Cash balance plan design and actuarial services

Optimizing Foundations designs, adopts and administers cash balance plans for closely held businesses and professional practices whose owners want to put away more on a deductible basis than a 401(k) alone allows. The plan is designed with the existing 401(k) and profit sharing plan, tested as one program and sized so that the owners' benefit and the staff cost are in proportion. The firm works directly with the client's CPA on contribution planning before the filing deadline.

What is included

• Design study. An initial illustration from a census showing the owners' and staff's contributions under two or three designs, the deduction and the cost of administration, so the business can decide before committing.
• Plan documents. Pre-approved cash balance and 401(k) documents, adoption agreements, the summary plan description and required notices.
• Annual administration. The actuarial valuation and contribution range, nondiscrimination testing under Sections 401(a)(4), 410(b) and 401(a)(26) with the 401(k) plan, top-heavy testing, Form 5500 with Schedule SB, participant statements and distributions.
• Investment guidance. The target return for the trust is the interest crediting rate. The firm works with the plan's investment advisor on an allocation that matches it.

Who it suits

Owners in their late forties or older with stable income, a business that can commit to a minimum contribution in a weak year and a staff group smaller or younger than the owners. A plan can be adopted as late as the business's tax filing deadline, including extensions, for the prior year. The firm's article on cash balance plans explains the design, the limits and the obligations.

Common questions

How much can an owner contribute? It depends on age, pay and the design, and is often several times the defined contribution limit for an owner over fifty. The design study shows the figure for the actual census.

What if the business has a bad year? The plan has a required minimum contribution, so the design is sized with a weak year in mind. The firm can redesign or freeze a plan when circumstances change, within the rules.

Does the firm work with CPAs on a referral basis? Yes. Many of the firm's cash balance clients are introduced by their accountants, and the CPA stays involved in the contribution decision each year.

Every deliverable described here is reviewed by a second credentialed actuary before delivery. This page is general information about the firm's services and is not advice for any specific plan.