Cash balance plans can be a great fit for successful, small- to mid-sized businesses in which some or all of the owners/partners would like to tax defer a lot more of their income than they can with their 401(k) plan alone. Doctor groups tend to be good candidates, and we have set up a lot of successful plans that allow each of the physicians to meet their own retirement savings goals.
In recent meetings with doctor groups considering a cash balance plan, a concern that I heard frequently was, “With healthcare reform, I don’t know whether my income level a few years from now will be enough for me to make large retirement plan contributions?“ My response: “All the more reason to set up a plan now and contribute while you’re certain you can afford it!” While a retirement plan (such as a cash balance plan) should be set up with the intent to fund at a certain level for several (three to five) years, it’s not set in stone. A plan can be amended, even after one year, to lower contribution levels if, among other reasons, business drops off dramatically.
