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A cash balance plan is a defined benefit retirement plan that maintains hypothetical individual employee accounts like a defined contribution plan.The hypothetical nature of the individual accounts was crucial in the early adoption of such plans because it enabled conversion of traditional plans without declaring a plan termination.
The cash balance plan typically offers a lump sum at and often before normal retirement age. However, as is the case with all defined benefit plans, a cash balance plan must also provide the option of receiving the benefit as a life annuity. The amount of the annuity benefit must be definitely determinable as per IRS regulation 1.412-1.
A Solo 401(k) plan is essentially a 1-person 401(k) plan for self-employed individuals or business owners with no employees, in which you are the employer and the employee. Solo 401(k) plans may ...
Common Examples. Pension. 401(k), 403(b), 457 ... Cash balance plan: ... Employees have to stay a certain time at their place of employment to earn the benefits provided by a defined benefit plan.
For example, the California exemption statute provides that IRAs and self-employed plans' assets "are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to ...
The self-employed have several plan options, including defined contribution plans such as a solo 401(k), SEP IRA and SIMPLE IRA. But they also have some defined benefit options, too.
Cash balance plans, for example, provide a guaranteed benefit like a defined benefit plan, but the benefit is expressed as an account balance, like a defined contribution plan. Pension equity plans are a type of cash balance plan that credits employee accounts with a percentage of their pay each year, similar to a defined contribution plan.
No self-employed person has to be envious of other workers’ pensions, IRAs, or 401(k)s with these approaches to retirement planning you can do largely on your own.