Timing Is Everything

30th Oct 2017

Client of the Week - Bridge Loan

The private owner of a short-term lending company is paying himself $250,000 and wants to save as much of that amount as possible yet offer a retirement plan for his staff. The business owner has three employees and his business is growing rapidly so he will likely add staff over the next few years but, like the money he lends, employees tend to turn over frequently. If he maximized contributions for himself, he wondered, how much he would have to contribute for the employees? We discussed the owner’s business expansion plans and came up with a solution. Using our  OwnersPlus™ Cash Balance Retirement Program, we paired a Safe Harbor 401(k) Profit Sharing plan with a Cash Balance plan.

The Cash Balance and Safe Harbor 401(k) Profit Sharing Plan allocates 93% of the contribution for the owner – over $245,000, for an estimated tax savings of over $100,000 each year. The Cash Balance plan has a one-year eligibility requirement and a three-year vesting schedule; new employees will not qualify to participate in the Cash Balance plan for a year, and employees who leave in under three years, will not be vested.

As we say, “It’s all in the timing!”

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