Why It’s Time to Look at Cash Balance Retirement Plans

Ascensus makes major strategic acquisition

cash balance plans, Ascensus, 401kAscensus is buying everything in sight (when it makes sense).

Mega-recordkeeper and retirement plan provider Ascensus announced Tuesday that it has acquired Kravitz as part of a broader foray into the cash-balance plan space.

Cash balance plans, increasingly popular since the passage of the Pension Protection Act a decade ago, earn a guaranteed interest credit on contributions made, as opposed to a dependence on the plan’s investment performance.

Cash balance plans are experiencing over 20 percent growth per year, while the 401ks are a mature market, growing at about 2 percent per year,” says Kravitz president Dan Kravitz. “It’s a good complement with the 401k for professional services firms looking for tax and retirement savings. Cash balance plans are a great way to do it.”

Ascensus had some success in the micro-market, he added, and realized the cash balance market growth potential overall.

“It has great technology which, when combined with our actuarial prowess, make for a great fit.”

Kravitz, founded in 1977, is a retirement administration firm and “cash balance specialist focused on bringing its clients the latest in the design, administration, and management of corporate retirement plans.”

It offers training, education, and support on cash balance plans to its clients and a network of financial advisors and third-party administrator partners.

“There are not a lot of firms that can handle large cash balance plans,” Howard Insley, Ascensus senior vice president of Retirement Operations, explained. “Some firms can do it regionally, but few have the size and scale that can handle a sole proprietor all the way up to those large plans. There really are no comparable competitors.”

Insley pointed to two advantages cash balance plans offer. The first is that they help “smaller midmarket firms as they try to reduce their tax burden.”

The second involves the national retirement savings deficit currently seen, and the fact that key employees “can only contribute so much” due to discrimination testing, something defined-benefit cash balance plans can address.

“The fact that they allow employees to contribute more makes them a nice benefit that’s marketable, and can be used to hire and retain high-quality employees.”

Dan Kravitz will stay on in a senior leadership role, and the firm’s 85 employees will remain with the firm, which will operate somewhat autonomously.

“Kravitz brings great brand equity that won’t go away,” Insley noted.

Ascensus acquired the actuarial firm Kravitz Inc., as well as Kravitz Back Office Solutions, but not Kravitz Investment Services.

“We’re not asset managers and we don’t provide investment services,” Insley concluded. “Importantly, we did not want to create an in-house conflict with our asset manager and investment provider partners.”

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