Tax Shelter & Wealth Building Plans
Reduce taxes. Build wealth. Protect assets.
Entrepreneurs and professionals often forego retirement savings early in their career as they build their business. Once established, they have two pressing needs:
In addition, business owners, partners and high-income owners may seek larger tax deductions and retirement savings than are available in a defined contribution plan. Both our Cash Balance (CB) plan and Direct Recognition Variable Investment Plan (DR-VIP) solutions are used to help set aside addtional money (potentially in excess of an additional $300,000 annually) on top of traditional 401(k) and profit-sharing plan limits. These plans are designed to optimize benefits, increase tax-deductible contributions and minimize costs.
USICG provides objective, unbiased retirement plan consulting to help you determine which type of plan is the right fit for your organization. Our experienced team of actuaries will collaborate with you to create a tailored retirement plan that accomplishes your goals for increasing tax deductions, mitigating risk, minimizing cost and maximizing investment flexibility. We will then partner with you and any of your current investment advisor to administer these plans efficiently, seamlessly and with as little distraction to your business as possible.
A side-by-side comparison
While both CB plans and DR-VIP provide businesses and employees with a reliable source of retirement income, there are some key things to keep in mind when reviewing the benefits and business profiles for each.
Benefits
| Cash Balance | DR-VIP |
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401(k) profit sharing plan assets continue to be individually directed by participants All contributions made by employer Provide a benefit that is communicated to participants as an account balance or lump sum, not an annuity Participants may track their benefits online 24/7 and could use a single sign-on option to view 401(k) |
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| Option for payment as a monthly lifetime annuity | |
| Tend to invest towards a conservative targeted goal to try and match the promised interest credit |
Tend to invest to maximize the long-term rate of return |
| Each participant's benefit grows by pay credits and interest credits that are both guaranteed |
Each participant's benefit grows by value of annual accruals, and increases or decreases in direct relation to investment results |
| Generally, overfunded or underfunded due to differences between crediting rate and actual rate of return |
Mitigates the overfunding and underfunding risk associated |
Business profile
| Cash Balance | DR-VIP |
|
Partners typically over 40 years of age |
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Seeking additional tax-deductible contributions in excess of the DC plan limit |
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Generally, offer 401(k) plan |
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Looking for a promised increase in participant benefit |
Looking for additional investment flexibility |
| Potential cost savings when actual plan asset return exceeds interest crediting rate, provide opportunity to make up for unfavorable investment returns through higher future contributions |
Contributions are highly predictable year-over-year due to the plan’s design, which eliminates funding risk associated with investment performance* |
Additional information
- Access detailed comparison charts for traditional Cash Balance plan and Market Rate Cash Balance plan
- Learn more about how DR-VIP works
Maximize retirement savings through cross-testing
A proven strategy to achieve the maximum tax shelter amount and increase retirement savings is “cross-testing.” It is a good first step in setting a retirement plan allocation of profit-sharing contributions for targeted individuals. In the example below, cross-testing has allowed the company to strategically allocate contributions based on their needs. Owner 1 benefits from the larger contribution percentage due to their age and employees receive a smaller contribution percentage, reflecting their longer time for the contribution to grow.
| Name | Age | Wages | 401(k) | Profit-sharing | Total |
|---|---|---|---|---|---|
| Owner 1 | 57 | $345,000 | $30,500 | $46,000 | $76,500 |
| Employee 1 | 39 | $35,000 | $1,000 | $1,575 | $2,575 |
| Employee 2 | 36 | $30,000 | $5,000 | $1,350 | $6,350 |
| Employee 3 | 34 | $20,000 | $4,000 | $900 | $4,900 |
| Employee 4 | 27 | $28,000 | $5,000 | $1,260 | $6,260 |
The above hypothetical scenario is for illustrative purposes only. Actual Plan results will vary.
Qualified retirement plans must be non-discriminatory and pass compliance tests each year, which is why it’s important to partner with an expert like USICG to help ensure that your plan is administered fairly and complies with the applicable non-discrimination rules.
Why choose USI Consulting Group?
Personalized, objective, unbiased consulting approach
We believe that every business is unique
Our goal is to partner with you and your investment advisor
Our teams have deep actuarial and compliance expertise, delivered with proactive service
How we can help
USICG has the resources, bench strength and experience to help your organization meet their objectives and your employees save enough money to retire. Our integrated team of actuaries, investment advisor representatives and administration experts work together to support the complex needs of employers and provide customized strategies that align with your plan’s investment goals and risk tolerances.
If you are interested in a complimentary plan design, please visit our Contact Us page or reach out to us at information@usicg.com.
* This assumes contributions are made timely and in full.
Investment advice provided to the Plan by USI Advisors, Inc. Under certain arrangements, securities offered to the Plan through USI Securities, Inc. Member FINRA/SIPC. Both USI Advisors, Inc. and USI Securities, Inc. are affiliates of USI Consulting Group. | 1024.S1001.0055