Cash Balancing Act

With the tax filing deadline extended to July 15th this year, many business owners realized the extent of their tax liability much later than usual. This shortened the window in which business owners had to adjust their strategic planning and minimize tax liability. With the COVID-19 pandemic affecting both daily operations and long-term planning, it can be difficult to fully maneuver the current economic environment — but planning now could mean significant tax savings next year.


A Cash Balance Pension Plan provides a tax-efficient solution to help business owners save for retirement on a tax-deferred basis. These IRS-approved, qualified employer-sponsored retirement plans are ideal for profitable, privately owned businesses with high and consistent cash flow. A Cash Balance Plan is integrated with a company’s 401(k) profit-sharing plan and allow for annual tax-deductible contributions well above the limits of 401(k) profit-sharing plans or SEP-IRAs.


An integrated retirement plan will reduce your tax burden and help build substantial tax-deferred wealth. The contributions
are made by the company on behalf of the owners and employees, reducing year-end tax liabilities for both the business and its owner(s). Large tax-deferred contributions, combined with tax-deferred investment, returns can generate substantial wealth over time. Additionally, these unique benefits help recruit and retain talented employees in a competitive labor market. The assets within the plan have the added benefit of being protected in the event of a lawsuit or bankruptcy.


A Cash Balance Plan must be written by the end of a business’s fiscal year. While you can fund throughout the year and dollar-cost average into the market actual contributions are not required until the tax filing deadline plus extensions, but no later than eight-and-a-half months after the end of the fiscal year. The funding deadline with extension is September 15th
for companies with a 12/31 Fiscal Year-End. Our Cash Balance White Paper provides more information on this retirement planning strategy and the significant tax benefits it can provide If you’ve frozen your Cash Balance Plan due to COVID to reduce your funding liabilities for 2020, it may turn out that you’re in a better position at the end of the year than when you
froze your plan. You can unfreeze your plan by Dec 1st and continue along the current charted course for your company’s retirement plan funding.



PPP forgiveness requirements were relaxed and now mandate that at least 60% of loan proceeds fund payroll expenses for the loan to be forgiven. Originally, the requirement was 75%. The funds must be used within the 24-week covered period modified from the original 8-week window, starting from the date the loan was received, and cannot extend beyond December 31, 2020. Qualified retirement plan contributions including safe harbor, profit sharing, cash balance, and defined benefit pension plans are considered eligible payroll costs under the Payroll Protection Program. This creates an opportunity for companies to fund 2019 required contributions, along with accrued liabilities in 2020.


Give us a call to begin or reevaluate your retirement savings strategy. With so much uncertainty, it’s important to be proactive and mitigate what you can control.

1.877.900.KARP (5277)