Cash Balance Retirement Plans - DailyAccess Corporation

What is a cash balance plan? A cash balance plan (also referred to as a hybrid plan) is a unique type of pension plan that has many characteristics typically found in a defined contribution plan (such as a 401(k)/profit sharing plan), while providing the higher contribution and benefit limitations of a defined benefit plan. In a cash balance plan, the amount of benefit each participating employee receives is stated as an account balance that can be converted to

an annuity or distributed as a lump sum at retirement. But like defined benefit plans, contributions and investment decisions are made by the employer, not the plan participant. Why would I want to consider implementing a cash balance plan? When combined with a 401(k)/profit sharing plan, a cash balance plan can provide business owners with significant additional income/tax deferral capabilities with a reasonable cost for covering the non-owner employees. Substantial flexibility exists in the design process to meet the overall needs of the plan sponsor as well as the individual owners. Is my company a good cash balance plan candidate? There are a number of key factors that help identify plan sponsors who could benefit from 2 0 1 2 M a x i m u m C o n t r i b u t i o n L i m i t s B y A g e adding a cash balance plan to their overall $300K $300K retirement plan lineup. The primary driver is $250K the number of owners looking for additional $250K tax-deductible contributions relative to the $200K number of non-owner employees that must $200K be considered. The ages of the various $150K $150K owners may also be a factor. $100K $100K Contribution levels already being provided $50K (or the level an employer is willing to provide $50K under the new arrangement) also play an $0K 35 40 45 50 55 60 65 important role. $0K 35 40 45 50 55 60 65 CB Contribution Credit DC Plan Limit 401(K) Plan Limit CB Contribution Credit DC Plan Limit 401(K) Plan Limit TYPICAL DEFINED CONTRIBUTION CHARACTERISTICS HYBRID PLAN CHARACTERISTICS Benefits accumulate in an account which is credited each year with service Higher deduction limits typically associated with defined benefit plans or contribution credits and interest credits (see maximum contribution chart) Lump sum distributions are available at termination/retirement, enabling Assets are pooled and investments can be directed by investment management participants to roll over their accounts into an IRA and continue the tax- professionals deferred investment growth “Contributions” to the plan are generally tax deductible for the year in Significant flexibility around who is covered and level of benefits (contributions) which they are credited to the accounts offered to different groups of participants covered under the plan DailyAccess Corporation | 888.535.4322 | e-mail: info@dailyaccess.com | www.dailyaccess.com PSCB - 01 ©2012 | DailyAccess and DailyAccess Corporation are trademarks of...

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