Designing Your Retirement Program – Including Cash Balance Plans

Your most successful small business owner clients have now filed their 2015 tax returns.  What comments have they made about their taxes?  Have they adequately planned for retirement?

Tax deductible contributions to qualified retirement plans, including Cash Balance Plans, are a way to addressboth issues.  Possible tax savings include federal, state and local, depending on the legal form of the business.  We estimate tax savings at a 40% incremental tax bracket.  In other words, your client may save 40% of the contribution to their retirement plan in taxes.  We understand that often the tax savings far exceed 40%.  Maximum annual combined employee and employer contributions to a 401(k) Plan are $53,000 or $59,000 for an individual age 50 or older.  Cash Balance Plans can add up to an additional $200,000 to that amount if your client is age 60 or above.  To be clear, an additional tax deductible contribution of $200,000 may result in $80,000 or more of tax savings.

Every business is unique.  The good news about qualified retirement plans is that there are numerous Plan design alternatives so that a Plan design can align closely with the goals of a business.  When you complete our questionnaire, we can propose a custom Plan design that aligns with your clients’ goals.  Any retirement plan design or redesign must be completed by year end and there are several months left in the year.  Let’s get started now to increase the contributions to qualified retirement plans of your successful clients for 2016!

Written By John R. Markley (ASA, FCA, MAAA, FSPA, CPC)
September 2016

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