Cash Balance Plan: How Much Can You Actually Contribute?

How much can you contribute to a cash balance plan? There isn't one number. Each year, the plan's actuary works out a range, and it can change. We follow David, an illustrative example of a practice owner from Episode 1. Episode 13 of Cash Balance Plans 101 from Emparion, and the start of Module 3. Learn more: https://www.emparion.com/?utm_source=... The range, in short. It comes from the business's facts and the plan's design, and each year brings a new range. Someone else's number may not apply, and a plan design study is an estimate, not a promise. 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: how much could go in? 0:26 Deposit or goal: a 401(k) vs a cash balance plan 0:53 The range: worked out each year by the plan's actuary 1:08 The two ends, and the amount the business usually picks 1:34 Why ranges can differ: design and investment results 1:49 The people in the plan, and a new range each year 2:17 Someone else's number may not apply 2:31 A first look at the range: a plan design study 3:00 The answer: a yearly range, and what's next Questions answered in this video: How much can I contribute to a cash balance plan? There isn't one number. Each year, the plan's actuary, the expert who does a plan's pension math, uses the benefit and other facts to work out a range. How is that different from a 401(k)? A 401(k) is built around what goes in, which has a yearly legal limit. A cash balance plan is built around the retirement benefit the plan promises, which has its own legal limit. It starts with the goal and works backward. What are the two ends of the range? The low end is a required minimum. The business has to put in at least that much, and that minimum can change. The high end is generally the limit on what the business can deduct for the plan. Between the two ends, the business usually picks the amount. Why can one owner's range look different from another's? Each plan has its own design, and once it's running, its investment results can move the range up or down. The owner and any employees in the plan matter too, because the business has to fund their benefits. For each person, the actuary looks at the pay the plan counts and the time left until the plan's retirement age. Why is there a new range each year? The facts behind it don't stay the same, and the assumptions behind the actuary's math can also change. Why might a number from a colleague or online not apply? It's built on other facts and other plan designs. How could an owner find their own range? In the example, David could ask an actuary and a plan administrator for a plan design study. That's a first look at the range. What does a plan design study look at? Real facts: how the business is set up, whether it has a 401(k), and each person's age and pay. It's an estimate, not a promise. After a plan starts, the actuary's yearly range takes over. Cash Balance Plans 101 | Module 3: The Money This video starts Module 3, which is about the money. Module 3 playlist:    • Cash Balance Plans 101 | Module 3: The Money   Module 2 playlist:    • Cash Balance Plans 101 | Module 2: Who It'...   New to the series? Module 1 playlist:    • Cash Balance Plans 101 | Module 1: The Basics   Episode 10: Cash Balance Plan: Why Age and Income Matter So Much    • Cash Balance Plan: Why Age and Income Matt...   Episode 11: When a Cash Balance Plan May Not Be a Good Fit    • When a Cash Balance Plan May Not Be a Good...   Episode 12: Cash Balance Plan: Can a Solo Business Owner Have One?    • Cash Balance Plan: Can a Solo Business Own...   Episode 13: Cash Balance Plan: How Much Can You Actually Contribute? (this video) Next: Episode 14, Cash Balance Plan: The Tax Deduction Story    • Cash Balance Plan: The Tax Deduction Story   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