Mbcbp
#1
Gets Weekends Off
Thread Starter
Joined APC: Sep 2005
Posts: 1,110
Mbcbp
https://www.whitecoatinvestor.com/ca...professionals/
There is something in this explanation of the Market Based Cash Balance Plan that sets off huge alarms in my brain when I read it. Can you see what it is?? Have a read.
This is something that MUST be optional.
There is something in this explanation of the Market Based Cash Balance Plan that sets off huge alarms in my brain when I read it. Can you see what it is?? Have a read.
This is something that MUST be optional.
#2
Banned
Joined APC: May 2018
Posts: 314
Well, here’s a start:
What are the downsides?
It’s possible the investments perform poorly for a long period of time and you have to make up the interest payments out of your cash flow. That doesn’t seem like a big deal if you have to make up a 5% payment on a $50,000 balance ($2500), but coming up with $50K could be a huge issue if you have a $1 Million balance. If you’re not already saving $50K into a 401K (and probably maxing out backdoor Roths for you and your spouse), then you’re unlikely to benefit from a cash balance plan especially given the decreased flexibility and higher expenses which drag on returns. The average physician (making $200K) probably doesn’t need one of these plans simply because she doesn’t make enough money to really benefit from them.
Although the money in the plan technically belongs to the company, not you, the assets must be managed for your benefit and are not subject to the company’s creditors. The pension is also usually insured by the Pension Benefit Guaranty Corporation, a government entity. Your company generally pays $35 per year per participant for this insurance, but may be exempt if there are fewer than 25 employees.
Also, if you’re required to make significant contributions for your employees, this can be an additional practice expense, eliminating the personal benefit to you, the owner.
What are the downsides?
It’s possible the investments perform poorly for a long period of time and you have to make up the interest payments out of your cash flow. That doesn’t seem like a big deal if you have to make up a 5% payment on a $50,000 balance ($2500), but coming up with $50K could be a huge issue if you have a $1 Million balance. If you’re not already saving $50K into a 401K (and probably maxing out backdoor Roths for you and your spouse), then you’re unlikely to benefit from a cash balance plan especially given the decreased flexibility and higher expenses which drag on returns. The average physician (making $200K) probably doesn’t need one of these plans simply because she doesn’t make enough money to really benefit from them.
Although the money in the plan technically belongs to the company, not you, the assets must be managed for your benefit and are not subject to the company’s creditors. The pension is also usually insured by the Pension Benefit Guaranty Corporation, a government entity. Your company generally pays $35 per year per participant for this insurance, but may be exempt if there are fewer than 25 employees.
Also, if you’re required to make significant contributions for your employees, this can be an additional practice expense, eliminating the personal benefit to you, the owner.
#3
Banned
Joined APC: May 2018
Posts: 314
I sell life insurance, annuities, and final expense insurance in addition to doing this job. This plan is no different. The managing firm/company aka the administrators are taking the bulk of the returns and recognizing the TVM all while allowing you to get the warm fuzzies about having a set amount of return (5%).
I have a small agency with about six people selling under my umbrella right now. Last year we wrote just over $4m in policies (life and final expense) in addition to annuity sales. It’s a suckers bet that helps to alleviate poor planning.
I have a small agency with about six people selling under my umbrella right now. Last year we wrote just over $4m in policies (life and final expense) in addition to annuity sales. It’s a suckers bet that helps to alleviate poor planning.
#4
"Although the money in the plan technically belongs to the company, not you, the assets must be managed for your benefit and are not subject to the company’s creditors. "
The MBCBP is a good option for late career pilots to stuff away cash toward retirement. IF implemented, I would elect not to participate until I was within 5 years of planned retirement. At that time, I would begin funding the plan as a way to have cash in my portfolio and reduce taxable income. Until that time, I would invest outside of the plan in real estate and tax efficient ETFs.
#5
Gets Weekends Off
Thread Starter
Joined APC: Sep 2005
Posts: 1,110
[QUOTE=Gunfighter;2822628]Was it this one?
"Although the money in the plan technically belongs to the company, not you, the assets must be managed for your benefit and are not subject to the company’s creditors. "
Yes. We’ve all seen what happens when things go south. What’s the saying? Fool me once, shame on you. Fool me twice, shame on me. Why anyone would be willing to not have their retirement in their own name is baffling given the events of bankruptcy.
"Although the money in the plan technically belongs to the company, not you, the assets must be managed for your benefit and are not subject to the company’s creditors. "
Yes. We’ve all seen what happens when things go south. What’s the saying? Fool me once, shame on you. Fool me twice, shame on me. Why anyone would be willing to not have their retirement in their own name is baffling given the events of bankruptcy.
#6
Gets Weekends Off
Joined APC: Apr 2018
Posts: 3,191
"not subject to company's creditors"
Not sure I understand why this is a problem....it actually seems good to me. What would happen to "your money" if fidelity went under due to a black swan ie "cyber attack etc....with 2.5 TRILLION AUM ....government step in with "insurance"....kinda like PBGC?
If it's voluntary what's the problem.....don't opt in.....if it's not voluntary (as they have said)......vote it down
Not sure I understand why this is a problem....it actually seems good to me. What would happen to "your money" if fidelity went under due to a black swan ie "cyber attack etc....with 2.5 TRILLION AUM ....government step in with "insurance"....kinda like PBGC?
If it's voluntary what's the problem.....don't opt in.....if it's not voluntary (as they have said)......vote it down
#7
Gets Weekends Off
Joined APC: Feb 2011
Posts: 760
That’s actually a good point. I wonder if these funds would be covered under the FDIC or SIPC. Even then, the coverage will likely far below the actual value of the account. I’m assuming since these will essentially be investment accounts they will not be subject to federal coverage of any sort similar to our 401k’s.
Last edited by mispoken; 05-19-2019 at 07:09 AM.
#8
Gets Weekends Off
Joined APC: Apr 2016
Position: Looking left
Posts: 3,251
https://www.whitecoatinvestor.com/ca...professionals/
There is something in this explanation of the Market Based Cash Balance Plan that sets off huge alarms in my brain when I read it. Can you see what it is?? Have a read.
This is something that MUST be optional.
There is something in this explanation of the Market Based Cash Balance Plan that sets off huge alarms in my brain when I read it. Can you see what it is?? Have a read.
This is something that MUST be optional.
#9
"not subject to company's creditors"
Not sure I understand why this is a problem....it actually seems good to me. What would happen to "your money" if fidelity went under due to a black swan ie "cyber attack etc....with 2.5 TRILLION AUM ....government step in with "insurance"....kinda like PBGC?
If it's voluntary what's the problem.....don't opt in.....if it's not voluntary (as they have said)......vote it down
Not sure I understand why this is a problem....it actually seems good to me. What would happen to "your money" if fidelity went under due to a black swan ie "cyber attack etc....with 2.5 TRILLION AUM ....government step in with "insurance"....kinda like PBGC?
If it's voluntary what's the problem.....don't opt in.....if it's not voluntary (as they have said)......vote it down
Bottom line, we are placing more trust in an outside entity with a MBCBP than we are with other retirement saving and investment vehicles. That doesn't make it inherently bad, it just requires that we be knowledgeable of the risks and because of their role DALPA owes us an honest explanation of those risks.
#10
Gets Weekends Off
Joined APC: Jun 2015
Posts: 4,116
Ok. Im gona tell u all this story. again.
When ron allen became ceo he called a meeting of all the pension trust component managers.
News to me, turns out one such company had a brother of mine as a partner. And he was at the meeting with our new ceo.
When i asked him wat he thot of new mgmt team he told me "well...my company is gona lose the delta account".
Why? "My company handles institutional money (pensions) and hi net worth individuals. We have a well defined investment template. Hi quality commercial real estate with stable returns and an underlying asset value."
"Buying raw land and planting pine seedlings and writing down in the trust leger this will be worth $100M in 25 years is no way to handle pension trust funding."
"If i were you.....i would be greatly concerned with the solvency of the delta pension trusts."
Anybody recall the year ron allen became ceo?
When i offered this info to the mec....i was informed my brother was "full of ****"...
When you are involved in a comingled (blind) trust you really dont specifically know what is being done.
When ron allen became ceo he called a meeting of all the pension trust component managers.
News to me, turns out one such company had a brother of mine as a partner. And he was at the meeting with our new ceo.
When i asked him wat he thot of new mgmt team he told me "well...my company is gona lose the delta account".
Why? "My company handles institutional money (pensions) and hi net worth individuals. We have a well defined investment template. Hi quality commercial real estate with stable returns and an underlying asset value."
"Buying raw land and planting pine seedlings and writing down in the trust leger this will be worth $100M in 25 years is no way to handle pension trust funding."
"If i were you.....i would be greatly concerned with the solvency of the delta pension trusts."
Anybody recall the year ron allen became ceo?
When i offered this info to the mec....i was informed my brother was "full of ****"...
When you are involved in a comingled (blind) trust you really dont specifically know what is being done.
Last edited by BobZ; 05-19-2019 at 08:35 AM.
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