Welcome:

The purpose of this website is to explain the concepts and practical considerations involved in adding a Cash Balance Pension Plan to an existing 401(k)/Profit Sharing Plan. These are also known as “Combo” Plans or Dual Plans since two different plans are being brought together to achieve a company’s specific retirement goals. Since the late 1990s and accelerated after PPA in 2006 as well as the results of favorable court cases, many small businesses have greatly benefited by the use of this approach.

Our firm, as actuaries, prefers this approach of adding a Cash Balance Pension Plan because:

A. Cash Balance Pension Plans do not carry the same risks as final average pay formula, traditional defined benefit plans, and

B. This “Combo” Plan setup not only provides the best of both worlds but allows for a nice division of labor with the 401(k) Plan's Third Party Administrator (TPA).

While our firm doesn't invest the funds or charge any fees related to the investments, we do provide guidance to the investment advisor or broker to assist in coordinating the Cash Balance Pension Plan investments with the 401(k)/Profit Sharing Plan and other investments of the owner(s). We believe that for Cash Balance Pension Plans utilized by small companies, the investments should be based around a financial planning model, as opposed to a targeted rate of return model.

Business owners have enjoyed these Cash Balance Pension Plan add-on or “combo plans” for three main reasons:

a. They enjoy much larger deductions than with just a 401(k)/Profit Sharing Plan.

b. They enjoy more of the contribution being directed to the owner or other favored and/or long service employees.

c. They enjoy flexibility in funding that helps the business owner cope with the usual uncertainties of running a small business.

For those with a 401(k)/Profit Sharing Plan the additional time and effort in administering a Cash Balance Pension Plan is usually minimal. Our actuarial billing is based on a billing algorithm and not the “time and expense” method. This allows our clients to ask questions and interact with us without constantly getting “nickel and dimed.” Our fees generally average to about 1% to 2% of the Cash Balance Pension Plan’s annual contribution. For mature plans this can be about one-tenth of 1% of the assets. (Note, our fees are not related to contributions or assets. We are just expressing them this way to give you a ballpark idea.) We invite you to explore the FAQs to help you understand more about the addition of Cash Balance Pension Plans. The information contained within these links will help give you a general sense of whether this approach will be helpful for you.

If you wish to pursue Cash Balance Pension Plans further we can prepare a proposal for you (at no charge). If you were referred to this site by a financial advisor (i.e., CPA, broker, financial planner, etc.), we ask that you request the proposal through them. If you found this site yourself you can feel free to either contact us directly or ask one of your advisors to do so. If you are already a client you can use this site to better understand your current plan and its structure. For those already working with other actuaries feel free to enjoy this site and invite your actuary to take a look. We encourage and invite feedback from all.