Plan Profile (Typical Physician Group)
- 1 owner physician, age 52
- Target CB contribution: $350,000/year
- Plan assets (January 1): $2,800,000
- Funding status (starting): FTAP/AFTAP ≈ 92% (slightly underfunded)
- Investment allocation: 60/40 portfolio
Scenario A — Stay with 5% Fixed Interest Crediting (FIC) (Legacy Design)
Assumptions:
- Crediting rate: 5% fixed
- Actual portfolio return year end: +12%
- Contributions made: $350,000 (target)
What Happens
- Assets vs. Liabilities Disconnect
- Assets grow at: +12%
- Liabilities grow at: +5%
- Creates overfunding pressure
- End of Year Results
| Metric | Result |
| Ending Assets | ~$3,486,000 |
| Funding Target | ~$3,255,000 |
| FTAP | ~107% (Trending Overfunded) |
- Real-World Consequences
- Risk of deduction compression
- Risk of contribution limits or zero deductible contribution
- Risk of assets “trapped” inside the plan
- You lose control of your tax strategy
Scenario B — Add Market Return Crediting (MRC) Mid-Year (July 1)
Assumptions:
- Jan–June: 5% FIC
- July–Dec: Market Return Crediting (aligned to 60/40 = +12%)
- Same contribution: $350,000
What Happens
- Assets and Liabilities Move Together
- Assets: +12%
- Liabilities: blended ≈ ~8.5–9%
- Funding stays aligned
- End of Year Results
| Metric | Result |
| Ending Assets | ~$3,486,000 |
| Funding Target | ~$3,430,000 |
| FTAP | ~102% (Stable Healthy Zone) |
- Real-World Consequences
- Full $350,000 deduction preserved
- No trapped surplus
- No forced contribution reductions next year
- Stable forward funding
- You regain control of your tax strategy
Side-by-Side Comparison
| Metric | FIC (Do Nothing) | MRC (Mid-Year Fix) |
| Contribution | $350,000 | $350,000 |
| Ending FTAP | 107% 🔴 | 102% 🟢 |
| Deduction Stability | ❌ At Risk | ✅ Stable |
| Flexibility | ❌ Reduced | ✅ Preserved |
| Structural Risk | ❌ High | ✅ Controlled |
Key Insight
This is not an investment problem.
It is a measurement mismatch problem.
- FIC = fixed liability vs volatile assets
- MRC = aligned liability with actual asset performance
Why Timing Matters
If you implement MRC:
- Before ~1,000 hours (mid-year) → Fixed
- After that → You’re stuck with:
- Overfunding OR underfunding
- Forced corrections later
Bottom Line
- FIC creates artificial volatility in funding status
- MRC neutralizes it
- Mid-year (July 1) is your last real chance to fix the structure before it shows up on your Form 5500
- If July 1 has passed, amend your plan by December 31 to switch to MRC effective January 1 for the following year
Call to Action
Most physician CB plans we review are unknowingly drifting into overfunded or underfunded territory due to outdated design.
We provide a Cash Balance Funding Risk Review that shows:
- Your projected FTAP/AFTAP
- Whether you are heading toward forced contributions or lost deductions
- The impact of adding Market Return Crediting before mid-year