If you are looking for a way to maximize retirement plan contributions beyond what a 40(k) plan offers, you may consider adopting a Cash Balance Plan in combination with your existing 401(k). Here are 4 more (Part I offered 4 FAQ’s) frequently asked questions regarding Cash Balance Plans:
1. WHAT HAPPENS IF AN EMPLOYEE LEAVES THE COMPANY? CAN THEY TRANSFER THEIR VESTED PORTION INTO AN IRA OR OTHER RETIREMENT ACCOUNT?
Yes, a participant would be eligible to request a distribution from the plan after termination, and the funds could be rolled over to any other retirement plan. Since the plan is valued once per year, distributions are delayed until the valuation for the year in which they terminated service is complete.
2. WHEN IS THE EMPLOYER CONTRIBUTION FUNDING DEADLINE FOR A CASH BALANCE PLAN?
The funding is due the due date of your tax return, including extensions.
3. DO I NEED A NEW TAX IDENTIFICATION NUMBER FOR THE PLAN?
No, you may use your company EIN to open the trust for a Cash balance Plan.
4. HOW CAN I GET A PLAN STARTED?
The plan document must be designed, drafted, and signed no later than the last day of the plan year. Send to Benefit Resources the client’s census data, and the goals to be accomplished with the plan. We will submit to our actuaries for an illustration. The minimum cost for an illustration is $500, and may be more for plans with more than 10 participants. We will return the illustration with a full proposal for you to deliver to the client. The proposal fee will be waived if BRI is engaged (within 2 months of the date of the illustration being provided) to administer a plan.
For more information view our related blog post Cash Balance Plan Information, or email me at admin@benefit-resources.com.
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