DBIllustration o35-25-25

DBIllustrationBank

Owner Age(s): 35
Employee Ages: 25, 25
Year: 2007


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3 Plan Comparison Traditional
Defined Benefit Plan
Cash Balance Plan Cross-Tested
Cash Balance Plan +
Profit Sharing Plan
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Defined Benefit Plan Cost of owner(s) $47,035 $56,995 $56,995
Owners' % of plan cost 89.3% 88.4% see Owners' % of
Grand Total below
401(k) Plan
(includes
Profit Sharing)
optional/required optional optional required
Additional benefit
to owner(s)
(includes owners'
401(k) deferral)
$29,000 $29,000 $27,250
Combined Plans Total for owner(s) $76,035 $85,995 $84,245
Owners' % of Grand Total 89.8% 89.1% 94.4%
Administrative expense: high twice as high three times as high
Overall Grade*: A- C- B-
Comments: Owner may be better served to wait to start Defined Benefit Plan until just 10 years from retirement. The marginal increase in benefits is offset by a decrease in benefit-to-cost efficiency and an increase in administrative costs and complexity. The marginal increase in benefits and benefit-to-cost efficiency must be weighed against the sharp increase in administrative costs and complexity.


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*Note that even poorly graded plans may be appropriate in certain situations, such as for lower benefit levels, or if the employee total compensation package is negotiable.