Defined benefit or cash balance plan
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A cash balance plan is a modern pension that lets a business put away far more each year than a 401(k) allows, often over $100,000 for an owner in their 50s, and deduct it.
It can sit on top of a 401(k), so owners with high, steady profit can save aggressively while cutting this year's tax. The tradeoff is commitment: contributions are required each year, not optional.
How it works
A pension-style plan lets a business put away far more each year than a 401(k), often over $100,000 for an owner in their 50s, and deduct it. It can sit on top of a 401(k).
What makes it hold up
- A plan written and run by an actuary
- Required contributions made each year
- Coverage for eligible employees
Risks
Low if funded on time, but the contribution is required each year, not optional. With employees it can get expensive. Works best when profit is high and steady.
Questions to ask your CPA
- How much could I put in at my age and income?
- What would it cost to cover employees?
- Can it pair with our 401(k)?
Common questions
Who is it for?
Owners with high, steady profit who want to save more than a 401(k) allows, usually in their 40s, 50s or 60s. The older you are, the more you can put in.
Can I have one with a 401(k)?
Yes. Pairing them is common and lets you save the most.
What if I have employees?
Eligible employees have to be covered, which adds cost. An actuary can design the plan to keep that reasonable.
What happens in a bad year?
The yearly contribution is required. Plans can be amended or frozen if business changes, but they work best when profit is reliable, and the IRS expects them to be kept for several years.
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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.