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LEARNING RESOURCES

Governmental and Employer Retirement Plans
ADVANTAGES IN GENERAL Process
CBPs have many pluses for small businesses. One
In this four-part, four-hour narrated PowerPoint
is that business owners potentially can contribute
video, moderator Tom Tillery will examine
three or four times the dollar limits of other types of governmental plans, qualified retirement plans,
retirement plans such as 401(k)s. The contributions and other employer retirement plans.
are deductible business expenses, potentially saving
CPE SELF-STUDY
the owners tens of thousands of dollars in annual
taxes. There is another benefit as well: These plans
help to attract and retain talent.
A further advantage of CBPs is that they are
easier for plan participants to understand than
AICPA & CIMA Employee Benefit Plans
traditional pensions. As noted above, benefits are
Conference
stated as an investment balance, unlike traditional
pensions, where an actuarial retirement income May 8–10, Denver and live online
is calculated many years out into the future. The Combine the benefits of learning leadership skills
stated-balance concept makes CBPs a hybrid plan along with understanding the key opportunities
with characteristics of both a 401(k) and a pension. and issues within employee benefit plans.
CBPs also provide significant flexibility. CONFERENCE
Partners/shareholders can receive different
contribution amounts. Owners can set different
“classes” and contribution levels for employee
groups that provide for more flexibility in For more information or to make a purchase, go to
allocating retirement plan benefits. aicpa.org/cpe-learning or call the Institute at 888-777-7077.
Further, contributions on behalf of nonowner
employees are limited and yet significant enough
to meet Employee Retirement Income Security
Act (ERISA) and DOL “gateway” requirements. some other types of plans, in part because of the
Contributions can also be structured as a divided- need for the services of actuaries. Note, too, that
up fixed-dollar amount or a percentage of pay. These the business must have a reliable cash flow to be
provisions are established during plan design. able to commit to crediting each participant’s
As with other types of retirement plans, the account annually.
investments in a CBP grow tax-deferred, accelerat-
ing retirement wealth building. At retirement (or CONTRIBUTION LIMITS
at plan termination), assets in both the CBP (and a One of the main reasons businesses adopt CBPs,
401(k) plan if paired with the CBP) can be rolled as previously noted, is that contribution limits
into IRAs and continue to grow tax-deferred until are substantially higher than for other types of
withdrawn. The rollover feature (often not available retirement plans.
with traditional pension plans) is one of the things CBPs are structured to target an allowable
plan participants appreciate most about CBPs. maximum income at retirement. This amount is
In terms of operating a CBP, the plan indexed for inflation. Currently, owners and
investments can be professionally managed as a participants can build their personal pension to
single pooled (commingled) balance just like large the actuarial equivalent of a lifetime income of
pension plans. Additionally, the plan assets are $245,000 at age 62 (which is derived from the
shielded from creditors in the event of lawsuits or maximum allowable pension balance of $3.1
bankruptcy. million for 2022).
The IRS also specifies the maximum salary
OTHER CONSIDERATIONS income that can be used in the annual contribution
Some potential drawbacks should be kept in calculation: $305,000 in 2022. Note that if a client
mind, too. Because participants are guaranteed reports artificially low salaries or earnings, this can
the amount in their hypothetical account upon limit annual contribution levels — contributions
retirement, the business bears the risk of poor cannot exceed reported salary levels. Actuaries use
investment performance. In addition, CBPs can income on Form W-2, Wage and Tax Statement; box
be more costly for businesses to operate than 14 of partnership Schedule K-1, Partner’s Share

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