Cash Balance Plan Required Minimum Contribution: A Yearly Commitment

Each year, a cash balance plan has a required minimum contribution. If it's missed, the business generally still owes it, and can owe an extra tax. It's due in busy years and slow ones. The extra tax doesn't replace the payment. This video shows no amounts or dates. David is an illustrative example. Episode 22 of Cash Balance Plans 101 from Emparion, the fourth lesson of Module 4. Learn more: https://www.emparion.com/?utm_source=... The funding commitment, in short: each year the actuary works out the required minimum contribution, and the business pays it by a yearly deadline, in busy years and slow ones. A missed payment can bring an extra tax that doesn't replace it. The IRS generally expects a long-term plan, and the business usually chooses an amount inside the actuary's range. David is an illustrative example only. Made for business owners, physicians, dentists, attorneys and other professionals. CPAs and financial advisors: feel free to share this series with clients who ask about cash balance plans. In this video: 0:00 David's question: would his practice still have to put money in? 0:24 The yearly minimum: the actuary works out the amount, and the business pays it 0:37 Like payroll: the required minimum is due in busy years and slow ones 1:05 A missed payment: the business can owe an extra tax, which doesn't replace the payment 1:27 Meant to last: the IRS generally expects a long-term plan, and could ask why if one ends soon 1:44 Inside the range: the business usually picks an amount; the low end is the required minimum 2:11 Changing course takes formal steps; David's question to an actuary and his tax advisor 2:38 The answer: a yearly minimum, a long-term plan, and an amount usually picked inside the range 2:56 Even when patients cancel, the required minimum is still due, and what's next Questions answered in this video: Does a business with a cash balance plan still have to pay in during a slow year? Yes. The required minimum is due in busy years and slow ones. What is the required minimum contribution? The least the business has to put in each year. The actuary works out the amount, and the business pays it by a yearly deadline. What happens if the required minimum isn't paid by the deadline? The business can owe an extra tax on the missed amount. The tax doesn't replace the payment, and the business generally still owes it. Is a cash balance plan meant to last? The IRS generally expects a plan to be built for the long run. If a business ended its plan soon after starting it, the IRS could ask why, and a real business reason matters. Does the business choose how much to put in? It usually chooses an amount inside the actuary's range. In a slower year it could choose the low end, the required minimum. The top end is generally the most the business can deduct. Do employees' benefits count? Yes. If the plan has employees, their benefits are part of what the business funds, too. What about changing or ending a plan? It takes formal steps, and required payments already owed generally still have to be made. A later lesson covers how. What would David ask before starting? One question for an actuary and his tax advisor: could the practice keep funding the plan in a slower year? Cash Balance Plans 101 | Module 4: Under the Hood Module 4 playlist:    • Cash Balance Plans 101 | Module 4: Under t...   New to the series? Module 1 playlist:    • Cash Balance Plans 101 | Module 1: The Basics   Episode 19: Cash Balance Plan: Why It Needs an Actuary    • Cash Balance Plan: Why It Needs an Actuary   Episode 20: Cash Balance Plan: Who Makes the Investment Decisions?    • Cash Balance Plan: Who Makes the Investmen...   Episode 21: Cash Balance Plan: What Can Happen When Investments Rise and Fall?    • Cash Balance Plan: What Can Happen When In...   Episode 22: Cash Balance Plan Required Minimum Contribution: A Yearly Commitment (this video) Next: Episode 23, what happens every year to keep a plan running (coming soon) Learn more, or see whether a cash balance plan might be right for your business: https://www.emparion.com/?utm_source=... About Emparion Emparion is a third-party administrator (TPA) that specializes in cash balance plans and defined benefit plans, and we help business owners design and run their plans. Emparion is a TPA, not the investment custodian. We do not hold or invest plan money. Disclosures This video is general education, not tax, legal or investment advice. Any examples and visuals are illustrative only. How a specific plan works depends on its plan document, and tax results depend on your own situation, so talk with your own tax, legal and financial advisors before making decisions. #CashBalancePlan #BusinessOwners #RetirementPlanning