Cash Balance Plan: A Success Story

The case of the successful private practice and the disappearing taxes

Plan Sponsor Scenario

A small, successful doctor’s office, was comprised of a husband and wife and a few part-time college students. The owners were paying $250,000 in quarterly taxes to the IRS, as directed by their CPA. Unfortunately, the owners (in their late 50s/early 60s) had no retirement plan in place. Therefore, they decided to hire a new financial advisor, who then decided to bring in EGPS to review their business and provide the best retirement plan options.

EGPS Action and Outcome

Upon review of their practice, goals, and profitability patterns, EGPS was able to design a combo plan – a 401(k) profit sharing plan with a cash balance plan— for them. This allowed the owners to save nearly $500,000 for retirement and significantly reduce their taxes, as this contribution was 100% tax deductible.

Key Learnings

Cash balance plans can be a great option for business owners looking to save more for retirement and reduce their current year taxes. Yet, many business owners don’t know about this option, and it requires specific knowledge to design and administer. Hiring an experienced financial advisor and TPA to educate business owners and manage the plan is critical for cash balance success.

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About the author

Regional Vice President, Sales & Consulting

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Regional Vice President, Sales & Consulting