Cash Balance Plan - Guardian Tax Consultants

Cash Balance Plan

A Cash Balance Plan is a qualified retirement plan that allows business owners to make substantial contributions beyond traditional retirement plan limits, securing immediate tax deductions and facilitating accelerated retirement savings.

Key Benefits

Higher Contribution Limits

Contributions are substantial and vary by age and income. For example, in 2024, a 60-year-old could contribute up to $361,000 annually, far exceeding 401(k) limits.

Immediate Tax Savings

Contributions are tax-deductible, significantly reducing taxable income and resulting in substantial federal and state tax savings.

Wealth Accumulation

Provides a predictable, tax-deferred growth model, enhancing retirement income potential.

Employee Retention

Offers competitive retirement benefits, aiding in attracting and retaining top talent.

Creditor Protection

Retirement assets within the plan are protected from creditors, ensuring long-term security.

Customizable Design

Plans can be tailored to include features like cash value life insurance, offering dual benefits for retirement and insurance needs.

Flexible Plan Year Structuring

Staggering the plan year across calendar years can optimize federal tax impact and accommodate operating company cash flow variability.

Business owners with substantial income seeking higher tax-deductible retirement contributions.
Professionals and small businesses aiming for significant tax savings and accelerated retirement planning.

The employer establishes the Cash Balance Plan and makes annual contributions, which are tax-deductible.
Contributions are pooled and professionally managed, with each participant’s account credited with a “pay credit” (a percentage of salary or a fixed dollar amount) and an “interest credit” (either a fixed or variable rate).
By structuring the plan year to span different calendar years, businesses can manage the timing of contributions and deductions to align with cash flow and tax planning strategies.