Cash Balance Plan

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Todays Lineup

• Illustrate methods that may help you close more
  business
• Show plan designs that can increase assets and
  cash flow
• Help identify prospects
• Questions and Answers

Why Cash Balance?
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Qualified Retirement Plans

• Defined Contribution Plans
• 401(k) Plans
• Profit Sharing Plans
• Defined Benefit Plans
• Traditional Defined Benefit Plans
• Cash Balance Plans

Why Cash Balance?
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Comparison

• Defined Contribution Plans
• Participants have accounts
• Contributions are discretionary
• Contribution limit 49,000/54,500
• Defined Benefit Plans
• Promise to pay specified monthly income
• Contributions mandatory
• No contribution limit

Why Cash Balance?
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Current industry trends

• ?Traditional defined benefit plans
• 1985 112,208 defined benefit plans
• 2005 29,000 defined benefit plans
• ?Cash Balance Plans
• ? 2000 4
• ? 2005 10

Source Employee Benefit Research Institute, 2005
Why Cash Balance?
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Cash Balance
Storick Group Cash Balance Research Report
Why Cash Balance?
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Storick Group Cash BalanceResearch Report
There were 1,755 new Cash Balance Plans created
from 2002 through 2006 versus 571 for 1997
through 2001, representing a 307 increase from
one five year period to the next.
Rank State Number of Plans Percent of Nations Total
1 California 462 13
2 New York 405 11
3 Ohio 293 8
4 Illinois 253 7
5 New Jersey 237 7
6 Pennsylvania 196 5
7 Texas 164 5
8 Michigan 146 4
9 Minnesota 138 4
10 Florida 118 3
Why Cash Balance?
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Storick Group Cash BalanceResearch Report
Active Participants Number of Plans Percent of Nations Total
Over 10,000 228 6
9,999 to 1,000 510 14
999 to 100 444 12
99 to 25 560 16
24 to 10 771 21
9 to 0 1075 30
Number of Total EEs1 Percent of Nations Total
Over 100,000 1
99,999 to 10,000 5
9,999 to 1,000 9
999 to 100 6
99 to 50 4
49 to 10 13
9 to 0 34
Not Reported 29
Why Cash Balance?
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Kravitz National Cash Balance Research Report
Percentage of Cash Balance Plans by Business Type
Other 16 Medical 28 Utilities 2 Insurance
Services 3 Construction Development
3 Products, Goods Supplies 3
Financial Services 6
Manufacturing 14
Scientific Technical Industries
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Dental 9
Legal Services 9
Medical Scientific Technical Industries
Insurance Services
Manufacturing Financial Services Utilities
Dental Products, Goods Supplies Other
Legal Services Construction Development
Why Cash Balance?
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Percentage of Plans by Asset Size
gt1 billion 3
1 billion-100 million 9
lt250,000 28 99.9 million-10 million 13
9.9 million-1 million 17
499,999 - 250,000 17
999,999 - 500,000 13
gt1 billion
1 billion-100 million
99.9 million-10 million
9.9 million-1 million
999,999 - 500,000
499,999 - 250,000
lt250,000
Why Cash Balance?
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Traditional Defined Benefit Plans

• Complex benefit formula
• Years of service X Final Average Pay X 1
• e.g. 10 X 50,000 X 1 5,000
• Confusing
• Difficult to understand and appreciate
• Account balances are not confusing

Why Cash Balance?
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