Cash Balance Plan: An Example of a Practice Owner

Cash balance plan example: what could one look like for a made-up practice owner? A study of his facts, a plan reviewed each year, and later a payout. No amounts are shown. We follow him from the first look to the yearly work and, later, retirement. Episode 17 of Cash Balance Plans 101 from Emparion. Learn more: https://www.emparion.com/?utm_source=... David's example, in short: a study of his facts, then a plan built around them, reviewed each year, and later a payout, with tax when the money comes out of a plan. A cash balance plan isn't a product with one result. 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: what could a cash balance plan look like? 0:33 The first look: a plan design study, an estimate, not a promise 0:47 The design: his 401(k) could stay, with a cash balance plan beside it 1:11 Setup: a written plan, a trust and a TPA 1:25 Each year in the plan: a range, and an amount the practice picks 2:01 Every year after: a new range, fairness testing and a yearly cost 2:23 When David retires: an annuity, and in many plans a lump sum 2:50 The answer: a study, a plan reviewed each year, and later a payout 3:06 Not a product with one result, and what's next Questions answered in this video: Where would a practice owner start? With a plan design study from an actuary and a plan administrator, using the practice's real facts. It would only be an estimate, not a promise. Would the owner's 401(k) have to go? No, it could stay. A cash balance plan would sit beside it, and maybe profit sharing too, designed together. What if there's a team? The plans are often tested together for fairness, so the design would usually include contributions for the team, which can help them save. That's part of the cost. How would the plan be set up? A written plan would set the rules and a trust would hold the money. A TPA would help run the plan, but wouldn't hold or invest the plan's money. How is the yearly contribution set? The actuary would work out a range, from a required minimum to a high end that's generally the most the practice can deduct. The practice would pick an amount in it. Where does the money go? It would go into the trust, invested as one pool. The practice may be able to deduct it, and how that reaches the owner depends on how the practice is set up. What happens every year after? A new range, fairness testing, a report to the government and a yearly cost. The plan is meant to last, so the practice needs to keep funding it, but it can be changed for the future, in writing. How could the benefit be paid at retirement? The plan would offer an annuity, meaning payments for life. Many plans also offer a lump sum, which can usually be rolled into an IRA or another plan that accepts it. When is the money taxed? Generally when the money finally comes out. The tax was put off, not erased. Who can help? An actuary, a plan administrator and your tax advisor. Cash Balance Plans 101 | Module 3: The Money Module 3 playlist:    • Cash Balance Plans 101 | Module 3: The Money   New to the series? Module 1 playlist:    • Cash Balance Plans 101 | Module 1: The Basics   Episode 13: Cash Balance Plan: How Much Can You Actually Contribute?    • Cash Balance Plan: How Much Can You Actual...   Episode 14: Cash Balance Plan: The Tax Deduction Story    • Cash Balance Plan: The Tax Deduction Story   Episode 15: Cash Balance Plan: How the Money Can Grow, Tax-Deferred    • Cash Balance Plan: How the Money Can Grow,...   Episode 16: How a Cash Balance Plan Can Work with a 401(k) and Profit Sharing    • How a Cash Balance Plan Can Work with a 40...   Episode 17: Cash Balance Plan: An Example of a Practice Owner (this video) Next: Episode 18, Cash Balance Plan: Can State Tax Matter?    • Cash Balance Plan: Can State Tax Matter?   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