The Cash Balance Plan for Owner-Only Businesses
Just you, or you and your spouse? Defer over $300k of income a year.
Request My Plan ReviewAnswer the owner-only questionnaire. The next step is a review of your age, income, and plan fit.
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Plan results at a glance
* Figures are illustrative of plan designs we have built, are hypothetical in nature, and are not a guarantee of future results. Your own numbers depend on your age, income, and plan design. Please consult an independent tax or financial advisor.
Is an owner-only plan the right next step?
The questionnaire is the quickest way to review the fit. These three checks explain what the review is looking for.
Owner-only household
The business has no eligible employees beyond the owner and, where applicable, a spouse.
Reliable income
The contribution is a pension commitment, so the plan should be sized around income you can reasonably expect to continue.
A review before a decision
Your age, income, and plan design determine the illustration. The questionnaire helps surface those details before you commit.
What Is a Cash Balance Plan?
A cash balance plan is a defined benefit pension plan that reports your benefit as an account balance. Each year the plan credits your account twice: a pay credit, set as a percentage of your compensation or a flat dollar amount, and an interest credit at a rate written into the plan document. The plan holds one pooled trust, and an actuary certifies each year that it is funded to pay what it has promised.
Why the limits are so much higher
A 401(k) caps what you put in. A defined benefit plan fixes the benefit you are working toward — the contribution is whatever an actuary calculates is needed to get there. Age and income drive that math, so a fifty-something owner with strong profit funds far more per year, deductibly, than someone in their thirties.
Why owner-only is the simplest case
Most pension cost and complexity comes from covering staff: coverage testing, nondiscrimination, contributions for employees who may not stay. Just you — or you and your spouse — and none of that applies. Owner-only plans are also generally exempt from PBGC coverage and its premiums.
What you are committing to
Contributions are largely required once the plan exists — you are funding a promise, and underfunding carries excise tax. It needs an enrolled actuary, an annual valuation, and a Form 5500. Best for income that holds up year to year; a plan can be designed with a range and frozen if things change.
General information about how these plans work, not tax advice. Your own contribution depends on your age, income, and plan design, and should be confirmed by an actuary.
Request My Plan ReviewDid You Know You Can Own Life Insurance Inside Your Plan?
Your Cash Balance Plan can hold life insurance — a strategy that allows you to:
- Deductible funding. The plan pays the premium out of deductible contributions; you report only the annual economic-benefit cost of the pure insurance (Table 2001, historically PS-58) as income — a fraction of the premium.
- Income-tax-free protection. Your beneficiaries receive the pure insurance amount income-tax-free; the policy's cash value is taxed to them as a plan distribution, and proceeds count toward your estate.
- A larger deduction, within limits. Funding protection alongside your retirement benefit can support a larger contribution — the insurance just has to stay incidental: broadly, premiums under 50% of contributions for whole life, 25% for term or universal.
"A Smart Way to Protect & Save"
Leverage your plan to fund protection for your loved ones while reducing your current tax bill.
Holding life insurance in a qualified plan is governed by the IRS incidental-benefit rules (Rev. Rul. 2004-20), which cap how much protection a plan can carry. Whether it suits you depends on your age, income, and plan design — this is general information, not tax advice. Review it with your own tax advisor before funding a policy.
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Understand exactly how and where your pension contributions impact your tax returns — covering S-Corp, Sole Prop, and Partnership filers.
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