Cash balance plans combine aspects of traditional pensions and 401(k)-style contributions, offering business owners and professionals a powerful tool for retirement savings. By including life insurance in these plans, participants gain added security, while employers unlock tax efficiencies and financial flexibility.
Life insurance in a Cash Balance Plan
How Life Insurance Enhances Cash Balance Plans?
Life insurance in a cash balance plan offers two main benefits:
Growing Cash Value
The policy’s cash value adds to the participant’s account, contributing to their retirement funds.
Death Benefit Protection
If a participant passes away prematurely, the policy’s death benefit can support their family.
To maximize these advantages, whole or universal life policies are typically used, offering steady growth and reliable payouts.
Tax Benefits of Using Life Insurance
Cash balance plans are tax-efficient for both employers and participants:
- Employer Savings: Contributions, including life insurance premiums, are tax-deductible for employers.
- Deferred Taxes for Employees: Taxes on contributions are deferred for employees until they withdraw in retirement.
However, the insurance protection’s economic value may be taxed for the participant, but the tax impact is usually manageable.
Ideal Candidates for Cash Balance Plans with Life Insurance
This structure works well for:
- Medical or dental groups
- Professional firms
- Small to mid-sized businesses committed to regular contributions
Such plans are particularly attractive for companies seeking to provide employees with robust retirement benefits while enjoying tax advantages.
Potential Challenges
While beneficial, life insurance in a cash balance plan can have downsides, including:
- Taxable income recognition upon retirement
- Possible reductions in other plan investments
- Estate tax implications if the policy value grows significantly
Making It Work for Your Business
Integrating life insurance into a cash balance plan offers holistic financial security for business owners, employees, and their families. This approach ensures a reliable retirement income stream, minimizes tax impact, and provides peace of mind through added life insurance coverage.
How Anthem Advisors Can Assist with Cash Balance Plans?
Anthem Advisors makes it easy to create and manage a cash balance plan tailored to your unique retirement goals. With our expert guidance, employers and employees benefit from personalized solutions designed to enhance financial security.
Personalized Support Every Step of the Way
Our advisors provide hands-on support from your first consultation through to plan setup and ongoing management. We handle the analysis, strategize solutions, and help you navigate complex financial regulations. Anthem Advisors empowers employers to confidently build a retirement strategy that works for them.
Get Started with Anthem Advisors
Ready to explore how a cash balance plan with life insurance can benefit your organization? Connect with our team today to discuss your goals and create a plan that aligns with your future.
