Adding Cash Balance Solved A Need for a Professional Firm

An engineering firm told us they wanted to continue to use their 401(k) plan for their 42 employees without much change (3% Safe Harbor plus 1.5% Profit Sharing), but that they would be interested in getting more money put away for the Owners and several key people. They gave us a budget of $50,000 additional for two owners; $30,000 for the other two owners and $10,000 each for three key people or $190,000 total.

We included the seven of them for the $190,000 budget and also covered their 10 lowest paid employees and the cost for them to pass all discrimination testing, etc. was only $6,300. So, $190,000 for principals of $196,300 total is 96.8%.

The concept of adding a Cash Balance Plan in combination with a 401(k) Plan is a great tax deferral technique that CPA's should make sure their successful clients evaluate. Have the client send us a census and a statement as to what they would like achieve and we can generate an illustration - there is not fee for doing this - just the expectation that we can compete for their business.

Retirement Plan Limits for 2014

Here is a brief recap of the retirement plan limits for 2014:

Salary Deferral Limit for 401(k) and 403(b) Plans is $17,500. Additional Salary Deferral for someone Age 50 by 12/31/2014 is $5,500.  Therefore a 50 year old can defer up to $23,000. The maximum amount of compensation counted for plan purposes is $260,000. Maximum Annual Additions Limit from all contributions is $52,000 and you can add $5,500 if age 50 or more if salary deferrals available. The maximum Defined Benefit Plan retirement amount is $210,000 per year. The amount of compensation in 2014 that would make someone an HCE in 2015 is $115,000. The Social Security Taxable Wage Base for 2014 is $117,000.


For a more complete chart go here:

 http://401kacademy.com/storage/Copy%20of%20limitations2014_Orange.pdf