Setting Up A Business Plan With SPP and Difference Between A Cash Balance Plan and A 401(K) Plan

Cash Balance Plan

It’s been said that customers or clients aren’t the most important thing about a business, that it’s actual employees that are the most important. If you take care of your employees they’ll take care of your customers. But how do you take care of those employees? How do you have a pension plan? Many employers think that it’s too expensive or they can’t afford to have one and that’s why we’re here today to talk about how easy, affordable and flexible Saskatchewan Pension Plan is and how it can be your pension plan to help your employees. At Saskatchewan Pension Plan we’re here to help every step of the way. We will come to your place of employment, talk to your employees, and help them get set up.

We help with the administration, we send out the statements and we look forward to working with each of your employees, individually, because Saskatchewan Pension Plan is for them. Each employee will fill out a Membership Application form. All you have to do is make a decision. You can put in up to $2,500 for each employee but you don’t have to put anything if you don’t want to. So why start Saskatchewan Pension Plan? A bigger question is why not? You will be offering your employees a pension plan that has a 30-year track record of excellent returns and low fees.

At the very least you can offer your employees a place for them to save, in the easiest place possible, right off their paycheck before they pay tax. There’s a savings right there and then and it’s important to start early. We all procrastinate and if we don’t have something that helps us to make that decision of saving for the future, it’s so easy to put it off. So not only will this be something great for you to give your employees, but it will make you stand out as an employer of choice.

Difference between a Cash Balance Plan and a 401(k) Plan

In America’s retirement system we have two families of plans defined contribution which includes 401k and defined benefit which includes Cash Balance. So what do these two types of plans have in common

  1. Number one, contributions are tax-deferred in both.
  2. Number two, your assets are protected from creditors in the case of bankruptcy or a lawsuit.
  3. Number three, in both plans you have your own account balance and it’s portable.

Unlike, old-style pension plans where your benefit was a complex formula that resulted in a lifetime annuity with Cash Balance you know exactly what you have, For example, I’m in our company’s Cash Balance plan. I know my balance. If I leave the company tomorrow I know exactly how much I can roll over to an IRA. Now let’s look at the key differences between these plans

  1. Number one, in a 401k the employee chooses the contribution amount and it’s very flexible. Cash Balance contributions, on the other hand, are set by the company and are generally less flexible.
  2. Number two, in 401k plans participants control their accounts and select their investments from a menu typically offered by the company. In Cash Balance plans, assets are pooled and invested collectively by the employer.
  3. Number three, these plans also grow in different ways. Your 401k growth is determined by the performance of the investment that you choose. Your Cash Balance account grows with an annual interest credit set by the company typically between four and five percent. Thanks to favorable legislation over the last 10 years. Cash Balance plans have become more similar to 401k plans.

They’re increasingly flexible, easier to administer, and have many more investment options. These changes have helped make Cash Balance the fastest growing retirement plan in America.


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