Reward the people who build the business

Benefits are one of the few decisions that hold on to key people and shape your tax position at the same time. Two of the most useful for owners are an executive bonus arrangement and a cash balance plan.

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Two plans owners ask about most

Both reward people you cannot afford to lose. They work differently, and they suit different businesses.

Executive Bonus

The business pays a bonus to a key person, who uses it to fund a policy or benefit they own personally. Because the benefit belongs to the employee from day one, it is simple to explain and simple to leave in place. The bonus is generally deductible to the business and taxable to the person receiving it, which is why the amount is usually set with the tax effect on both sides worked out first.

It suits an owner who wants to reward one or two people without offering the same benefit to everyone, and who wants the arrangement to be easy to understand and easy to unwind.

Cash Balance Plan

A cash balance plan is a defined benefit plan that each participant sees as an account balance. For a profitable business it allows contributions well beyond what a 401(k) alone allows, and those contributions are generally deductible to the business, which is why owners with strong and steady profit look at it closely.

It asks more in return: an actuary sets the funding each year, the plan is expected to be funded in lean years as well as good ones, and staff coverage rules have to be worked through before it is set up. That is the conversation to have before the plan exists, not after.

How either plan would work in your business depends on your entity, your payroll and your profit. Contribution levels and tax treatment are confirmed with your CPA, and where a plan needs an actuary or an attorney we bring them in.

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What we do with you

Benefits only work when the tax plan, the payroll and the paperwork agree with each other.

Check the fit

Your profit, payroll and team decide which plan is realistic, and whether either one is.

Model the numbers

What it costs, what it may save and what it commits you to in future years.

Coordinate the team

Your CPA, payroll provider, attorney and, for a cash balance plan, an actuary.

Keep it current

Funding and paperwork are reviewed as the business changes, in your quarterly sessions.

Crucial Business & Life Solutions is not a law firm or investment advisory firm.

Would either plan work in your business?

Answer some questions, upload your return and book your 30-minute assessment. We will tell you plainly whether benefits belong in your plan this year.

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