The Standard is the marketing name for StanCorp Financial Group, Inc., and its subsidiaries. StanCorp Equities, Inc., member FINRA, wholesales a group annuity contract issued by Standard Insurance Company and a mutual fund trust platform for retirement plans. Standard Retirement Services, Inc. provides financial recordkeeping and plan administrative services. Investment advisory services are provided by StanCorp Investment Advisers, Inc., a registered investment advisor. StanCorp Equities, Inc., Standard Insurance Company, Standard Retirement Services, Inc., and StanCorp Investment Advisers, Inc., are subsidiaries of StanCorp Financial Group, Inc., and all are Oregon corporations.
Powerful Option to Help Clients Lower Tax Bills, Raise Retirement Savings
It’s not surprising that at this time of the year, business owners are looking for ways to lower their tax bills. At the same time, high wage earners may be bracing for tax increases proposed by the Biden administration. Also on their minds? Options to help them raise their retirement plan savings.
If you have clients who fit this description, here’s a powerful solution — a cash balance plan.
Who may have the most to gain from a cash balance plan?
- A business owner looking for additional tax savings and wealth accumulation
- A business owner over 50 with some younger employees
- A business owner making more than $250,000 per year
- A business owner willing to contribute 7% to 10% of pay annually to the plan for full-time rank-and-file employees
Think of a cash balance plan as a hybrid retirement plan. It combines the account balance features of a defined contribution plan with the higher contribution and deduction limits of a pension plan. Like a 401(k) plan, cash balance plans are considered qualified plans, because they’re eligible for tax deferral and creditor protection. The plan contributions are employer-funded based on the levels determined by them.
Here are some of the biggest benefits for business owners:
Higher contribution limits. Participants enjoy contribution limits based on age. For example, in 2021, a 55-year-old could contribute up to $207,000 to an individual cash balance account. That person’s contribution limit to a 401(k) account would be only $26,000 ($19,500 contribution limit + $6,500 catch-up contribution).
Tax deductions. Business owners can deduct contributions to their own account and to their employees’ accounts from their business income.
Tax-deferred earnings. Participants enjoy tax-deferred earnings until they begin withdrawing assets during retirement.
Consider This Hypothetical Scenario
for a 55-Year-Old Business Owner:
|Cash balance contribution||$207,000|
|Additional tax savings||$87,000|
|Total potential tax savings||$114,000|
This example is hypothetical and for illustrative purposes only. It assumes that the business has a 401(k) plan with a profit-sharing and cash balance plan. The tax savings estimate is based on a 42% combined rate for federal and state laws.
Actual tax savings will vary based on your situation.
Offering a cash balance plan can give business owners a compelling way to recruit and retain employees, and help them save more for retirement. It’s an unexpected option for some small business owners, who may struggle to attract the best and brightest employees.
With a cash balance plan in place, employees can experience advantages, too:
- Employees don’t have to fund their plan, and employers cover all plan costs.
- Cash balance plans are easy to understand and present no investment risk to the employee.
- Account balances are portable and may be covered by the Pension Benefit Guaranty Corporation.
Talking to clients about the advantages of a defined benefit plan is always a good idea. And demonstrating your expertise in cash balance plans can set you apart and help you deepen business relationships. It gives you an opportunity to offer clients more than a 401(k) and showcases your value.
And when you work with the right partner, like The Standard, you can consult with a team of cash balance experts who can help you deliver this solution to your clients.
Confidence and Compassion
A Note from Greg Ness, Chairman, President and CEO
At The Standard, we’ve been helping people achieve financial well-being and peace of mind since 1906. As the global health crisis continues to disrupt lives, communities and the economy, I am confident we’ll continue helping people when they need us the most. Our company has been through hard times and market volatility before and we will navigate through this challenge as well. As our customers face tremendous stress and uncertainty, we will continue providing support and stability to those who rely on our products and services.
This pandemic is tough on everyone. Our communities are hurting, our families and friends are distressed and some of our most vulnerable neighbors are at risk.
The crisis and the way we collectively respond to it will define a generation. We are rising to the challenge. I know every single employee at our company — along with staying focused on keeping our business running and serving our customers — is looking for ways to make a difference for those most affected by this pandemic. That’s proving true in businesses and homes across the community, the country and around the world.
Part of the tragedy of this disease is that even as we come together to help those most in need, the unique nature of COVID-19 is forcing us apart. We all understand the importance of —social distancing— to slow the spread, but we should remember that’s just physical distancing. I encourage you to find ways to safely connect with those in your neighborhood who may require extra help and with groups in your community that are making a difference and support them however you can. And now is the perfect time to reach out to friends and others and just check in.
To our health care providers, first responders and everyone selflessly setting aside their own fears and concerns to help others during this time — thank you hardly seems enough. These people are true heroes. This crisis reinforces how reliant we are on the many essential services we too often take for granted. We are grateful to so many for continuing to show up with focus and commitment.
We will get through this, especially if we are sustained by the examples of those who make us the proudest right now — family, friends, neighbors and colleagues working together — rather than allowing our fears to guide us. No matter how unsettled we may feel, remember we are not alone. There are so many people in this world trying their level best to help others. And I am certain we will get through this — together.
In times of crisis, we are defined by how we react. Let’s continue to be defined by compassion.
And to our customers, thank you for putting your trust in The Standard. What we sell is a promise to be there when you need us, and that promise is unwavering.
Be safe and well, and stay connected.
Jared's Story: Time for Family
Age: 36 - Occupation: pediatrician - Married, one child
How the Family Care Benefit provided the ability to care for a loved one
Jared's daughter was born with a heart defect. They visited multiple specialists to diagnose the condition and determine the appropriate treatment. Then his daughter underwent surgeries, hospital stays and months of follow-up appointments. Benefits from Jared’s Platinum Advantage policy helped make up for the income lost when Jared spent time away from work to attend physician appointments and to be with his daughter in the hospital and throughout her extended recovery — providing peace of mind during a trying time.
Supportive Office Equipment
Age: 42 - Occupation: accountant - Married, no children
Assistance on the road to recovery through a rehabilitation program
Jody's role as an accountant at a small firm requires a lot of computer work. After sustaining a serious back injury from a car accident, Jody was totally disabled under her Platinum Advantage policy. Jody’s doctor recommended she purchase assistive equipment to help her work comfortably at her desk without aggravating her condition. She was able to return to work full time after participating in a rehabilitation program in which expenses for a sitstand desk and other ergonomic accommodations were paid for under her Platinum Advantage policy. These modifications helped ensure she could return to work safely, without hindering her recovery.
David's Story: Starting a Medical Career
Age: 33 - Occupation: dermatology physician - Single, no children
Benefits that match career growth through the Benefit Increase Rider
David is completing his dermatology residency and just accepted an offer at a private practice. Before the end of his residency, he purchased a Platinum Advantage policy that included the Benefit Increase Rider, knowing his income will rise significantly after he starts his first post-residency job. The benefit also will allow his policy to grow with him as he progresses in his career and receives additional salary increases. David values the fact that his coverage going forward will match his developing career.
Jason's Story: Accidents Happen
Age: 35 • Occupation: orthopedic surgeon • Married, two children
Finding work in a new occupation with the Own Occupation Rider
Jason injured his right hand in an accident and was unable to return to his job as an orthopedic surgeon because he couldn't perform surgery. Due to his medical training, he was able to return to work as a family medicine physician. Jason was considered totally disabled in his regular occupation as an orthopedic surgeon — even though he earns an income from another occupation as a family medicine physician — because of the own occupation definition of total disability included in his Platinum Advantage policy. Because of this, he receives the policy's full basic monthly benefit, in addition to the income he receives in his new position.
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