Cash Balance Plans

A Cash Balance Plan may allow businesses with partners and highly compensated employees contribute more than traditional defined contribution plans.

Advantage of Cash Balance Plans:

• Substantial opportunity to defer additional contributions for retirement savings
• Plans provide predictable and guaranteed benefit, not dependent on asset reteurns
• These plans favor older participants that are closer to retirement.
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Defined Contribution and Defined Benefit Plans

Who Can Establish Cash Balance Plans?

S-Corporations or C-Corporations

• Your W-2 compensation may be used for calculating defined  benefit plan contributions.  K-1 compensation may not be used.

Partnerships:

• If your business is a partnership, and taxed as partnership, you may consider your K-1 income for calculating cash balance plan contributions.
• If your business is a taxed as a corporation, your W-2 may be considered for calculating cash balance plan contributions.

Sole Proprietor:

• Your net schedule C income is used for calculating the cash balance contribution.

Consult your tax professional regarding your eligible compensation.  

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DOL Fact Sheet