The Buffett RuleWarren Buffet, the “Oracle of Omaha” might be the most accomplished living investor. His homespun commentary is often quoted and his example emulated where possible. For instance Mr. Buffett often admonishes us to “invest in stocks as if you were buying a business” and “the stock market is the only thing we want more of when prices are high and less of when prices are low.” Much like EF Hutton of a generation ago, when Warren Buffet speaks, people listen. Mr. Buffett famously opined that he pays less tax dollars as a percent of his income than does his secretary. This innocuous statement morphed into “The Buffett Rule” that nearly became policy in our nation. Millionaires or thereabouts would have been subject to a minimum 30% tax rate as a ‘fair share’ had legislation been passed.

For perspective, the majority of Mr. Buffett’s income is capital gain, which up until recently was taxed at a maximum of 20%, a rate probably lower than the marginal rate paid by many middle class Americans. However, last spring, the Oracle described the real Buffett Rule: “I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe. And that’s very simple,” Mr. Buffett told Fortune magazine. The billionaire also gave a clue about his thoughts on corporate inversions (an American acquirer taking the tax domicile of a target foreign company to gain that country’s lower tax rate). “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” he said. Interesting.

Mental connections are funny things. Just the other day we came across an article regarding Cash Balance Plans and it made us think about the real Buffett Rule. Cash Balance plans offer the chance to do what Mr.

Buffett does, not what he says, namely, pay no more in taxes than you owe. Cash Balance plans are becoming increasingly more popular and you may not have heard much about them yet. At small and midsize firms, when used in conjunction with a 401(k) program, these plans can help participants save more towards retirement in a tax deferred manner and help business owners improve the cost and tax efficiency

of their organization. Not too shabby.

Cash Balance plans are considered a bit of hybrid plan as they combine the high contribution limits of a defined benefit plan with the flexibility and portability of a 401(k) plan. According to the US Department of Labor, “A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution

plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance.” The stated account balance is a function of the plan sponsor’s contributions and a crediting rate.

According to multiple surveys, somehow accumulating enough assets to retire comfortably, given all other demands on our savings, remains a top five concern of Americans. This is a major reason why Cash Balance plans are on the rise throughout the U.S. and why it may be something to consider for your business both from a tax efficiency (Buffet style) and a retirement savings perspective.

To learn more about Cash Balance plans, contact Jason Grantz, QPA, AIFA®, Institutional Retirement Consultant at jason.grantz@unifiedtrust.com or (732) 227-9252.

Michael Weiner, CFA®, Chief Investment Officer, Unified Trust CompanyMr. Weiner received his Bachelor’s Degree from Duquesne University and his MBA from the University of North Carolina at Chapel Hill. He is responsible for establishing and implementing investment policy, including research, policy development, asset allocation, mutual fund and separate account manager selection. His position leads the Trust Investment Committee for both the Wealth Management and the Retirement Plan Consulting Group business lines. Mr. Weiner joined Unified Trust in 2013 with more than 29 years of experience in the investment management industry and is an accredited CFA (Chartered Financial Analyst).

Michael Weiner, CFA®Chief Investment OfficerUnified Trust Company

Cashing In onCash Balance

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