Curi Capital

Understanding Cash Balance Retirement Plans

A model that could be right for your practice.

In a recent study by Fidelity Investments, more than 80% of Americans surveyed indicated that the events of the past year have affected their retirement plans, leading many to rethink their retirement strategy. Given this current climate, it’s important for organizations and individuals to learn more about options that may better suit personal financial goals while preserving the business’ bottom line.

As reported in the Kravitz National Cash Balance Research Report, cash balance retirement plans are the fastest-growing type of retirement plan in the nation, particularly among healthcare professionals. In fact, according to the report, since many private medical and dental practices have income levels and organizational demographics that make this type of plan beneficial for owners and partners, the healthcare industry represented nearly 40% of all cash balance plans in place through 2018. Cash balance plans are also highly effective for small businesses, and the Kravitz report also indicated 94% of all cash balance plans are used by organizations with less than 100 employees. If this sounds like your business, perhaps a cash balance plan may be worth exploring.

What Is a Cash Balance Plan?

A cash balance plan is a financial planning tool that can be effective for physicians, other high-earning professionals, or owners of profitable businesses looking to accelerate retirement savings and save money on taxes. Cash balance plans are often described as “hybrid plans,” featuring characteristics of pension and 401(k) profit-sharing plans. Like a pension, the maximum pre-tax contribution amounts for cash balance plans are age-weighted, meaning the older you are, the more you can save—and contribution limits for those 55 and older are in excess of $200,000. In addition, similar to a 401(k), cash balance plans provide each participant with their own account that earns a crediting rate, despite the fact that assets are pooled and managed at an organizational level.

How it Works

While cash balance plans can be established on their own, businesses often will sponsor them in tandem with a 401(k) profit-sharing plan. This is done so that the total amount of potential savings is increased. The cash balance accounts grow in two ways: through contributions made to participant accounts, and from an interest crediting rate (fixed or variable) as defined in the plan document. Assets that are held in one pooled account managed by an investment advisor, with the objective of achieving a rate of return similar to that promised to participants in the plan document. At retirement, account balances are then paid to participants either in installments or in a lump sum, and given that it’s a qualified plan, account balances can be rolled to an individual retirement account.

What’s the Catch?

As with all qualified retirement plans, there is a fairly complex set of rules outlined in ERISA (Employee Retirement Income Security Act) that must be taken into consideration. For example, employee coverage requirements must be met, meaning a certain number of employees must receive a contribution. In addition, because the performance of the assets may not always match the crediting rate, an actuary must be involved to determine the organization’s contribution levels. Generally speaking, if the assets underperform, contribution levels will need to be higher in order to make up for that underperformance. That said, these are not insurmountable obstacles to establishing an effective cash balance plan, and the tax benefits often significantly outweigh the cost of running the plan.

If you’re interested in learning more about cash balance retirement plans, Curi Capital is here to help. Our team can perform an initial screen to determine feasibility, have illustrations run to determine saving rates and potential tax benefits, guide you through plan design, and manage assets for you. You may also watch a recording of our webinar on the subject. For more information, call 984-202-2800.

Curi Capital is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. Curi Capital only transacts business in states or jurisdictions in which it is properly registered or exempt from registration. A copy of Curi Capital’s current disclosure brochure, which describes, among other things, Curi Capital’s business practices, services and fees, is available through the SEC’s website at

The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein.

Curi Advisory—Health Policy

Fall 2021

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