The Quick Step Guide to Setting Up Your Cash Balance Plan Account at Charles Schwab

So now that we’ve set up your defined benefit plan or cash balance plan, what’s next?

Although your plan has been set up, you’re not finished yet. You now need to open up a custodial investment account with Schwab (or any custodian of your choice).

We have been setting up plans on the Charles Schwab platform for years. They have always been a great custodian to work with. You often get access to the same customer service representative throughout the entire application process. The representatives at Schwab are typically knowledgeable and easy to work with.

While the application process is very simple compared to other custodians, we do find that our clients often have a lot of questions. As such, we decided to do a post specifically on how to fill out the Schwab account application for a cash balance plan or defined benefit plan.

We are always here to help our clients. But make sure to contact Schwab upfront with any questions. They can help expedite the process.

Keep in mind that they get especially busy around year-end. The direct line for the team that specializes in Small Business Retirement accounts is 1-800-435-4000.

Opening Up Your Charles Schwab Custodial Account

To open your account with Charles Schwab, you will need to fill out the following application:  

You will need to complete one application for your cash balance plan or defined benefit plan.

If you are setting up a 401(k) plan, you will need a separate application for that one as well. DO NOT OPEN UP ONLY ONE ACCOUNT AND DEPOSIT FUNDS FOR BOTH YOUR CASH BALANCE PLAN AND 401(K) PLAN INTO IT. Please contact us if you are confused.

As a side note, remember that for a solo 401(k) you can use one account for both the deferral portion and the employer portion.

Part 1 Master Account Application

For the cash balance plan (or defined benefit plan) as well as one participant 401(k) plans, only part 1 of the application will need to be completed. This application will generate 1 pooled account, so please make sure if you are opening both a cash balance plan (or defined benefit plan) and 401(k) plan please fill out 2 applications one for each plan.

For 401(k) plans with more than 2 participants, there is a 2nd part of the account set up process that will be required.

We will follow right through the pages and point out some tips and tricks along the way. You should have your plan adoption agreement handy as this will be required. You can find your plan adoption agreement and other documents in your SmartVault.

Section 1 – Company Information

In this section, enter information for the business sponsoring the retirement plan. The business sponsoring the plan is your actual company. The following information is needed:

  • Company Name
  • EIN
  • Entity Type (S-Corp, C-Corp, etc)
  • State of Incorporation
  • Country of Establishment
  • Address
  • Phone number

This section is pretty easy and should not trip up many folks. But the application gets a little more complex.

Section 2 – Plan Details

This information is provided by Emparion in your plan documents and adoption agreement. You have access to this in your Smartvault account.

  • Plan Name. This is the name of the plan in the adoption agreement. Do not use your company name or EIN. For example, if your company’s name is “ABC Company, LLC” then your plan name is something like “ABC Company, LLC Cash Balance Plan”.
  • EIN. Include here the EIN for the plan. You can find your IRS letter containing the EIN in your SmartVault. DO NOT USE YOUR COMPANY EIN HERE.
  • Date Plan Established is found on the 1st page of the adoption agreement. This is usually January 1st for the effective year.
  • Number of participants is you (and possibly your spouse) and any additional employees that we discussed receiving an allocation of your contribution.

Answers to Check Box Questions Based on Plan Type:

Cash Balance Plan/Defined Benefit Plan:
  • Does your Plan document allow covered options trading? NO
  • Does the Plan allow participants to direct investments into their own accounts? NO
  • Does the Plan allow for segregated accounts/FBO? NO
  • If segregated accounts are allowed, does the Plan allow the Participants to trade directly with Schwab? NO
401(k) plan. Remember that these need to be separate forms.
  • Does your Plan document allow covered options trading? NO
  • Does the Plan allow participants to direct investments into their own accounts? YES
  • Does the Plan allow for segregated accounts/FBO? YES
  • If segregated accounts are allowed, does the Plan allow the Participants to trade directly with Schwab? YES

Take a look below. This is what the application would look like for a cash balance plan:

Here is what it would look like for a 401(k) plan. Remember that these need to be separate forms.

Section 3 – Trustee information

This is where you as the owner enter your information. If you added your spouse as a co-trustee of the plan, meaning they signed the plan document as well, then you can enter their information in the co-Trustee section.

Sections 4 – 8

This contains personal preferences and information you need to know regarding Charles Schwab’s program.

Section 9 – Authorization and Signature section

Don’t forget to sign this page before submitting it. You would be surprised how often this is missed.

Section 10 – Third Party Pension Administration

Please do not include Emparion’s information we do not require duplicate statements.

Section 11 – TPA Authority

This section is not required. We do not need to be authorized to receive duplicate statements and relay trading instructions. 

Section 12 – TPA Authorized Agent Information

This section is not required. We do not need to have access to your account information.

Section 13 – Limited Power of Attorney (LPOA) for TPA Agreement

Again, another section that is not required. We do not need a Power of Attorney over your account.

Part 2 Participant Application

For 401K plans with more than one participant, a participation application will need to be submitted for each participant that is eligible to participate in the account. We recommend that the Master Account Application is submitted 1st and completely processed before submitting the individual participant applications. The application you will need is:

Company Retirement Account Participant Application

On page 1 of the Participant Application, before section 1, are the following questions:

Provide Trust Tax ID: Include here the EIN for the plan. You can find your IRS letter containing the EIN in your SmartVault. DO NOT USE YOUR COMPANY EIN HERE.

Provide Plan Master Account Number: This number is received once the Master Account Application is processed with Schwab.

Participant Information

In this section, enter information for the corresponding participant,

Page 1
  • Name (first, middle, last)
  • Address
  • Phone Number
  • Email Address (Required)
  • Social Security Number
  • Date of Birth
  • Mother’s Maiden Name
  • Identification Type (Passport, Driver’s license)
    • Identification Number
    • State of Issuance
    • Expiration Date
    • Countries of Citizenship (must List all)
    • Country of Legal Residence
    •  
Page 1: Securities industry regulations
  • Employment status
  • Name of Employer
  • Occupation
  • Employer Address
  • Affiliation Questions
Page 2: Participant Information Continued
  • Marital Status
  • Number of Dependents
  • Investment Experience

Trusted Contact Designation

This is an optional section of the application. The plan’s participant can designate up to 2 individuals that will act as a point of contact for the account. The individuals will not have authority to view the account or execute transactions.  The primary purpose of the trusted contact is to address possible activities that might indicate financial exploitation of the participant.

Information requested:

  • Name (First middle last)
  • Relationship
  • Address
  • Phone Number
  • Email Address

Overall Investment Objective

Select 1 check box option.

Participant Signature

It’s as simple as that! Just make sure to get your plan funded before the deadline. You can always reach out to us if you need additional help.

Paul Sundin

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