Top 3 Door-Opening Strategies for Cash Balance Plans + A Bonus Invitation

Cash balance retirement plans are one of the most powerful tax strategies available to business owners today.

First, they provide a way for small- and mid-sized businesses to take a significant tax deduction for contributions to the plan. And second, they enable business owners and participants to rapidly set aside substantially more for retirement, on a tax-deferred basis, than they could through a 401(k) or other qualified retirement plan.

And best of all – owners and participants can take advantage of both a cash balance plan and a 401(k) and profit sharing arrangement, as shown in the total column of the chart below.

^{*Important: If you want to obtain your own, or your client’s personalized scenario, please provide FuturePlan with a full, up-to-date owner and employee census in order to receive a customized plan design illustration. FuturePlan by Ascensus does not provide tax, legal, or accounting advice. This material has been prepared for informational and illustrative purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You or your client should consult your/their own tax, legal, and accounting advisors before engaging in any transaction. FuturePlan by Ascensus provides plan design, administration, and compliance services. It is not a broker-dealer or an investment advisor and does not provide tax, legal, or accounting services. (SEE BELOW FOR ADDITIONAL DISCLOSURES.)}

Not surprisingly, cash balance plans are one of the fastest growing retirement plans in the industry today, with more than $1 trillion in assets nationwide.¹

How can advisors leverage the opportunity this growing market offers? Here are three strategies that can help.

1. Zero in on the right business owners. The tax benefits and savings opportunities cash balance plans offer can be very attractive for business owners, but not every business is right for a cash balance plan given the cash flow required to maintain the plan. Databases, such as FreeERISA, Judy Diamond, and Larkspur ProPLUS allow you to set specific search criteria that can be helpful in generating a list of highly qualified business prospects in your area that may be likely to benefit from a cash balance plan.

2. Put a stake in the ground. Focusing on a well-defined segment of the market is another effective strategy for targeting cash balance plan prospects. A niche focus enables you to become someone who understands the particular issues and challenges that affect a profession or industry sector, and you’ll immediately impress prospects with your understanding of how a cash balance plan could meet their needs. At the same time, a niche focus can generate referrals and word-of-mouth advertising since many professional communities are tightly knit. Review our case study for a medical group.

3. Give prospects a reason to believe. It can be difficult for current and prospective clients to quickly understand the advantages a cash balance plan may provide. One of the best tools for bringing these benefits to life is through a dollars-and-cents illustration. Request a cash balance illustration from FuturePlan so you can better frame your meetings and win more business, click here.

Reaching the right people

We’ve designed thousands of cash balance plans. Here’s what we’ve learned about what makes an ideal candidate for a cash balance plan.

• Principals seeking a tax deduction of more than $69,000 ($76,500 if age 50+) or earning more than $275,000/year
• Highly profitable companies of all types and sizes
• Successful family businesses and closely held companies
• CPA and law firms, medical and dental groups, and professional firms
• Older business owners looking to catch up on retirement savings

As one of the country’s leading authorities with cash balance design expertise for over 35 years, FuturePlan has the proven strength and scale in technology, innovation, and service quality to help advisors deliver more tax efficient solutions and expand their practice with cash balance plans.

Join Our Next Cash Balance Coach Training
To help you bring something unique to your clients, we offer carefully crafted sales enablement tools, including FuturePlan’s industry-leading Cash Balance Coach® Program. This results-focused training program covers all the key elements of cash balance sales success, from plan design and investments to prospecting and sales success.

Join our next two-day training program and see how becoming a Certified Cash Balance Consultant can help you open doors and build your AUM. To learn more, click here.

^{1FuturePlan National Cash Balance Research Report, 12th Annual Edition.}

^{*Important: If you want to obtain your own, or your client’s personalized scenario, please provide FuturePlan with a full, up-to-date owner and employee census in order to receive a customized plan design illustration. FuturePlan by Ascensus does not provide tax, legal, or accounting advice. This material has been prepared for informational and illustrative purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You or your client should consult your/their own tax, legal, and accounting advisors before engaging in any transaction. FuturePlan by Ascensus provides plan design, administration, and compliance services. It is not a broker-dealer or an investment advisor and does not provide tax, legal, or accounting services.} 

^{(2024 Plan Limits) $23,000 for 401(k) plan; $7,500 catch-up; $46,000 profit sharing. This chart assumes a 45% tax bracket of combined federal and state taxes and taxes are deferred. The following assumptions also apply:}

• ^{Maximum annual contribution amounts for the cash balance/defined benefit plan are calculated using 4% interest rates and assuming no pre-retirement mortality and using the latest available applicable mortality tables.}
• ^{The maximum cash balance amounts assume a 3-year average compensation of at least $275,000 (the maximum annuity limit for 2024), and prior years of service.}
• ^{The amounts needed to fund the cash balance/defined benefit plan may be reduced by a participant’s prior highest 3-year salary history if it is less than the IRS maximum annuity limit (as shown above) or below the IRS maximum compensation limits under 401(a)(27) (e.g., $345,000 for 2024, $330,000 for 2023, etc.) and other deduction limits may apply.}
• ^{The amounts needed to fund in the cash balance/defined benefit plan will also be reduced if a participant participated in any prior cash balance/defined benefit plan of the employer or a related employer.}
• ^{Further, amounts shown may be reduced if the cash balance/defined benefit plan is not covered by the Pension Benefit Guaranty Corporation (PBGC), which may limit the amount available to fund in any paired 401(k) profit sharing plan of the employer. (Plans typically not covered by the PBGC are professional service businesses with less than 26 active participants.)}
• ^{It is also important to note that amounts shown are estimates and will vary depending on an employer’s demographics of owners and employees along with a myriad of other factors and considerations.}

^{All information is for illustrative purposes only and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. FuturePlan by Ascensus provides plan design, administration, and compliance services. It is not a broker-dealer or an investment advisor and does not provide tax, legal, or accounting services.}