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Pro Tips for Managing a Cash Balance Plan During a Pandemic

If you currently sponsor a Cash Balance Plan, then you know they can be complex, particularly during uncertain times. But did you know there are many ways to make Cash Balance Plan management easier for the plan sponsor? The trick is to find the right adviser. An adviser with experience with various Cash Balance strategies can ease your burden and allow you focus on what you do best. In this article we will outline 6 pro-tips on how to manage your Cash Balance Plan during a pandemic.  

During times of uncertainty, you have a lot on your plate so the last thing you want to worry about is managing your Cash Balance plan. Here are 6 pro tips to ease your Cash Balance Plan burden today:

Pro Tip 1: Consider freezing or amending the plan.

A little known fact about Cash Balance Plans is that they can be amended and/or frozen. Both of these options provide the plan sponsor the flexibility to adjust future contribution commitments (potentially decreasing costs)—which can be very valuable during economic uncertainty. A good adviser can help you with this process, and should bring up this strategy proactively as an option to consider. 

Pro Tip 2: Take advantage of the CARES Act.

It’s well known that the CARES Act provides some flexibility to Defined Contribution plans (like 401(k)s), but did you know it also includes provisions for Cash Balance plans? In fact, the CARES Act allows Cash Balance Plan sponsors to postpone their 2019 plan contributions (typically due in 2020) to January 2021. This allows you to hold on to your cash for a little longer. A good Cash Balance Adviser should keep you abreast of these options, and helping you navigate the retirement plan legislative landscape. 

Pro Tip 3: Review your asset allocation.

Something unique about Cash Balance Plans is that the assets are pooled, this means that all the funds in the plan are subject to a single asset allocation. Reviewing the asset allocation is something that should be done on an ongoing basis, but especially during times of uncertainty. A good adviser will proactively help you understand what options you have. For example, tailoring your allocation to target the plan’s interest crediting rate (ICR, annual rate of expected return) is one way to make future contribution levels more predictable.

Pro Tip 4: Hire an adviser who specializes in Cash Balance Plans.

An adviser who specializes in Cash Balance Plans will be well-versed in how to weather the storm so you come out the other side with a plan that is stronger than ever. For example, reviewing the investments, evaluating the plan features, and helping manage the plan vendors. An adviser like this will proactively provide you with Cash Balance strategies to maximize plan efficacy, even during a pandemic. 

Pro Tip 5: Have one adviser to manage your Cash Balance Plan and 401(k) Plan.

If you have a Cash Balance Plan, you probably also have a 401(k) plan. Having separate providers for the two plans can add extra work to your plate, and may be more costly. Having the same providers for the plans has several benefits: it provides a streamlined, holistic solution; it unifies the strategy of the 2 plans for maximum efficiency; and it can save you time and money! For example, having a single adviser for the two plans enables you to coordinate plan parameters like vesting schedules and employer contribution formulas to maximize efficiency and flexibility.  

Pro Tip 6: Communicate with employees.

During uncertain times it’s extra important to communicate with your employees, especially when it comes to the retirement plan(s). A good adviser will reach out to each individual plan participant in your Cash Balance Plan (and 401(k) plan) to answer any questions they have regarding the market, their retirement goals, their assets, etc.  Fisher is a proactive partner that works hard to anticipate needs and solve problems before they exist. During the COVID epidemic, Fisher proactively reached out to 100% of plan sponsors and 29,000 plan participants to answer questions and provide financial guidance, resources and tools. 

If your adviser isn’t providing you with proactive strategies to ease your Cash Balance burden, it might be time for an upgrade. Fisher Investments is one of America’s top advisers and specializes in providing Cash Balance plans for small businesses. 

To learn more about these pro tips, or how to upgrade your Cash Balance adviser click here

Download Our Guide to Cash Balance Plans

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