ASK THE EXPERTS – Grow Your Cash Balance Plan Business

John Markley - Business Development Consultant, Cash Balance Plan SpecialistIn this interview on Cash Balance Plans, Actuary John Markley dispels some misconceptions that even the most experienced financial advisors have about this important and expanding segment of the retirement market — and shares some surprising Cash Balance Plan success stories from advisors partnering with The Retirement Advantage, Inc. (TRA).

What is (are) the biggest misconception(s) you find that even the most experienced advisors have about Cash Balance Plans?

I find that all too often advisors focus on the challenges that may arise with Cash Balance Plans, when the reality is that truly difficult situations are few and far between. At TRA, we specialize in having strong relationships and open communication with all the advisors we work with — especially when it comes to Cash Balance Plans.

For example, one of our financial advisor partners has had a Cash Balance Plan client for five years. The client’s annual revenues had been largely dependent upon a government contract. When the client lost that contract, they could no longer afford to make contributions to the Cash Balance Plan. When the advisor told us about the problem, we suggested freezing the Cash Balance Plan so that it would not be a burden on the business. In the future, when earnings improve, the company can restart the plan and resume making contributions.

Financial advisors can also overlook the longer-term tax-planning opportunities of Cash Balance Plans. After the first year, employers can greatly expand their tax-deductible contributions, which they can use to offset future contributions in tougher years.

Do you have any tips/suggestions for advisors who have already done Cash Balance Plan business and want to do even more?

Take a look at the businesses that you’ve already sold Cash Balance Plans to, and ask them if they’d consider giving you referrals to their advisors and service providers, such as CPAs and consultants.

Also, keep in mind that there are increasing opportunities in business exit planning. People who work in this field will have successful clients who will want to maximize their savings between now and the retirement they are already planning for.

Can you share any unexpected Cash Balance Plan success stories?

Yes — the first is for a solo business owner, a party planner. A very successful party planner, who made about $500,000 per year. Even through the pandemic, her business was strong enough so that she has been able to contribute and deduct almost $130,000 through a Cash Balance Plan. She’s a 40-year-old who is on a great path to achieve a substantial retirement benefit. The next story involves a client that has a consistently successful business selling car wash products. He was putting at least 10% of annual compensation into a profit-sharing plan — and adding a Cash Balance Plan has enabled him to substantially expand his tax-deductible contributions, every year.

What both these success stories tell us is that the best Cash Balance Plan prospects are consistently highly profitable professionals and businesses, even if those businesses might not be “top of mind” when we think about prospects for Cash Balance Plans.

If you’re not already familiar with the Cash Balance Plan resources TRA provides to financial advisors, be sure to check them out. And remember that your TRA Regional Sales Consultant is standing by to help you qualify prospects and get answers to any questions you have about Cash Balance Plans.


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