Combo Defined Contribution/Cash Balance Qualified Plan
Adding a Cash Balance Defined Benefit Plan to an existing 401(k) Profit-Sharing Plan
Many times, high income professionals and other business owners want to accelerate their retirement savings towards retirement and the base defined contribution plan, almost always a 401(k) profit-sharing plan, of $49,000/yr. in pre-tax contributions is not enough. Saving with after-tax dollars is inefficient in the sense that marginal federal, state and local income tax rates coupled with Medicare payroll taxes puts the taxpayer in a combined marginal tax bracket approaching 50%, in some states, and 40% in states without a state income tax.
An additional planning tool is to install an additional retirement plan on top of the existing core 401(k) profit-sharing plan, and additional pre-tax contributions can range from as little as $25,000 to $250,000/yr. There are many factors to examine when considering this decision and it is extremely important to use only experienced professionals before implementing. One key variable: what is the additional cost for funding your common law employees?
For more information, see the attached white papers/articles published on the subject of combo 401(k) profit-sharing and cash balance defined benefit plan(s) and please contact either Joe.Gordon@gamria.com or Russell.Smith@gamria.com
