Retirement Planning Store, Inc.
  • Home
  • LTC
  • Insurance Review Service
  • Privacy Policy
  • Contact Us
  • Blog CMS
Like us here

Hitting the Highlights: 2010 Cash Balance Plan Regulations

1/25/2023

0 Comments

 
​This letter is part of a series on cash balance retirement plans, one of the best strategies to help high-earning Americans reduce taxes and accelerate their retirement savings. Since the loosening of IRS restrictions in recent years, cash balance plans have become extremely popular and only continue to grow, commanding over $1 trillion in assets. Adding a cash balance plan on top of a 401(k) profit-sharing plan can generate hundreds of thousands of dollars in annual tax savings. We’ve already looked at the Pension Protection Act of 2006, which clarified the legal status of cash balance plans and increased their popularity. Today, we’ll give a brief overview of the 2010 IRS regulations that further defined the status of cash balance plans and sent their popularity soaring. Major points from the 2010 legislation include: Increased flexibility regarding rate of return: When crediting interest to employees’ hypothetical accounts, the Pension Protection Act permitted the use of any interest crediting rate not greater than the market rate of return. This meant that most plans relied on the 30-year Treasury bond rate, which didn’t allow for much flexibility and often led to funding issues. The 2010 regulations increased flexibility and added more interest rate options for plan administrators, including fixed rates and the option to use the investment’s Actual Rate of Return. Clarification of wear-away protection for employees: Some employees expressed concern that converting to a cash balance plan would decrease their earned benefits, but protection against this is written into the legislation. When employers add a cash balance plan on top of a profit-sharing 401(k) plan, this becomes a non-issue. Vesting: This requirement was first introduced in 2006 but, again, was further developed in 2010. It declares that participants must be 100% vested in the cash balance plan after three years of service, as a form of employee protection. On the whole, these regulations clarified certain parts of the Pension Protection Act of 2006 while adding increased flexibility and options for cash balance plan administrators. This flexibility made adding a cash balance plan an even more appealing option for thousands of businesses and accelerated the growth of the cash balance plan as a retirement savings option.
0 Comments



Leave a Reply.

    Author

    My name is Dan Hopwood and I first started my career in the insurance business back in 1988.  2018 will be the start of my 30th year in the business. My agency is a member of the Better Business Bureau and holds an A+ rating.

    Archives

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    March 2021
    February 2021
    January 2021
    November 2020
    August 2020
    July 2020
    June 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    July 2019
    May 2019
    April 2019
    December 2018
    November 2018
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018

    Categories

    All

    RSS Feed

Powered by Create your own unique website with customizable templates.