Cash Balance Plan Examples

This document shows hypothetical examples of Cash Balance Plans for different companies.

Introduction

• This document shows hypothetical examples of Cash Balance Plans

• Actual results will vary based on company demographics

• Call JULY today and we will prepare a no-cost report to illustrate how a Cash Balance Plan will work for you

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Cash Balance Plan Example 1 Owner-Only Plans at Different Ages

EE Age Salary

Employee 401k

Deferrals

Employer 401k

Contribution

Cash Balance

Contribution Total

Contributions

Owner 65 $245,000 $22,500 $32,500 $234,000 $289,000

Owner 60 $245,000 $22,500 $32,500 $182,000 $237,000

Owner 55 $245,000 $22,500 $32,500 $175,000 $230,000

Owner 50 $245,000 $22,500 $32,500 $134,000 $189,000

Owner 45 $245,000 $17,000 $32,500 $103,000 $152,500

Owner 40 $245,000 $17,000 $32,500 $78,000 $127,500

Owner 35 $245,000 $17,000 $32,500 $60,000 $109,500

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Example 1 illustrates the maximum contribution to a single participant, owner-only plan and shows the contribution amounts for owners between age 35 and 65.

Cash Balance Plan Example 1 Owner-Only Plans at Different Ages

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

35 40 45 50 55 60 65

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Age

401k Deferrals Profit Sharing Cash Balance

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Cash Balance Plan Example 2 One Owner – Maximum Contribution in Both Plans

EE Age Salary

401k Employee Deferrals

401k Employer

Contribution Cash Balance Contribution

Total Employer Funded

Contribution Total

Contribution

Owner 50 $245,000 $22,500 $32,500 $134,000 $166,500 $199,000

NHCE 1 50 $40,000 $2,000 $3,800 $500 $4,300 $8,100

NHCE 2 40 $35,000 $1,750 $3,325 $438 $3,763 $7,088

NHCE 3 35 $45,000 $2,250 $4,275 $563 $4,838 $9,113

NHCE 4 30 $50,000 $2,500 $4,750 $625 $5,375 $10,125

NHCE 5 25 $30,000 $1,500 $2,850 $375 $3,225 $6,075

% to Owner 63.11% 98.17% 88.56%

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Example 2 illustrates a 401k – Cash Balance Combo Plan with one owner and five other employees. Based on the employee ages and salary levels, the maximum contribution for the owner is $199,000. The employer-funded contribution to non-owners is $21,501.

Cash Balance Plan Example 2 One Owner – Maximum in Both Plans

0

50,000

100,000

150,000

200,000

Owner NHCE 1 NHCE 2 NHCE 3 NHCE 4 NHCE 5

Co

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Participant

Profit Sharing Cash Balance 401k Deferral

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Cash Balance Plan Example 3 Two Owners - Equal Employer Contributions

EE Age Salary

401k Employee Deferrals

401k Employer

Contribution

Employer Cash Balance Contribution

Total Employer Funded

Contribution Total

Contribution

Owner 1 50 $245,000 $22,500 $32,500 $100,000 $132,500 $155,000

Owner 2 45 $245,000 $17,000 $32,500 $100,000 $132,500 $149,500

NHCE 1 50 $40,000 $2,000 $3,000 $500 $3,500 $5,500

NHCE 2 40 $35,000 $1,750 $2,625 $438 $3,063 $4,813

NHCE 3 35 $45,000 $2,250 $3,375 $563 $3,938 $6,188

NHCE 4 30 $50,000 $2,500 $3,750 $625 $4,375 $6,875

NHCE 5 25 $30,000 $1,500 $2,250 $375 $2,625 $4,125

% to Owners 81.25% 98.77% 93.81%

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.

Example 3 illustrates a 401k – Cash Balance Combo Plan with two owners and five employees. The two owners receive equal employer contributions, and contribute the maximum 401k salary deferrals. Owner 1 is eligible for Catch-up Contributions because he is age 50. Total contributions for the owners is $304,500. Total employer-funded contributions for non-owners is $17,501.

Cash Balance Plan Example 3 Two Owners - Equal Employer Contributions

0

50,000

100,000

150,000

200,000

Owner Owner NHCE 1 NHCE 2 NHCE 3 NHCE 4 NHCE 5

Co

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Participant

Profit Sharing Cash Balance 401k Deferral

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This is a hypothetical example dependent on specific assumptions and used for illustrative purposes ONLY. Plan is assumed to have PBGC coverage, otherwise combined plan limits may apply. Full amounts may not be deductible in the first plan year.