
employees.
Ideal Client Profile
Successful small-business
owners wanting to save the
maximum for retirement on a taxdeductible basis, while keeping
other plan costs to a minimum.
•
•
Owners: Age 50 or older, with
compensation of $265,000 or
more.
Stable Business Income:
Company expects to be able
to make similar contributions
in future years.
•
Number of Employees: 50 or
fewer for maximum
effectiveness.
•
Goal: Annual contribution for
targeted owners in excess of
$100,000.
CASH BALANCE DB + 401(K)
Supercharge a 401(k) Plan by adding a Cash Balance Defined Benefit Pension Plan.
Annual contributions for owners can exceed $200,000 each.
Plan Benefits
•
Targeted Contributions: May favor owners and other targeted
employees with a significantly higher percentage of company
contributions compared to other options.
•
Increase Benefit to Owners: Annual contributions for each owner as
high as $200,000 or more (depending on age and compensation).
•
Low Employee Costs: Contributions to other employees may be a
small fraction of that under a traditional DB Plan.
•
Safe Harbor 401(k): Allows owners to make maximum salary deferrals
on top of company contributions.
Example
Analysis: Company contributions for owners total $345,941, while
contributions to other employees total $33,060 (91% to owners). When
combined with their deferrals, the owners set aside a total of $393,941.
Age
Salary
Owner 1
50
$265,000
$24,000
Owner 2
55
­$265,000
$24,000 10 Employees
Deferrals
$425,000
--
Company
Contributions
$172,971
$172,971
$33,060
Total Company Contributions:
$379,002
Total / Percentage to Owners:
$345,941/ 91%
Plan Background
A “Cash Balance” Plan is a type of Defined Benefit Plan that appears to
participants to be similar to a Profit Sharing Plan in many respects.
By combining a Cash Balance Plan with a Tiered profit sharing contribution,
special discrimination testing can be used to keep employee costs much
lower than would be required under a traditional Defined Benefit Plan. In
many cases, a 7.5% profit sharing contribution and minimum Cash Balance
accruals result in the ability to set aside up to $200,000 for each owner.
Also, since Safe Harbor Non-Elective Contributions can be included in
Tiered testing, Safe Harbor NEC provisions may be used without increasing
company contributions. This would allow the owners to defer at the
maximum rate in addition to benefiting from the company contributions.
Next Step: A Free Proposal
Benetech, Inc.
3947 Lennane Drive, Suite 250
Sacramento, CA 95834
800-285-7526 fax: 888-484-6870
To find out if a Tiered Cash Balance / 401(k) is right for you or your client,
contact your local Benetech specialist, or call our consulting department at
800-285-7526. With some basic company and employee information,
Benetech will generate an analysis of your options at no cost or obligation.
Not For Participant Use
B_CBDB 1/15