shutterstock_96774844No, they won’t work forever, so with the current lackluster performance of the stock market, now is the perfect time to get creative in order to meet your clients’ retirement goals. It is critical to be sensitive to their desire to accumulate money quickly, save income taxes, and grow the money using conservative investments. That’s where a Split Funded Defined Benefit Plan comes into play.

Before we get into the nuts and bolts of what these creative plans entail, let’s discuss who are good prospects. Take for example a husband and wife in their early 60’s with a successful business, employing about a dozen staffers, including their son and daughter in their 30’s. The business owners and their heirs have been maxing out the contributions on their 401(k)/profit sharing plan. Lately, the couple has been thinking about retiring within 5 years and passing the company on to the son and daughter. Their CPA has been raising the issue of increasing income taxes.

While the clients are eager to retire, they also realize that they have re-invested much of the company’s profits back into the business. Their savings have been depleted meeting their children’s higher education obligations. But the company is highly profitable and the owners are confident they can afford to carve out about $600,000 per year, in PRE-TAX dollars, to contribute to a custom pension plan for the next 5 years.

The plan needs to address three concerns:

  • The need to quickly accumulate retirement income
  • Contributions had to be income tax deductible
  • The plan needs to include life insurance as one of the assets in order to protect the wealth transfer

If the three concerns could be addressed effectively, the clients feel that the company could be passed to the children under favorable financial terms and they would have sufficient income to retire.

The advisor presented a Split Funded Defined Benefit Plan as follows:

  • Total 401(k) for the clients: $48,000
    Total Split Funded Defined Benefit for the clients: $550,000
    Required contribution for the employees: $43,000
    Total Company Tax Deductible Contribution: $641,000
  • In a 45% tax bracket, the $641,000 represented a tax savings of about $289,000 with the clients realizing about 94% of the contribution for them.
  • The plan provided the husband and wife with approximately $1.5 million of whole life insurance. The two life insurance policies are assets inside the defined benefit plan with total target premiums of $260,000.
  • In addition to the life insurance sale, the FA will receive at least $381,000 of new managed assets each year for the life of the plan.

It’s a win-win across the board for this couple, assuring a solid retirement income, as well as the continuation of the business they worked so hard to build and can now successfully pass onto their family. Does this scenario sound familiar; do you have clients that fit this profile?

Let us help you identify who is perfect for Split Funded Defined Benefit Plans. Reach out to your Insured Solutions Consultant— the PensionQuote Team. We will assist in identifying cases and provide the tools to help you close them.

Eugene Gordon, Chief Executive Officer [email protected]
Joe Penchansky, Executive VP [email protected]
Peter Lash, JD, General Counsel/Chief Compliance Officer/Suitability [email protected]
Matt Magarahan, Chief Marketing Officer
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Sam Collard, Director of Sales/Marketing [email protected]
Lia Sutherland, Executive Assistant [email protected]

Telephone: 800-717-4723
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About Us

We are pioneers in retirement planning, featuring tax-advantaged defined benefit pension plans as exit strategies for high net worth clients. We partner with top industry Advisers to bring their clients preferred solutions to achieve large income tax deductions.


Coral Gables, FL

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Phone: 1-800-717-4723

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