Case study
Cash Balance Plans for Businesses with Employees
Two owners, four employees
The full stack. A Cash Balance plan layered on a 401(k) with Safe Harbor and profit sharing moves the owners past $400,000 in a single year while the employee cost stays modest and predictable.
95.9%
Total contribution to owners
$413,500
Total for owners
$17,600
Cost for employees
| Role | Age | Compensation | 401(k) | 3% Safe Harbor | Profit Sharing | Cash Balance | Employer Total |
|---|---|---|---|---|---|---|---|
| Joe | 56 | $345,000 | $30,500 | $0 | $18,000 | $255,000 | $303,500 |
| Carl | 48 | $200,000 | $23,000 | $0 | $12,000 | $75,000 | $110,000 |
| Employee | 30 | $80,000 | $0 | $2,400 | $3,000 | $1,600 | $7,000 |
| Employee | 70 | $50,000 | $0 | $1,500 | $2,000 | $1,000 | $4,500 |
| Employee | 23 | $35,000 | $0 | $1,050 | $2,100 | $700 | $3,850 |
| Employee | 45 | $25,000 | $0 | $750 | $1,000 | $500 | $2,250 |
| Company total | $735,000 | $53,500 | $5,700 | $38,100 | $333,800 | $431,100 | |
| Total for owners | $413,500 | ||||||
| Cost for employees | $17,600 |
Illustrative design based on the assumptions shown. Your own numbers will differ with age, compensation and employee group.
How this design works
- A Cash Balance plan is normally added to an existing 401(k) plan.
- Contribution limits are determined by age, compensation and employee group, which is why the older owner carries the larger pay credit.
- Conservative investment management matters, because underperformance increases the amount to be funded over time.
Would this work for your company?
The right design depends on your census, your budget and what you are trying to accomplish. Send us your headcount and we will model it against your actual numbers.
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