Is a Cash Balance Plan the Right Plan for You?

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It is crucial to have a thorough understanding of your organization in order to determine a plan design that best meets the retirement goals of the employers and employees. Below are five questions to help determine if you may be an ideal candidate for a cash balance plan. If you answer “yes” to most of these questions, a cash balance plan could be the right plan for you.

Five Cash Balance Questions

  1. Do you owners already maximize their contributions to a defined contribution (401k) plan?
    The defined contribution limits for 2015 are as follows: 401(k) elective deferrals up to $18,000, profit sharing and matching contributions up to $53,000 (including elective deferrals), and catch-up contributions up to $6,000 for participants 50 and older.
  2. Do the highly compensated employees (HCEs) wish to contribute far more than the defined contribution limits will allow?
    If so, then a cash balance plan may be the answer.
  3. Is there a low ratio of non-highly compensated employees (NHCEs) to highly compensated employees?
    The lower the ratio of NHCEs to HCEs, the more appealing a cash balance plan becomes.
  4. Are the HCEs older than the NHCEs, on average?
    The greater the disparity the better, with the HCEs being the older group.
  5. Will the company have significant and consistent cash flow moving forward?
    With a cash balance plan, profit sharing contributions in the defined contribution plan are no longer discretionary.Employers in non-cyclical industries are better cash balance candidates.

If you think Cash Balance may be a good fit for your firm, contact us!

If you think Cash Balance may be a good fit for your firm, please contact us.


Any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties under the Internal Revenue Code or applicable state or local tax law provisions. © 2015 0318 Pinnacle Plan Design, LLC.

The opinions expressed are either those of Gordon Asset Management, LLC (GAMLLC) and subject to change without notice, or were developed from sources believed to be providing accurate information. This material is not financial advice or an offer to sell any product.  Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. GAMLLC reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Gordon Asset Management is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. More information about the adviser, its investment strategies and objectives is included in the firm’s Form ADV, which can be obtained, at no charge, by calling (866) 216-1920. The principle office of Gordon Asset Management, LLC is located at 1007 Slater Road, Suite 200, Durham, North Carolina, 27703.

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Todd Zempel, known as "Z", has over 12 years of extensive industry experience. Prior to taking over retirement plan operations for the Gordon Asset Management, Z spent a decade as a TPA and record-keeper. Z holds the Accredited Investment Fiduciary Analyst (AIFA) designation Qualified 401(k) Administrator (QKA) designation, and is a Certified Plan Fiduciary Adviser (CPFA). Z was voted one of the nation’s top 50 retirement plan advisors under the age of 40 in 2015.

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