Most businesses sponsor a retirement plan for their employees – typically a 401(k) Plan. However, if you are an owner and want a retirement plan uniquely designed for you, enabling you to contribute far more than you could to a 401(k) Plan, a BOSS Plan may be for you.
First, here are some questions to consider if a BOSS Plan could be beneficial to you:
- Do you want to reduce your taxes?
- Is now a good time to pull (more) cash out of your business and move it to a creditor-protected environment?
- Would you be willing to contribute 5 to 10% of pay for your employees if you could contribute 50 to 100% of your pay for yourself?
- Do you need to find a way to reduce your business income in order to qualify for the deductions on pass-through income?
- Are you older than your average employee?
If you answered “Yes” to most of these questions, keep reading . . .
The BOSS Plan is a tax-qualified retirement plan that utilizes a Cash Balance Plan framework. The owner receives the bulk of his or her annual contributions in the Cash Balance Plan while eligible employees receive the bulk (or all) of their contributions in a 401(k) Profit Sharing Plan. So let’s first take a look at what a Cash Balance Plan is.
Cash Balance Plans have become the choice for businesses to provide significant retirement accumulations for business owners and key employees, as well as to meet the employer obligation to provide a meaningful retirement benefit to employees. It is a Defined Benefit Plan that has the look and feel of a 401(k) Profit Sharing Plan. It expresses the benefit in terms of annual allocations and annual investment return, but it utilizes many of the IRS rules pertaining to Defined Benefit Plans. These rules allow a business owner to contribute far more than they could to a 401(k) Profit Sharing Plan and also a much larger percentage of their pay than they contribute for their eligible employees.
What are the potential benefits of the BOSS Plan?
- Much higher contribution limits apply to the BOSS Plan (as compared to a 401(k) Plan), for example*:
- Age 50 - $155,000
- Age 55 - $195,000
- Age 60 - $255,000
- The older an owner is, the larger the contribution allowed by the IRS to a Cash Balance Plan.
- The goal is to incentivize business owners to make retirement contributions for their employees, but 401(k) Profit Sharing Plans limit the annual allocations a business owner can receive.
- Owner(s) can accumulate a limit of approximately $2.8 million for themselves at age 62 (lower at younger ages).
- You can overfund the BOSS Plan with a goal to build an “asset cushion” and build up funding credits for owner allocations in future years.
You might be surprised about how much you may be able to contribute each year for the BOSS – you!
*Calculations are based on a number of factors and individual results may vary.
The Business Owner’s Special Savings Plan (BOSS Plan) is not an IRS designated plan type. CBIZ RPS uses the name, BOSS Plan, to identify the setup of a Cash Balance Plan in combination with a 401(k) Safe Harbor or Profit Sharing Plan.
CBIZ Retirement Plan Services does not provide legal or tax advice.
CBIZ Retirement Plan Services is a trade name under which certain subsidiaries of CBIZ, Inc. (NYSE Listed: CBZ) market investment advisory, third party administration, actuarial and other retirement plan services. Investments and investment advisory services offered through CBIZ Financial Solutions, Inc., Member FINRA, SIPC and SEC Registered Investment Adviser, dba CBIZ Retirement Plan Advisory Services. Third party administration, actuarial and other consulting services offered through CBIZ Benefits & Insurance Services, Inc.