Cash Balance Plans for Attorneys
Law firms bring two design problems most businesses don't: partners decades apart in age who each want their own contribution level, and a liability profile that makes ERISA's creditor shield valuable. This guide covers the partnership K-1 mechanics, per-partner tiers, asset protection, and sizing a plan on contingency-fee income.
Reviewed by Alexander Tecle, MBA, MS Taxation
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Reviewed
Your business shapes the plan
Owner goals
Start with compensation and the retirement benefit you want to build.
Your team
Employee ages and compensation affect the design.
Funding capacity
Review the ongoing commitment alongside your cash flow.
Law firm economics fit the cash balance mold (high per-partner income, support staff younger than the partners, stable billing in most practice areas), but the profession adds its own design texture. Firms are usually partnerships or PLLCs, so the deduction flows through K-1s rather than a corporate return. Partners span decades of age and disagree about savings. Every attorney has thought about asset protection at least once.
This guide covers the law-firm version of the design: the partnership mechanics, the per-partner tiers that keep a multi-generation partnership in one plan, the creditor-protection angle, and the caveat for contingency-fee practices.
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Calculators
| Limit | 2026 | 2025 |
|---|---|---|
| Defined benefit annual benefit limit — IRC 415(b) | $290,000 | $280,000 |
| Compensation that can be counted — IRC 401(a)(17) | $360,000 | $350,000 |
| Total additions to a defined contribution plan — IRC 415(c)Employer + employee; excludes age-based catch-up. | $72,000 | $70,000 |
| 401(k) / 403(b) employee contribution | $24,500 | $23,500 |
| Catch-up contribution (age 50+) | $8,000 | $7,500 |
Official IRS figures for 2026. Source: IRS Notice 2025-67 (IR-2025-111).
Partnership mechanics: how the deduction reaches each partner
In a partnership or PLLC, the firm sponsors the plan, but contributions made for partners pass through to each partner individually — reported on their Schedule K-1 (Box 13, code R) and deducted on their own returns. Staff contributions are a firm expense. Each partner's pension cost therefore lands on that partner, which is what makes per-partner design tiers politically workable. Solo attorneys typically run the simpler S-Corp version instead.
Firm sponsors plan
The partnership or PLLC adopts and funds the qualified retirement plan.
Partner amount passes through
Each partner contribution is reported on that partner's Schedule K-1.
Partner takes deduction
The partner claims the retirement contribution on the partner's own return.
Staff stays with firm
Contributions for common-law employees remain a business expense of the firm.
Per-partner tiers: one plan, many appetites
The design problem that kills naive law-firm plans is partner heterogeneity: the 63-year-old managing partner wants the maximum, the 38-year-old rising partner wants cash flow. Tiered cash balance designs solve it: pay-credit levels can differ by partner or partner class within nondiscrimination testing, so each partner funds at a level matched to their age and goals, and the firm isn't held to the appetite of its most reluctant member. Since each partner's cost is their own K-1 item, the tiers price themselves fairly.
The creditor-protection angle
Assets in an ERISA-covered plan sit behind the federal anti-alienation shield, among the strongest creditor protection American law offers and materially stronger than IRA protection in many states. One boundary matters here: ERISA's shield attaches to plans covering at least one non-owner employee, so an owner-only solo plan leans instead on federal bankruptcy protection and state law, which vary. For a firm with staff, the same dollars reduce taxes on the way in and sit protected while they grow. Our ERISA guide covers the shield's scope and its exceptions.
Staff, associates, and the contingency caveat
Support staff (paralegals, assistants, admins) are typically younger than partners and test the way clinical staff do in medical practices: covered at tested levels while partner funding runs high. Associates are the design nuance: well-paid attorneys in their 30s cost more to cover than admin staff, so associate-heavy firms model carefully. Steady-billing practices (transactional, defense, estate) can carry a funding commitment comfortably. Contingency-fee practices with lumpy settlements are the caveat: they should size the plan on the income they can count on in a slow year, or build the 401(k) layer first and add the pension after several proven years.
Frequently asked questions
Can partners contribute different amounts?
Yes — tiered designs assign different pay-credit levels by partner or class within nondiscrimination testing, and because each partner's contribution passes through their own K-1, each partner effectively funds their own tier.
How does the deduction work in a partnership?
Partner contributions pass through on Schedule K-1 (Box 13, code R) and are deducted on each partner's personal return; staff contributions are deducted by the firm. Solo attorneys operating as S-Corps deduct on Form 1120-S instead.
Are pension assets protected from malpractice claims?
For plans covering at least one non-owner employee, ERISA's anti-alienation rule provides among the strongest general-purpose creditor shields available — subject to narrow exceptions (notably QDROs and certain federal claims). Owner-only plans fall outside ERISA's shield and rely on bankruptcy and state-law protections instead. See our ERISA asset-protection guide for the boundaries.
Our firm runs on contingency fees — can we still do this?
Often, yes, if the plan is sized conservatively: base the funding level on the income you can count on in a slow year rather than on a headline settlement year, and keep the flexible 401(k)/profit-sharing layer doing more of the work until the floor proves itself.
Sources
- IRS — Partner's instructions for Schedule K-1 (Form 1065) (opens in a new tab)
- ERISA §206(d) — anti-alienation of pension benefits (29 U.S.C. §1056) (opens in a new tab)
- IRC §401 — qualified plan requirements (401(a)(4), 401(a)(17), 401(k)) (opens in a new tab)
- 26 CFR 1.401(a)(4)-8 — cross-testing on projected benefits (opens in a new tab)
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See what your practice could fund
Model a contribution for an owner in your field from age and compensation alone. The result is an illustration with its assumptions shown, not a quote.
This guide is educational and is not individualized tax, legal, or investment advice. Contribution limits and tax rules change annually and depend on your specific situation; figures are illustrative. Consult a qualified professional before acting.