The Background
Let us introduce Peter and Jeff, partners, and sole employees of a specialty insurance brokerage firm.
In September 2023, Cambium introduced S-Corp business owners, both in their early sixties, who had been long-time collaborators. Despite being cash rich with substantial earnings in 2022 and a healthy forecast for the future, they faced concerning projected tax requirements. Having maximized their tax deferral options for the 2022 tax year, including contributing to a SEP IRA up to the IRS limits of $61,000 each, they believed their tax filings were finalized.
401(k) Profit Sharing & Cash Balance Plan
Cambium Consultation
Upon consulting with our team, Peter and Jeff discovered a more efficient strategy. Cambium proposed a combination Profit Sharing and
Cash Balance Plan, enabling them to increase their deferral from $122,000 to $547,000. This approach allowed consistent high-level deferrals
until retirement, providing tax savings in peak earning years and building a substantial nest egg.
The revelation left them thrilled.
Obstacles
But there were some hurdles to overcome first:
Prior SEP contributions
Tax Filings already completed
Tight deadlines
Despite facing obstacles such as prior SEP contributions, Peter's filed tax return, and a tight deadline of September 15th, 2023, Cambium swiftly engaged with the CPA. The CPA endorsed the idea and promptly updated the returns with the new deductions.
Addressing the SEP contributions was crucial for the Cash Balance Plan's benefits. Cambium efficiently handled this by executing an excess contribution directive. Overcoming the tight deadline, typically challenging for plan setups, our implementation team and specialist vendors expedited the process. Legal documents were drafted, accounts opened, and funded within 7 business days, well ahead of the deadline.
The successful execution of the plan showcased Cambium's commitment to meeting deadlines and delivering optimal financial solutions.
This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation. Securities product and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC OSJ: 800 Westchester Avenue, N409, Rye Brook, NY 10573, 914 288 8800. PAS is a wholly owned subsiduary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Hypothetical examples are not intended to suggest a particular course of action, or represent the performance of any particular financial product of security. Cambium Group, LLC is not an affiliate or subsidiary of PAS or Guardian. 2024-167977 Exp 01/26