CASH BALANCE RETIREMENT PLANS

We are all aware of the shortage in todays world of finding and retaining qualified help. Our everyday lives are slowed down daily through not having an order fulfilled sometimes for a simple little thing such as an order at a drive thru. The baby boomer mass retirements, supply chain disruptions and the aftermath of the Covid pandemic have all contributed to varying degrees with the difficulties we are currently in when it comes to our daily lives. 

I would like to offer a opportunity to business owners and employers to help with employee retention which has been around for quite some time but is consistently overlooked for employee retention and retirement planning. The 401k Man has programs for all levels of employees but this plan is better suited for the executive suite and top performers.

We are in a very competitive employment market which makes it difficult to find employees who are valuable to an organization much less retain them. This makes it vitally important to structuring a compensation package that attracts and retains top talent for any organization’s success.

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Employers who offer a tax-efficient vehicle to manage employees’ current income while enhancing their long-term financial security can create significant interest from prospective employees and huge loyalty from existing ones.

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Cash balance plans are a type of retirement planning which is often overlooked as a retirement plan choice. The appeal of cash balance plans for employees is the ability to defer taxes on a substantial amount of current income while building considerable retirement dollars. A percentage of each participating employees’ income is deferred into an asset pool, reducing their current income tax burden. Assets are managed to earn an interest crediting rate, allowing for continued growth through the term of the plan.

 

What are the key features of a cash balance retirement plan?

These plans offer a range of attractive benefits to highly compensated employees. Reducing current income tax by deferring significant amounts of income is an attractive trait. Allowable contribution limits which far exceed those for traditional, defined contribution plans, amounting to as much as several hundred thousand dollars per person every year.

Offering portability into an IRA or another workplace plan when terminating service gives the flexibility many participants want. These plans also accelerate retirement savings by deferring large sums of money into the investment pool. If principal protection of assets is desired, the need is definitely filled. This can help to offset risk in other parts of an individual’s retirement savings. Throw in the added benefit of the option to generate a lifetime income stream, and the case for a cash balance plan as a desirable benefit is solidified.

As an employer, you always have the flexibility to choose an investment approach that best suits the plan’s needs, and one where the participants will enjoy the principal protection of the plan structure.

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The downside of cash retirement plans

Employers must pay attention to how those assets are invested and overseen. A professional manager is a must, If the plan fails to meet its targeted rate of return in any given year, the financial burden to fill the funding gap falls on the employer.

A properly managed cash balance plan can also dramatically enhance the financial well-being of employees while significantly improving an organization’s competitive position in the employment marketplace.

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If you would like to learn more about cash balance retirement plans and other employee benefits along with ways to retain them schedule an appointment with The 401K Man and see how we can help you with our proven business plans and retirement solutions.   

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