Cash Balance Plan Business Owner Maximizes ContributionsThis business owner had delayed saving for retirement and was looking to maximize retirement contributions for himself having not contributed significantly for retirement in prior years.

In this advanced profit sharing plan design, the employer contributions were allocated based on a formula that was set out in the plan document, so that plan participants were divided into five groups with each group receiving its own level of employer contributions. Census subgroup 0 was allocated an annual theoretical cash balance contribution of 5.00% of compensation plus an annual contribution of 5.80% of compensation. Census subgroup 1 was allocated an annual theoretical cash balance contribution of $275,000.00 plus the maximum annual account addition for profit sharing contributions. Census subgroup 2 (daughter of Owner) was allocated an annual profit sharing contribution of 3.00% of compensation. Census subgroup 3 was allocated an annual profit sharing contribution of 7.50% of compensation. Census subgroup 4 was allocated an annual profit sharing contribution of 3.00% of compensation.

The use of subgroups allows different contribution percentages to be allocated to different groups of employees to achieve the minimum contribution liability for ‘groups of employees’ while passing all required discrimination tests AND achieving the maximum objectives for the Owner.

Employee Name Annual Salary Census  
401(k) Profit Sharing Cash Balance Total Contribution 
Business Owner$270,000.001$24,000.00$36,000.00$275,000.00$335,000.00
HCE Subtotals$806,500.00$81,020.00$52,095.00$275,000.00$408,115.00
Employee 1$85,500.000$5,130.00$4,959.00$4,275.00$14,364.00
Employee 2$50,000.000$2,500.00$2,900.00$2,500.00$7,900.00
Employee 3$79,500.000$3,975.00$4,611.00$3,975.00$12,561.00
Employee 4$71,000.000$3,550.00$4,118.00$3,550.00$11,218.00
Employee 5$100,000.003$12,000.00$7,500.00$0.00$19,500.00
Employee 6$70,000.003$7,000.00$5,250.00$0.00$12,250.00
Employee 7$60,000.000$800.00$3,480.00$3,000.00$7,280.00
Employee 8$175,000.003$0.00$13,125.00$0.00$13,125.00
Employee 9$30,000.000$0.00$1,740.00$1,500.00$3,240.00
Employee 10$30,000.000$0.00$1,740.00$1,500.00$3,240.00
NHCE Subtotals$751,000.00$34,955.00$49,423.00$20,300.00$104,678.00
Grand Totals$1,557,500.00$115,975.00$101,518.00$295,300.00$512,793.00
% to HCE69.8599%51.316%93.1256%79.5867%