Maximize Tax Savings for Your Clients with Cash Balance Pension Plans

As a tax professional, you’re always on the lookout for ways to help your clients reduce their tax burdens while securing their financial futures. One powerful tool that often goes underutilized is the Cash Balance Pension Plan. These plans offer significant tax advantages, especially for high-income small business owners who need to catch up on retirement savings. Partnering with Baker Wealth Strategies can make implementing these plans seamless and effective, providing your clients with substantial benefits.

What is a Cash Balance Pension Plan?

A Cash Balance Pension Plan (CBPP) is a type of defined benefit plan that combines features of traditional pension plans with those of a 401(k). Each participant has an account that grows annually in two ways: first, through a contribution from the employer, and second, through an interest credit, which is typically a fixed rate or tied to an index. These contributions are made pre-tax, lowering taxable income for the business.

For high-income earners, the contribution limits for cash balance pension plans are significantly higher than those for 401(k)s or SEP IRAs. This makes them an excellent choice for clients who want to contribute more to their retirement savings and reduce their tax liability. We generally recommend this strategy for business owners who wish to contribute $100,000 or more annually. Depending on the situation, we have seen clients able to contribute up to a million dollars and take the full deduction.

Why Tax Professionals Should Consider Cash Balance Plans for Their Clients

As a trusted advisor, you understand the importance of optimizing tax strategies for your clients. Cash balance plans offer a win-win scenario: they provide a robust retirement savings vehicle while also delivering significant tax deductions. The employer contributions are tax-deductible, which can result in substantial tax savings.

Furthermore, these plans can be tailored to meet the specific needs of your clients. For example, they can be designed to favor key employees, offering them higher contribution limits while maintaining IRS compliance. This customization makes cash balance plans a flexible and attractive option for businesses of various sizes.

Lastly, cash balance pension plans can be implemented all the way until business owners file their tax return, including extensions. This is one of the few strategies that can be implemented after year end, helping with those last minute clients who were too busy at year end to implement strategies, but now don’t want to write a huge check to the IRS!

Why Partner with Baker Wealth Strategies on Cash Balance Plans?

Implementing a cash balance retirement plan requires expertise in plan design, compliance, and ongoing management. This is where Baker Wealth Strategies comes in. Our team has extensive experience in helping implement and manage cash balance plans. 

By partnering with Baker Wealth Strategies, you can ensure that your clients are receiving the best advice and solutions tailored to their unique financial situations. We work closely with the tax professional and an actuary team to design plans that maximize tax benefits while aligning with the long-term financial goals of the business owners and their employees. We offer back office support for implementation and compliance with IRS regulations. 

If you have clients who could benefit from a cash balance retirement plan, now is the time to act. By leveraging the expertise of Baker Wealth Strategies, you can offer your clients a powerful tool to reduce their taxes and build a secure retirement. Contact the Baker Wealth Strategies team today to learn more about how they can partner with you and bring this valuable strategy to your clients.