Yet another article on the growing popularity of cash balance plans was featured on the front page of Yahoo! finance this morning. It’s a bit of a generic overview, but gets the point across.
One thing to note: the article states that annual interest crediting rates in these plans are guaranteed rates such as 4%, 6% or 8%, but then goes on to say that these rates are often tied to an index such as the 10-Year Treasury rate. Last time I checked, the return on 10 Year Treasury rates was just under 4% and nowhere near 8%. In fact, an 8% guaranteed return would likely violate IRS rules on providing interest crediting rates in excess of a “market return”.
This reinforces the point that one of the main benefits for business owners of adopting a cash balance plan is the opportunity for additional tax-deductible retirement savings, NOT necessarily the investment return of the account balance or the underlying assets.
