Add a Cash Balance Plan to your Company 401(k) Before This Year’s Deadline

If you’re a business owner maxing out on contributions to your company-sponsored 401(k) plan—and are looking to accelerate your retirement savings with more tax-deferred funds—a Cash Balance Plan may be worth a closer look.

With a Cash Balance Plan, business owners have the opportunity to turbocharge their retirement savings with increases in tax-deferred money up to four times that of a traditional 401(k), while employees are guaranteed a sum of money from the plan in the form of an annual employer contribution.

While an individual’s contribution limit with a traditional 401(k) is only $18,000 (or $24,000 for those over age 50), contributions for a 401(k) plus a Cash Balance Plan can be well over $300,000—with tax savings of more than $144,000.*

Cash Balance Plans have become more popular in recent years, and make up more than 25% of all defined benefit plans—up from only 3% in 2001.1 They’re popular among owners of successful professional service firms. With a Cash Balance Plan, you can expect benefits that other plans don’t offer, including the ability to contribute more as you get older. Like any retirement strategy however, there are certain risks to consider.

So how do I know if my business is a good fit?

Many professionals and entrepreneurs neglect their personal retirement savings while they’re in the process of building a business or firm, and may have a need to catch up on the savings they’ve missed out on. You should consider a cash balance plan if:

  • You’re looking to rapidly increase your retirement savings
  • Your business has historically generated a steady revenue
  • You make at least $250,000 per year
  • Your business has at least one owner for every 15 employees
  • You’d like to reduce your taxable income by more than $50,000


Cash Balance plans can be offered in addition to other plans, and certain combinations can help create the ideal company-sponsored retirement plan.

Here’s how you can get your full tax savings for 2016 before the deadline

If you’re seeking to add a Cash Balance Plan before this year’s December 31 deadline, you’ll need to get started by October 15—and it’s easier than you think. Here’s how it works with Fisher Investments 401(k) Solutions:

   1. Contact us, and we’ll send you a form (called a census template). The census template includes information like employee salaries, date of birth, date of hire, and ownership information. Send the form back to us after it’s filled out, along with a copy of the Adoption Agreement for your existing 401(k) plan.
   2. An actuary will prepare an illustration that depicts what adding a Cash Balance Plan to your company 401(k) can do for your specific business, including the specific costs and benefits. Once you have this information, you can decide whether you’d like to move ahead.
   3. If you decide you’d like to start a Cash Balance Plan, we will work with you and an actuary to coordinate plan documents that integrate with your existing 401(k). Documents must be signed by December 31 in order to get the tax savings for 2016. You won’t have to put any money into the plan until you file your 2016 taxes next year.

If you’re interested in seeing what a Cash Balance Plan can do for your business, call us at 844-343-4015—but hurry! Time is running out to save on your taxes this year.

1Kravitz 2015 National Cash Balance Research Report
*Source: IRS Plan Limits. Assumes 40% tax and 2016 limits. Varies by state. Taxes deferred.

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Fisher Investments 401(k) Solutions is committed to bringing unparalleled support to small and mid-size businesses and their employees through 401(k) retirement plan services.

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