Cash Balance Plans

Why A Cash Balance Plan?

Do you need to backload your retirement savings? If you need to catch up on the pool of money you have for retirement, or if you have a large tax liability year in and year out, a cash balance plan may be right for you. These plans offer contributions that in some cases can exceed 3 – 4 times what would be available in a 401(k) profit sharing plan. This allows business owners or key employees to save a large sum of money in a short period of time.

Protect employee retirement accounts against market fluctuations.

Understanding complex actuarial mathematics can be difficult; a Cash Balance Plan can fix that. While MGKS has been administering traditional defined benefit plans for decades, cash balance plans are quickly becoming the most popular pension plan out there. They are both easier to understand, and beneficial to plan sponsors with several owners or key employees who want to contribute at different levels. These plans offer the same funding potential as a traditional defined benefit plan but also operate with the veneer of a 401(k) profit sharing plan, making them easier to understand.



Large contributions and the miracle of compound interest can help grow your portfolio very quickly.

Contribute More

Cash Balance Plans allow for significantly higher contribution limits that increase with age and create great incentives for both older and younger employees.

Tax Incentives

 Cash balance plan contribution reduce taxable income to the employer which helps minimize tax payments to the IRS.

Interest Credits

Each participant’s hypothetical account balance will grow at a stated interest rate every year. When distributions are processed a participant can elect a lump sum payout of that balance or they can take an annuity option, which is rare.

Sample Cash Balance Plan

Cash Balance Sample Plan

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Cash Balance Plan FAQs

What is a Cash Balance Plan?

A cash balance plan is a hybrid plan that blends the best of both worlds.  Higher contributions of a defined benefit (DB) plan, with certain features of a defined contribution (DC) plan (e.g. account balances).

Can I borrow money from the plan?

Yes, if allowed by the plan, maximum loans are the lesser of (a) 1/2 of your vested benefit or (b) $50,000.  Loan terms generally allow no longer than five (5) years for repayment.

When can I withdraw money from the plan?

Normal retirement age, termination, death or disability is required to justify a distribution.  Participant loans may be available if your plan is designed to allow for them.

You should always contact us before withdrawing any money from the plan, as there are election forms that need to be completed and potential tax withholding before taking any money out of the plan.

How is the Contribution Formula defined?

The contribution formula is typically designed either as a percentage of annual compensation or a flat dollar amount, for example:

75% of the Participants Annual Compensation (not to exceed $285,000 for 2020)


$100,000 for each owner employee per year.

*Subject to overall maximum benefit limits.

When does the required contribution have to be made?

The contribution must be made by the earlier of:

a) The due date of your tax return that reflects the tax deduction (including any extension).

b) 8 1/2 months after the plan year end (e.g., September 15th if a calendar plan)

Are the benefits under the plan guaranteed?

Certain plans are insured by the Pension Benefit Guaranty Corporation (PBGC) and must file annual forms and make premium payments.  Plans that fall in this category have some or all of their benefits guaranteed by this government entity. The premiums are generally modest.