Cash Balance Plan Allows Printing Company to Maximize Owners’ Contributions and Defer Substantial Tax Liability
- By Oaktree Advisors
A family owned manufacturing company with a history of both profitability and taking good care of its employees wanted to find a way to reduce its sizable tax liability. After many successful years, the company decided to revisit their benefits plan to see if how it could better match the needs of the owners and their 18 employees.
The company had a existing 401(k) Profit Sharing Plan with high employee participation rates and a generous 5% company match. The problem? The two business owners were paying an exorbitant amount in income taxes each year.
What We Did
Oaktree’s solution: By adding a cash balance plan and making an additional 2.5% contribution on behalf of their employees, the owners were able to each put away an additional $180,000 a year and accelerate their retirement savings.
The additional cost to the company to offer their employees this new layer of benefits: $46,800. Of the total annual contribution of $581,200, roughly 80% or $468,400 was directed towards the business owners. Best of all, implementing the plan resulted in a tax savings of $154,800. This allowed the business owners to take money once sent to the federal government and invest it in tax deferred retirement accounts.