Cash balance plans for business owners
When your 401(k) is maxed and the business is still profitable, a cash balance plan can move six figures a year into your own retirement and off your tax bill. We build it with a TPA and an enrolled actuary so the funding and compliance hold up.
A cash balance plan solves one specific problem.
You are profitable, you have already maxed the 401(k), and you still have income you would rather keep than hand to the IRS. That is the moment a cash balance plan earns its keep. It lets you set aside a large, deductible amount for your own retirement, and the amount can climb with your age, so owners in their 40s, 50s, and 60s often shelter the most.
It is not a fit for everyone. It works best when profits are steady enough to fund the plan for several years, and it takes a TPA and an enrolled actuary to run. We will tell you plainly whether the numbers make sense for you before you commit to anything.
Everyone has a story. Ours is making sure the financial side of yours is never the part that holds you back.
Austin Wolfe & Joe Anderson · ClearMind Capital Workplace Retirement
A cash balance plan is a type of pension, a defined benefit plan, that works next to your 401(k). It gives you a much larger contribution ceiling than a 401(k) and profit sharing can on their own, which is why profitable owners use it to shelter serious money each year. It also comes with real moving parts: an enrolled actuary has to certify the funding every year, a third-party administrator (TPA) runs the plan documents and testing, and the money has to be invested carefully to track the plan's interest crediting rate. We handle the advisory side and coordinate the TPA and actuary, so you get the tax benefit without the plan becoming a second job. If you are still deciding on a base plan, start with should my Ohio business start a 401(k), and see how we support employers on workplace retirement. Want a quick gut check first? Our cash balance plan fit check walks through the factors that matter in a couple of minutes. We are based in Columbus and work with owners across Ohio and nationwide.
How much more you can put away
A 401(k) with profit sharing caps out at a set dollar amount each year. A cash balance plan is funded to pay a future benefit instead, so the yearly contribution is driven by your age and income, and for many owners that means six figures a year on top of the 401(k). The older you are and the higher your income, the more the plan generally lets you fund, which is why it is a popular way to catch up in the years before you sell or step back.
The tax deduction
Contributions the business makes to the plan are generally deductible, and the money grows tax deferred until you take it out, usually rolling to an IRA at retirement. For a profitable pass-through owner, that deduction can meaningfully lower this year's taxable income. The exact number depends on your plan design, your age, and your employees, so we model it with the actuary before you decide.
The TPA and the enrolled actuary
A cash balance plan is a defined benefit plan, so the IRS requires an enrolled actuary to certify each year that it is funded correctly, and a TPA to handle the plan document, government filings, and nondiscrimination testing. We work with a TPA and an enrolled actuary we trust, coordinate the yearly cycle, and keep the plan compliant. You get one point of contact instead of a stack of vendors.
What your team gets, and the commitment
To pass IRS testing, a cash balance plan almost always pairs with a 401(k) that gives employees a meaningful contribution, often in the range of 5% to 7.5% of pay. You should also plan to fund the cash balance plan for at least a few years, since it is meant to be ongoing, though it can be amended or frozen if the business changes. Because the plan targets a set interest crediting rate, the assets are invested conservatively and managed to avoid large over or underfunding.
What this can look like
Illustrative examples, not actual clients, and not a promise of results.
The owner catching up before retirement
A 58-year-old owner is maxing the 401(k) but wants to put away far more in the last stretch of a career. A cash balance plan lets them shelter a large, age-based amount each year and roll it to an IRA at retirement.
The professional practice
A medical or legal practice with a few employees has strong, steady profits and owners who want a bigger deduction. We design a paired 401(k) and cash balance plan that rewards the owners and gives staff a fair contribution.
Adding it to an existing 401(k)
A company already runs a solid 401(k) with profit sharing and has room to save more. We layer a cash balance plan on top, coordinate the testing, and lift the owner's yearly savings well past the 401(k) ceiling.
Why fee-only and fiduciary matters
Fee-only means we are paid by you, never through commissions or product sales, so the advice stays about you. Fiduciary means we are legally bound to act in your best interest, at all times. We work with clients in Columbus, across Ohio, and nationwide, and everything can be done virtually.
Common questions
What is a cash balance plan?
It is a type of defined benefit pension plan that shows each participant a growing account balance. The employer funds it, an enrolled actuary certifies the funding each year, and owners use it to save far more than a 401(k) allows while taking a deduction. It usually runs alongside a 401(k).
How much can I contribute to a cash balance plan?
Far more than a 401(k). The limit is based on funding a future retirement benefit, so it rises with your age and income, and for many owners the contribution runs well into six figures a year on top of the 401(k). We model your specific number with the actuary before you commit.
Do I need a 401(k) too?
Almost always, yes. A cash balance plan is typically paired with a 401(k) and profit sharing so the combined plan passes IRS nondiscrimination testing. The pairing is also what lets owners maximize their own contributions while giving employees a fair benefit.
What does a cash balance plan cost, and who runs it?
It costs more than a 401(k) alone because it needs a TPA to administer it and an enrolled actuary to certify the funding each year. For a profitable owner, the tax savings usually dwarf those costs. We coordinate the TPA and actuary and act as your point of contact.
Do I have to contribute for my employees?
Yes. To pass testing, the paired 401(k) generally provides employees a contribution, often around 5% to 7.5% of pay. We design the plan so it rewards the owners and treats the team fairly, and we show you the employee cost up front.
Can I stop or change the plan if profits drop?
A cash balance plan is meant to be funded consistently, ideally for at least a few years, but it is not permanent. It can be amended or frozen if the business changes. We build it with a funding range that gives you flexibility from year to year.
Who is a cash balance plan right for?
Owners with strong, steady profits who have already maxed the 401(k) and want to shelter more, especially those in their 40s, 50s, or 60s trying to save aggressively before retirement. It fits professional practices and profitable small businesses well. If it is not a fit for you, we will say so.
Let's see how much a cash balance plan could shelter.
This page is general information for people exploring our services and is not investment, tax, or legal advice or a recommendation for any specific person or situation. The examples are illustrative, are not based on actual clients, and are not a promise of results. Strategies such as S-corp elections, backdoor and mega-backdoor Roth contributions, equity-comp decisions, and deferred compensation depend on your specific situation and current law, so confirm the details with a qualified professional before acting. ClearMind Capital LLC is a registered investment adviser; registration does not imply a certain level of skill or training. Past performance is not indicative of future results.
