A Cash Balance 401(k) Plan Combo Case Study

Prospect told us they wanted to continue to use their 401(k) plan for their 42 employees without much change (3% Safe Harbor plus 1.5% Profit Sharing), but that they would be interested in getting more money put away for the Owners and several key people. They gave us a budget of $50,000 additional for two owners; $30,000 for the other two owners and $10,000 each for three key people or $190,000 total. They will want to do more than that when the economy recovers, but that was their budget for 2009.


We included the seven of them for the $190,000 budget and also covered their 10 lowest paid employees and the cost for them to pass all discrimination testing, etc. was only $6,300. So, $190,000 for principals of $196,300 total is 96.8%.

As a result of providing this solution, the financial advisor who brought us this prospect will end up getting the 401(k) plan too which has over $4,000,000 and will provide the investment for the Cash Balance almost $200,000 per year contribution. And in addition, now the advisor has access to some very successful individuals relative to their personal needs.

Cash Balance additions to existing 401(k)'s for highly successful professional plan sponsors is a great way to give them a legitimate tax deduction and to help them save more for the future.  Proactive CPA's should make sure that their high income clients who control their own businesses or professional practices are aware of Cash Balance 401(k) Combo plans and their very large potential contributions
 
You can go here to see how much of a deduction might be possible:
 
Cash Balance 401(k) Combo Deduction Calculator
 
If you would like for us to illustrate to a professional client, how this plan might work, get us a current census of employees (date of hire, date of birth, compensation, ownership percentages) and a printout of their allocations for the last plan year.  Email to paul.carlson@plandesign.com