A wealth management solution for small business owners

Very often small business owners are looking for retirement planning options beyond a 401(k). They want a retirement plan that provides them, as the owner, substantial contributions for themselves, but also tax deductible contributions. A Split Funded Defined Benefit Plan (also known as a SFDB Plan or Cash Balance Plan) can be an ideal solution for owners or partners of successful small businesses seeking potentially large tax deductions, combined with the ability to supercharge their retirement savings.

SFDB plans are like an old-fashioned defined benefit plan with one difference. Plan contributions are split between life insurance and other investment options (stocks, bonds, mutual funds, CDs, etc.). These plans benefit a business because employer contributions decrease the annual tax liability for the owners or partners. SFDB plans can be added to an existing 401(k) and profit sharing plan, specifically to address the needs of the high-income business owners or partners.

Split Funded Defined Benefit Plan Benefits

  • Can create some of the highest tax deductible contributions of any retirement plan type
  • Can drive significant retirement income for the owner(s) and also select key employees
  • All assets in the retirement plan are protected from creditors under current federal law
  • When combined with life insurance provides the ability to address financial, estate, and tax planning needs on a pre-tax basis
  • Provides business owner’s family financial protection in the event of the business owner’s pre-mature death
  • The ability for the corporation/partnership to determine individual contribution amounts for each owner
  • Business continuation and succession options
  • Flexibility in investment and product choices

Split Funded Defined Benefit Plans may be Appropriate for clients who:

  • Are owners or partners of a successful business with a consistent profitable history
  • Own a business with has sufficient budget to cover annual contributions
  • Have fully funded all other qualified retirement options
  • Own a business has fewer than 50 employees


Do you think you have clients who should be using this strategy?

Download our SFDB Client Checklist to find out.