A Cash Balance Plan is a type of Defined Benefit Plan. A Defined Benefit Plan is a retirement plan where the participants' benefits are defined by the terms of a legal plan document. Participants' earnings and/or years of service are often taken into consideration in the definition of benefits. The annual benefits are known (since they are defined), but it is generally up to the plan sponsor to contribute and invest the necessary money to pay out the final benefits. In addition to the known annual benefits, a Cash Balance Plan also guarantees an annual rate of return on benefits to participants (generally between 3% and 5%). These plans are subject to government regulations that typically require certain work to be certified by an Enrolled Actuary. While the annual benefits are known, the Enrolled Actuary must determine the deductible contribution range each year. In contrast, a 401(k) Profit Sharing Plan is not subject to these same Enrolled Actuary requirements. In a 401(k) Profit Sharing Plan, the contributions are known each year, and the final benefit, which is generally subject to a participant's investment selections, is unknown.

A Cash Balance Plan generally allows deductible contributions that are much larger than those allowed under a 401(k) Profit Sharing Plan. The following is a list of some positive benefits of a Cash Balance Plan:

• provides a reduction in immediate taxes for business owners
• can be "combined" with a 401(k) Profit Sharing Plan to maximize benefits and tax deductions for owners
• can help ensure accelerated retirement savings, especially for owners and employees closer to retirement age
• is an attractive benefit to offer to employees and prospective employees
• generally allows plan assets to be protected from creditors during bankruptcy

• Solo owners who are interested in maximizing their personal retirement savings and tax deductions
• Companies interested in establishing a Cash Balance Plan in addition to a 401(k) Profit Sharing Plan (even if the 401(k) Profit Sharing Plan is already existing) to maximize benefits and tax deductions for company owners while also providing benefits to employees
• Professionals such as accountants, attorneys, and financial advisers who are looking for someone to provide actuarial work for their clients
• Plan sponsors of already existing Cash Balance Plans who are looking for an actuary to take over certain responsibilities, such as ongoing actuarial consulting and services, outstanding issues, special studies, or plan terminations

Under federal law, retirement plans must pass certain nondiscrimination tests. That is, if an owner or other “Highly Compensated Employee” is receiving a certain amount of annual benefits from a retirement plan, there is a minimum level of benefits that employees must receive so that the plan is deemed nondiscriminatory. For example, an owner may be able to have an annual Cash Balance benefit of $250,000 and also do maximum 401(k) deferrals and Profit Sharing allocations, but in order to satisfy all applicable tests, the employees must receive a Cash Balance benefit equal to 2% of their pay and Profit Sharing allocations equal to 5% of their pay. These numbers are simply an example, as actual numbers could vary significantly depending upon owner and employee ages and compensations. If a plan sponsor were to instead adopt a standalone Cash Balance Plan or a standalone 401(k) Profit Sharing Plan, the benefits and tax deductions for owners will generally be much smaller than if both plans are adopted.

The following is a non-exhaustive list of work we perform for Cash Balance Plans:

• Plan design (including free proposals)
• Plan document work
• Database maintenance
• Actuarial valuations (including checks against applicable Internal Revenue Code tests)
• Actuarial certifications, distribution forms, government forms, and benefit statements
• Nondiscrimination testing and guidance to help plan sponsors comply with government regulations
• Accounting disclosures
• Plan terminations
• 5500 reporting
• PBGC reporting (some, but not all, Cash Balance Plans may be required to pay an annual insurance premium to the government agency PBGC)
• Extensive consulting on a wide range of pension plan issues
• Note that we also offer services for Traditional Defined Benefit Plans (which, along with Cash Balance Plans, make up the two main types of Defined Benefit Plans)