How to create a combo plan with a defined contribution plan and a cash balance plan. This example uses a DASH Opt but you can use any DC plan.
*DASH stands for Double Advantage Safe Harbor and it combines a profit share new comparability with a safe harbor non elective. The OPT means that you can optimize the plan on whoever you choose to select, typically owners.
Step 1: Add a new case and enter a name.
Step 2: Fill out relevant case information. If the case is PBGC covered please be sure to select "yes", otherwise the system will default to "no".
Step 3: To upload multiple employees, add the census file via XLSX.
Step 4: To create a Safe Harbor Non-Elective Opt DASH plan, select "SHNEC NC Opt DASH" which can be found in the proposals tab under "Single Defined Contribution Plan". Before creating the illustration, at the bottom select the option to exclude HCEs + Key Employees.
Step 5: To add and assign rate groups, migrate to the Design Grid tab and select "Edit Profit Share Contributions". Now select "Edit Rate Groups" followed by "Edit Classes" in the top left. This is where classes can be created before being assigned to employees. After creating a class you will be redirected to the "Assign Classes" tab. A drop-down grid on the right will contain the new class that was created and can be applied to the appropriate group. After assigning all of the rate groups click the x in the top right and recalculate when prompted.
Step 6: The design grid and testing tabs are useful tools at this stage of the plan design to ensure the plan is set up as expected.
Step 7: To create a Cash Balance Plan, migrate over to the proposals tab and select "Cash Balance Plan". Under the Design Grid tab select the "Edit Allocation Classes" button. Add appropriate allocation classes (See step 5, the format of this page is identical to the rate group editor). Tip: To max out the allocation for an employee or owner, allocate a large percentage (Ex: 500%). The system will automatically bring them down to their allowed individual maximum Section 415 limit . A dollar amount can also be assigned as an allocation class. After assigning appropriate allocation classes, click the x in the top right. You will not be prompted to recalculate this time, so remember to select "Update & Recalculate..." at the top of the screen.
Step 8: To create a combo of the two plans, under the Proposals tab, select "(CB/DC) Cross Test Tool. Select the "Save & Cross-Test" option to generate the proposal. Check to see if your plan stayed under the "IRC 404(a)(7)(C) 6% CONTRIB OF ELIGIBLE PAYROLL TEST". If your plan is failing testing because it is over 6%, decrease owner contributions. To troubleshoot this, I set the owner compensation to 0% in the DC plan and then calculated the dollar amount needed to get the plan to 6% exactly. To calculate this I took the difference from the total 6% in dollars of payroll and the current % being used by the plan in dollars. The difference between these two will be how much more money we can allocate to the plan which I will split between the two owners.
Step 9: After making these changes in the DC plan, recalculate both the DC plan and the CB/DC cross test plan. If your plan fails testing, migrate to the testing tab and it will diagnose the problem. To fix any problems, use the DB Plan and DC Plan tabs to edit previously generated proposals. Once your plan is finalized, a "Presentations..." button is at the top of the screen to display the plan.