Cash Balance Plans

A small business with both owners and other employees may benefit from a Cash Balance OFFSET plan design to achieve maximum benefits for the principals while effectively controlling employee costs. In the illustrations below, note that rank-and-file employees receive a net benefit of $0 in the Cash Balance Plan because their larger Profit Sharing / Safe Harbor benefits completely offset their Cash Balance formula. These plan designs depend on the demographics of the workforce, including the relative age and pay of all employees. Each sample is based on a real world plan design. We can generate an illustration for your specific situation.

Single Owner (H/W) with Small Staff

A husband and wife near age 50 with W-2 wages at the max ($285K in 2021) have 7 employees from age 25 to 57 with wages from $10K to $51K. The owners are able to contribute $337K for their own benefits, supported by $17K for employee benefits--thus garnering 95.3% of their $354K total cost. (Their personal 401k maximum deferrals for the year are included in these numbers.)

Participant

Age

Pay

Cash Balance

Profit Sharing

401k

Total Benefit

% of
Employer
Total Cost

Owner

$285K

$146K

$8.6K

$26K

$181K

51.1%

Owner

$285K

$146K

$8.6K

$19.5K

$181K

44.2%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

employee

$51K

$3.3K

0.9%

Cash Balance Plans

Single Owner (H/W) with Small Staff

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