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One and One Makes Five: Calculating the Minimum Required Contribution

DWC 08/20/20
  In our last episode, we showed how the cash balance benefit for our owner, Robert Smith, accumulates over time. In our Perfect World (no offense Huey!), Robert contributes exactly $100,000 to the plan each year, and the investment return is exactly 3% to match the interest crediting rate. When Robert is ready to retire at the end of ten years, ...
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What Are My Options (and Deadlines) for Implementing a Retirement Plan This Year?

DWC 08/11/20
Facts We’ve been debating implementing a 401(k) plan for 2020. After much back and forth, we’ve decided its “a go!” for this year. Since we are still in a more relaxed summer vacation mode, we’d like to wait until sometime this fall to really get rolling on implementation.
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Cash Balance Contributions: Definitely Not "Money for Nothing"

DWC 08/6/20
  In our last installment, we took a look at the different ways to define the contribution credits in a cash balance plan. For Robert Smith, the owner and only employee of Robert Smith, Inc., the contribution credit is set at $100,000 or 66.67% of W-2 pay, if lower. Now it’s time to start learning about the actual contribution amounts. As a ...
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Can We Offer Additional Matching Contributions Without Losing our Safe Harbor Status?

DWC 08/4/20
Facts We currently sponsor a 401(k) plan for our company. While we certainly want to be able to provide meaningful benefits to the owners, our goal is to encourage all our employees to save more for their retirement, and to reward those who do. We were failing our annual testing, so we implemented a safe harbor provision to provide a matching ...
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Just Can't Get Enough...Savings from your 401(k) Plan

DWC 07/23/20
  Now that we know the basics, we can apply our knowledge to (almost) real life scenarios. We will follow our fictitious company: Robert Smith, Inc., an S-corporation with no employees other than the owner. Robert is an accomplished song writer who is currently living off royalties from his hits. Robert sponsored a SEP for many years, then at the ...
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Defined Benefit vs. Defined Contribution: A Cash Balance Plan Primer

DWC 07/9/20
  Welcome to Cash Balance Corner! We've created this bi-monthly column to teach you everything you need to know about defined benefit and cash balance plans in order to help you make the best possible decisions about your company retirement plan. Because a cash balance plan is a type of defined benefit (DB) plan, we'll start with a primer on the ...
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Should We Include Government-Mandated Coronavirus PTO When Calculating Company Contributions?

DWC 04/21/20
Facts We have several employees who have had to take time off from work either because of a loss of childcare or to care for affected family members due to the coronavirus.  As a result of recent legislation, they qualify to receive compensation during their leave from work.
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How Do We Stop Our Discretionary Matching Contribution?

DWC 03/26/20
Facts My company sponsors a 401(k) plan that provides for a discretionary matching contribution, which we deposit each pay period along with employee deferrals.  Given the economic uncertainty, I’m focused on doing what I can to ensure adequate cash flow to maintain operations, including making payroll.  That might mean we make the decision to ...
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Can We Suspend our Safe Harbor Contribution Mid-Plan Year?

DWC 03/24/20
Facts Given the current uncertainty in the world economy and the unknown ongoing affects of coronavirus, I’m looking at all financial obligations for our company, and for opportunities to reduce risk.  We currently sponsor a 401(k) plan for our employees and provide a safe harbor contribution equal to 3% of employee compensation.
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How Can We Create More Flexibility in our Cash Balance Plan Contributions?

DWC 03/17/20
Facts We are considering adopting a new cash balance plan.  We really like the higher contribution amounts, but we keep hearing that the contributions are fairly rigid and inflexible.
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The views expressed in this blog are those of the authors and do not necessarily represent the views of any other person or organization. All content is provided for informational purposes only and is not intended to be tax or legal advice.