Structuring Cash Balance Pension Plans and Conversions: Tax Benefits for Principals and Employees

BARBRI

This CLE course will provide ERISA counsel and advisers with a thorough and practical guide to structuring cash balance pension plans and converting current defined benefit plans to cash balance plans. The panel will detail optimal scenarios for establishing a cash balance plan, identify risks in structuring a plan, and discuss critical features to include in any cash balance plan document in light of IRS guidance.

Description

For many businesses, particularly closely held firms and professional practices, establishing a new cash balance plan, or converting a traditional defined benefit pension plan to a cash balance pension plan, may offer significant potential advantages, both in terms of current tax benefits and increased retirement accruals. However, a cash balance plan should be carefully constructed to help mitigate legal and financial risks while maximizing tax benefits and retirement savings.

A cash balance pension plan is a defined-benefit pension plan under which an employer credits a participant's account with a defined percentage of the employee's compensation or other specified principal amount plus an interest credit amount. By using a cash balance plan, principals of professional firms and well established closely held businesses may be able to significantly increase their retirement savings and realize greater current-year tax benefits.

Additionally, plan sponsors may want to consider ways they may structure the plan investments so the performance of the trust assets reasonably approximates the plan's specified interest credits. Employee benefits counsel can help ensure that plans are designed and documents are drafted to support plan compliance and risk mitigation strategies related to funding and interest crediting.

Listen as our experienced panel provides a practical and in-depth guide to structuring cash balance pension plans.

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