Definition
Designer DB Plus® runs on a layered framework. No fancy new plan type here. It just combines familiar options into one clean approach.
Designer DB Plus®
A Comprehensive Retirement Plan Design from Retirement Actuarial Services LLC
Designer DB Plus® is a plan that combines different components for retirement savings. The plan includes a Cash Balance defined benefit plan, Profit Sharing, and a 401(k) feature, plus an extra 401(h) retiree medical reimbursement for those who want it. All these parts work as one. This plan helps people see how these things can be set up to work well under today's tax rules and ERISA rules.
Designer DB Plus® is a retirement plan design from Retirement Actuarial Services LLC. It stacks three parts into one smart setup: Cash Balance defined benefit, Profit Sharing/401(k) layer, and optional IRC section 401(h) overlay for retiree medical costs---when it fits and the rules allow. Each layer has its role, but together they build a system for retirement savings and post-retirement medical reimbursements.
Problem Statement
Business owners and advisors often picture defined benefit plans as those old-school pensions. You know, the kind promising fixed monthly checks based on final pay and years served. Folks see them as rigid, confusing, and a hassle to run---thanks to memories of big-company plans, strict funding rules, and opaque formulas.
Cash Balance plans flip that. They're legal retirement plans showing simple account balances with pay credits and interest, not some convoluted promise. Easier to grasp and talk about. But myths linger: too inflexible, clashes with 401(k)s or profit-sharing, forces all-or-nothing contributions. Law's more flexible now, though.
Designer DB Plus Methodology
Layered Framework
LAYER 1
Cash Balance Defined Benefit Foundation
This is the powerhouse: a Cash Balance defined benefit plan pumping big tax-deductible contributions mainly to owners. Owners snag the lion's share since they're usually older and higher-paid---perfect for maxing wealth while keeping employee costs low. If employees joined the Cash Balance, it'd get pricey fast, handing too much benefit their way. So owners take the bulk via CB, dodging nondiscrimination headaches. The 401(k)/PS handles employee perks with lower limits.
Everyone gets a notional account that grows via pay credits---a flat percentage or dollar amount of pay---plus interest per plan rules. Still fully defined benefit under law, with calculated contributions hitting minimum funding and tax limits via math under IRS and ERISA. In In Designer DB Plus®, it targets retirement benefits, caps contributions right, includes only eligibles, and eyes funding, investments, and rule shifts.
LAYER 2
Profit Sharing + 401(k) Coordination
Layer 2 pairs with a defined contribution plan---typically 401(k) plus profit-sharing. It syncs with Cash Balance to deliver main employee retirement benefits, keeping pension costs in check and nondiscrimination satisfied. Employee perks stay reasonable: deferrals, matches, profit shares---all flex to owner goals without overfavoring HCEs.
Outcomes tie to actual deposits and investments in individual accounts, no promises. This DC layer meshes DB rules seamlessly.
LAYER 3
Optional IRC §401(h) Medical Reimbursement Overlay
Add this under IRC §401(h) for retiree medical reimbursements from pension funds. Requires a separate account, used only for qualified medicals and admin---fair, equitable, and under retirement benefit caps.
In Designer DB Plus®, it funnels part of contributions tax-free for future healthcare, if your setup allows. Tax-smart, compliant. Right for you? Depends on business, staff, plan specs, and advice.
Who It Is For
Ideal For
Designer DB Plus® is meant for businesses that:
- They are private companies or have a few owners. They can align the goals of the owner and key people into a single plan.
- They have a steady income most of the time. This money can cover fixed amounts paid each year, as determined by the number experts. Some years may need a certain amount of money to be added.
- They agree to handle the paperwork, get help from number experts, and handle all tasks needed to run a set pay plan and a set pay-in plan, plus maybe a 401(k) part.
Not Suitable For
It is often less suitable for businesses that:
- Go through periods when profits can fluctuate a lot, making it hard to plan long-term funding for DB plans.
- Like things to be simple and easy to handle, and do not want to work with specialists or outside help to run DB/DC plans and follow rules.
- Expect big changes soon with ownership, company type, or workers, that may make a layered DB/DC design hard or not fit your goals.
The right plan for you will depend on some things. You have to look at your business type, how you pay your workers, the kinds of people you hire, and how your business handles change and some hard tasks. It is important to have a full review done. You should also get help from a pro.
How It Works
Designer DB Plus® helps design and run a layered setup. It is not a fixed plan that you must follow. In practice, it usually goes through these main steps:
1
Preliminary fact-finding
Collect facts about what type of business this is, how many people own it, who those people are, if there are any other companies tied to it, basic worker details like age, pay, years they've been there, and if there are already retirement plans set up. Also, look at how much money gets put into those plans now and how often. This helps show which kinds of retirement plans fit, and how a new plan like Cash Balance, combined with a 401(k), might work with what is already set up.
2
Feasibility modeling
Based on the facts collected earlier, you develop sample models to show the range of Cash Balance benefits and the amount of money that would be needed to be contributed to the plans each year. These samples align with the possible 401(k) and profit-sharing options. Things like how much money is made from investing, how fast money earns interest, how much people make, and if workers stick around are all used as guesses in the models.
3
Plan design selection
If the testing phase looks good, the next step is to pick one Cash Balance Setup (like pay credits or interest crediting style), a way to share money for a 401(k) or profit-sharing part, and possibly a 401(h) medical part, making sure all rules about fairness and who can be in the plan are met. At this stage, you also decide whether workers must wait.
Regulatory Foundations
Designer DB Plus® works fully with the current setup for qualified retirement and related plans. It does not change or take the place of the rules set by law.
Qualified Plan Framework
Qualified retirement plans must comply with the Internal Revenue Code and ERISA. These rules lay out what you need to get into the plan, how you earn your rights, how the money is put in, and the tax rules for both the employer and the people in the plan. A plan must meet these rules to maintain a good tax status.
Defined Benefit vs. Defined Contribution
A defined benefit plan promises a set benefit when you retire, and how much goes in is set to meet that goal. A defined contribution plan provides benefits based on contributions and the investments in each person's account. A Cash Balance plan is a defined benefit plan under the law, even if it refers to Hypothetical account balances.
ERISA's Role
ERISA sets basic standards for joining plans, earning your rights, building your benefits, contributing, and handling responsibilities. It makes plans give people details about the plan and the money in it. The Pension Benefit Guaranty Corporation (PBGC) backs defined benefit plans in most cases, but there are limits.
Nondiscrimination and Coverage
A qualified plan cannot give much better benefits to highly paid workers compared to those who are not highly paid. A plan must meet rules requiring sufficient coverage for workers and avoiding bias.
This overview provides a basic overview of the topic. It does not cover every rule, exception, or meaning that may apply. You should talk with tax, legal, or actuarial experts to get answers about your plan.
For more details, see DOL ERISA overview and IRS Employee Plans guidance.
Limitations and Risks
There are some important things you should keep in mind before you start any layered DB/DC plan. You need to know about the limits, what is expected, and the risks that come with it.
Funding variability and required contributions
Defined benefit plans are generally subject to minimum funding requirements under the Internal Revenue Code and ERISA. Required employer contributions can rise or fall from year to year based on factors such as investment performance, interest rates, workforce changes, and the plan's funded status over time. In some circumstances, however, a plan may be frozen prospectively if that decision is communicated to the plan administrator in advance and applicable requirements are met. When that happens, no minimum contribution may be required for future accruals, depending on the plan's status and the specific facts involved.
Overfunding
If a plan has a lot more money than what it owes, the chances of adding more taxdeductible funds can be limited. The ways to use or distribute extra money under the plan are also limited by tax and other rules. Extra funding thoughts can get tricky when there are several parts of the plan and other types of benefits in play.
Administration and compliance requirements
Defined benefit plans---as well as paired DB/DC plans---need steady check-ups, including yearly reports from actuaries, annual tests about who gets covered and treated fairly, government forms, and notices sent out to those in the plan. If these steps are not taken, the plan may face additional taxes, fines, or the risk of losing its good standing.
Eligibility, participation, and workforce dynamics
Who can join and get covered is shaped by rules and how the staff is made up, including pay and staff turnover. Changes in these areas can increase the benefits or money paid in. Designer DB Plus® is best seen as a flexible setup that needs regular checks. It is not something that you set up once and leave alone. It needs you to keep watching and making changes.
