Rich Wagner: Using cash balance plans to improve your retirement

But wait — there’s more. “You mean to tell me that there are more benefits to this program that I have not been using?” Yes — asset protection. Not only can you protect these hard earned profits from taxes, but you may also be able to potentially shield them from creditors as well. This may provide you a chance to get off the rat race treadmill and retire someday. To potentially protect your assets, you don’t need to move your money to some far off location overseas, or bury the assets on a deserted island. There are two powerful protections given to pension plan assets. The first is called BAPCA for short, or Bankruptcy Abuse Prevention and Consumer Protection Act. Retirement funds in any account exempt from taxation under certain sections of the Internal Revenue Code, among others, are exempt property from a bankruptcy estate, under either the “opt-out” state exemptions or the federal exemptions.

Additional asset protection comes from the anti-alienation provisions of the Employee Retirement Income Security Act (ERISA) section 206(d) and IRC section 401(a)(13) that have protected tax-qualified retirement plans from the claims of creditors of plan participants and their beneficiaries, except in divorce, federal tax levies, or certain criminal actions. (“Is Your Retirement Plan Really Safe?”; Journal of Accountancy, April 2005, Richard A Naegele and Mark P Altieri.)

Is a cash balance plan the panacea to all things tax and creditor? No. Laws and court rulings are constantly evolving, but if you would like to reduce your tax liability and improve protection from creditors, these plans are certainly worth a look.

Rich Wagner, CPA, MAcc, is a tax reduction and investment expert. If you’d like more ideas on protecting , saving and growing your money call him at 801-657-4459, or email at richw@vwapro.com