Minimum Cash Value plan and the IRS
#11
Gets Weekends Off
Joined APC: Jun 2015
Posts: 4,116
I am not an expert by any means but I don’t think they correlate as equals. Last year I had a talk with my financial planner about sheltering more money from taxes. We had discussions about some ideas but there aren’t a lot for hourly employees like us. One of the things he mentioned was a cash balance plan. The company he works for has been setting them up for doctor and lawyer practices as a way to shield more money from taxes now. There were definitely some good benefits
It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.
It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.
What income are you expecting to shelter in the cash balance plan? Excess 401 money is not likely to be a significant dollar amount for most pilots I would think. if its an optional plan, I guess each pilot can make their choice.
#12
I am not an expert by any means but I don’t think they correlate as equals. Last year I had a talk with my financial planner about sheltering more money from taxes. We had discussions about some ideas but there aren’t a lot for hourly employees like us. One of the things he mentioned was a cash balance plan. The company he works for has been setting them up for doctor and lawyer practices as a way to shield more money from taxes now. There were definitely some good benefits
It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.
It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.
#13
Current 415c limits allow for 56k of contributions, provided those contributions are based on no more than 280k of earnings. Our contract provides for DPSP Cash beyond both of those limits. Raising the company contribution percentage and contributing personal money via 401K could create the opportunity to shelter some money. Please just make it optional rather than a mandatory confiscation of DPSP Cash into MBCBP.
#14
Gets Weekends Off
Joined APC: Jun 2015
Posts: 4,116
Exactly. Its why I asked the whole life insurance question.
#17
Gets Weekends Off
Joined APC: Jul 2010
Posts: 3,185
One is tax deferred, the other is tax free as far your insurance doesn’t go into Modified Endowment Contract and you don’t let it lapse. The government imposed limits in the late 1980s, because people were sheltering money in them. You can’t pass a line, if you do, it becomes taxable.
Mutual insurance companies have been around before the wall street.
#18
Line Holder
Joined APC: Jan 2017
Posts: 43
I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.
Optional would be nice, but I was under the impression it wasn't possible.
Optional would be nice, but I was under the impression it wasn't possible.
#19
Trimming my beard
Thread Starter
Joined APC: Jul 2014
Position: 7ERB
Posts: 241
I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.
Optional would be nice, but I was under the impression it wasn't possible.
Optional would be nice, but I was under the impression it wasn't possible.
Thought I read that in their study materials of a year ago. I’ll look for it.
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#20
Gets Weekends Off
Joined APC: Oct 2014
Posts: 886
I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.
Optional would be nice, but I was under the impression it wasn't possible.
Optional would be nice, but I was under the impression it wasn't possible.
As far as I know the plan would be mandatory until the IRS says it’s not (like the VEBA). My guess is that this upset enough people that they put the word “optional” in the opener. Nobody knows what the plan will be until the company agrees and it’s set up with the IRS. Beware of buy-in on negotiating an “optional” plan that becomes mandatory in the end.