Cash balance plans are swiftly becoming the plan of choice for small businesses that desire large deductions and benefits following the passage of the Pension Protection Act ’06. These plans are often paired with a Safe Harbor 401(k) plan to create a retirement plan program that offers the best of both the defined contribution and defined benefit worlds.
A Cash Balance plan, termed a “statutory hybrid” plan, is a defined benefit plan that mimics the operation of a Money Purchase pension plan. Our cash balance program offers:
- Deductible contributions that may exceed 100% of pay
- Design flexibility
- Guaranteed benefits to participants
- Easy to understand and communicate
Unlike Fully Insured plans or traditional defined benefit plans, a cash balance plan may be designed to better control the cost of the rank-and-file employee benefits. The operative engine that makes this work is often referred to as New Comparability and is very similar to the nondiscrimination testing criteria of profit sharing plans that use this feature.