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A firm with 75 shareholders and 200 staff sponsored both a 401(k) and a Cash Balance Plan exclusively for shareholders. After seven years, the Cash Balance Plan’s funding became increasingly volatile, a situation worsened by investment losses in 2022. Growing plan assets further amplified contribution swings due to a mismatch between fixed crediting rates and actual investment returns.
Leadership sought a more predictable and stable funding strategy to reduce underfunding risk and smooth out contributions.
Working with October Three, the firm transitioned to an interest crediting rate tied to actual investment returns minus 100 basis points, effectively reducing funding volatility. This change helped offset the prior funding shortfall while stabilizing future contributions.
Working closely with the controller, October Three also ensured alignment with cash flow management to minimize financial disruptions.
Key outcomes of partnering with October Three included:
A reduction in funding volatility, creating consistent contributions, aligning liabilities with actual investment returns
Minimized additional cash injections to cover past losses
Increased shareholder confidence in plan sustainability and financial stability
This strategic adjustment enhanced the plan’s stability and reassured stakeholders of its long-term viability.
Whether you want to reward key executives, reduce tax exposure, or boost retention with long-term wealth-building benefits, a cash balance plan can help. Reach out to our team to request your free cash balance illustration today.