DBIllustration o35-3x20-6x25-6x30-6x35-5x40-6x45-5x50-5x55-5x60-3x65

DBIllustrationBank

Owner Age(s): 35
Employee Ages: 3@20, 6@25, 6@30, 6@35, 5@40, 6@45, 5@50, 5@55, 5@60, 3@65
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) $47,036 $56,995 $56,995
Owners' % of plan cost 7.0% 25.4% 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)
$22,250 $22,250 $45,000
Combined Plans Total for owner(s) $69,286 $79,245 $101,995
Owners' % of Grand Total 9.2% 25.6% 33.9%
Administrative expense: high twice as high three times as high
Overall Grade*: D- C- B
Comments: As an employee benefit plan, this plan is too rich with many employees costing more than 30% of pay. Owner may be better served to wait to start Defined Benefit Plan until just 10 years from retirement. Employee cost is 9.5% of pay.


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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.