A Cash Balance plan is a type of retirement plan that belongs to the same general class of plans known as “Qualified Plans.” A 401(k) is a qualified plan which means this plan “qualifies” for tax deferral and creditor protection under ERISA.
In a Cash Balance Plan each participant has their own account. The account grows annually in two ways:
- Contributions from employer
- An interest credit – this is guaranteed rather than being dependent on the plan’s investment performance.
Many owners of businesses and partners are looking for larger tax deductions and accelerated retirement savings. Cash Balance Plans may be the perfect solution for them. The 2006 Pension Protection Act (PPA) and the Cash Balance regulations issued in 2010 and 2014 have made these qualified plans even more flexible and easier to administer, making them increasingly popular choice for successful business owners.