Law Firm
Cash Balance plans allow lawyers to accelerate retirement savings in a tax-favored fashion. Pairing an existing 401(k) Profit Sharing plan with a Cash Balance plan can lead to between $100,000 and $300,000 each in contributions on behalf of the owner-partners. The plan is also flexible in terms of who is covered and how much is contributed on behalf of the owner-partners. Upon retirement, or leaving the firm, the participant can roll over their lump sum to an IRA, which is not a taxable event.
Law firms are excellent candidates because Cash Balance plans:
- Reduce taxable income
- Allow flexible contribution levels for owner-partners
- Are a powerful tool for recruiting and retaining top talent
- Squeeze 20 years of savings into 10
- Fully protect assets from creditors
- Are portable and allow lump-sum rollovers into an IRA
LAW FIRM CASE STUDY
Challenges:
- Older partners need to accelerate their retirement savings
- Each partner needs the flexibility to contribute different amounts and not be locked into a required contribution
- Partners want the option to set up a separate 401(k) plan for associates
- Management and non-participating partners want to minimize liability for other partners’ contribution amounts
Plan Design Solution:
- FuturePlan designed a Cash Balance plan allowing the below contribution amounts for the owner-partners
- Associates did not contribute to the Cash Balance plan and only contributed 3% of their pay to the Safe Harbor Profit Sharing plan, to satisfy non-discrimination testing
- The Interest Crediting Rate was tied to the performance of the portfolio, thereby greatly reducing risk
Retirement Plan Illustration – 2023
Do you have clients or prospects looking to accelerate retirement savings and reduce their tax burden? To receive a Cash Balance Overview with one of our dedicated FuturePlan Cash Balance experts, fill out this quick form here.