Issue link: http://viewer.e-digitaledition.com/i/727041
CA SH BAL ANCE PL ANS continue to be a favorite in professional practices, especially in the medical field since the owners of medical practices are high earners, but late starters with respect to personal retirement accounts. Without the implementation of cash balance plans (or another defined benefit plan), owners are limited to deferring $54,000 (plus $6,000 for eligible catch-up deferrals) between their contributions a nd their employers'. Cash ba lance plans give these same owners the chance to defer up to an additional $245,000 per year, depending on the owner's age. A s you k now, g reat benef its a lso come w it h a cer ta in a mount of r isk . The r isks a ssociat ed w it h ca sh ba la nce pla n s a re t he requ i rement s t o ke ep t hem f u nded a nd potentia l issues a n employer ca n r un into when they become underfunded. The employer w i l l be required to meet mini- mum f unding requirements ba sed on the contributions credited to each employee account. If the pla n investments achieve h ig her ret u r ns t ha n what is distr ibuted into employee accounts, then the pla n will be overfunded. However, if the investments fail to produce the guaranteed rate of return, then the employer is left with underfunding. In order to protect ow ners a ga inst this underfunding during changes of ownership, cer ta in protections in your buy-sell ag ree- ment shou ld be implemented. A buy-sel l agreement is an arrangement whereby own- ers deta i l how ow nership of the compa ny will be va lued, transferred, and paid for upon the occurrence of a qua lif ying event such as a sha reholder's retirement, termination, or death. A buy-sell agreement ca n be dra f ted or, if a lready in place, a mended to ref lect the potentia l for a n underfunding in a cash ba la nce pla n. Genera lly, upon a qua lif ying event, a percentage of the underfunded plan will either be secured or set-off by a por tion of the withdrawing owner's buy out amount. Lu ca s Mur ray is an at to r n e y w ith th e law firm of Krugliak , Wilkins, G rif fiths & Dougherty Co., LPA , in Canton , Ohio. NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice. ■ Your Cash Balance Plan Funding During Ownership Changes BY LUCAS W. MURRAY, ESQ. 2 6 2 6L E G A L E A S E