Pinnacle Plan Design is a third party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting. Pinnacle is proud to offer retirement plan administration services in Tallahassee, FL (Florida), as well as nationally.

 Is a Cash Balance Plan the Right Plan?

Here are five questions to help determine if a plan sponsor is an ideal candidate for a cash balance plan. If the answer is “yes” to most of these questions, a cash balance plan could be the right plan for the employer.

1. Does the employer already maximize their contributions to a defined contribution plan?

The defined contribution limits for 2022 are as follows: 401(k) elective deferrals up to $20,500, profit sharing contributions up to $61,000, catch-up contributions up to $6,500 for participants 50 and older.

2. Do the highly compensated employees (HCEs) wish to contribute far more than the defined contribution limits will allow?

If so, then a cash balance plan may be the answer.

3. Is there a low ratio of non-highly compensated employees (NHCEs) to highly compensated employees?

The lower the ratio of NHCEs to HCEs, the more appealing a cash balance plan becomes.

4. Are the HCEs older than the NHCEs, on average?

The greater the disparity the better, with the HCEs being the older group.

5. Will the employer have significant and consistent cash flow moving forward?

With a cash balance plan, profit sharing contributions in the defined contribution plan are no longer discretionary. Employers in non-cyclical industries are better cash balance candidates.

Contact: Third Party Administrator Tallahassee

Pinnacle Plan Design is proud to offer retirement plan administration services in Tallahassee, FL (Florida) and surrounding areas including Cairo, Thomasville, Bainbridge, Moultrie, Valdosta, Albany, Callaway, Springfield, Lynn Haven, Tifton, Panama City, Dothan, and Dawson.