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Covering your staff is required, but it doesn’t have to be expensive. With the right design, 90% or more of total contributions can go to the owners.
Fair to your team. Efficient for you.
A free illustration of owner vs. staff contributions
Yes. A cash balance plan is a qualified plan, so eligible employees must be covered and the plan must pass IRS nondiscrimination testing. But the rules leave a lot of room for design.
Because contribution limits are age-based, an older owner can receive a much larger contribution than a younger employee while the plan still passes testing. Combined with eligibility rules, vesting, and a coordinated profit sharing plan, owners commonly receive 90% or more of total contributions.
From first call to first contribution, we handle the design, the math, and the compliance.
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We look at your income, age, staff census, and current plan to see what’s possible.
We layer your 401(k), profit sharing, and cash balance plan around your tax goals.
You get a clear illustration of your deduction, your savings, and your staff cost before you commit.
Plan documents, annual actuarial work, testing, and filings, handled every year.
A practice has two owners, both 55 and earning $360,000, and six employees with an average age of 32 and average pay of $50,000.
| Per person | Total | |
|---|---|---|
| Owners (401(k), profit sharing, cash balance) | About $344,100 | About $688,200 |
| Employees (combined employer contribution of about 7.5% of pay) | About $3,750 | About $22,500 |
| Share going to owners | About 97% |
Employees’ own 401(k) deferrals come out of their paychecks, so they aren’t a cost to the business.
Hypothetical example for illustration only. Actual contributions are set by the plan’s actuary and depend on age, compensation, employees, and plan design.
We run your actual census before you commit, so you see owner and staff contributions side by side. See it in action for physicians, dentists, and attorneys.
Michael, a successful business owner with no employees, wanted to maximize his retirement savings while minimizing taxes.
Through a custom-designed retirement plan stack, he and his wife were able to contribute over $575,000 across multiple plans in a single year.
This strategy not only helped secure their financial future but also generated over $222,000 in immediate tax savings, significantly increasing their cash flow and long-term wealth-building potential!
James runs a construction company with high employee turnover and wanted a way to protect cash flow while maximizing retirement contributions.
Through a custom 401(k) and profit-sharing plan design, we used strategic eligibility and vesting schedules to limit costs from short-term employees while allowing ownership to maximize contributions.
This strategy protected company assets, controlled expenses, and helped James build significant retirement wealth.
Eileen, a small business owner, needed a low-cost retirement plan that would meet state mandate requirements while helping her recruit and retain high-quality employees.
Eileen used a customized 401(k) solution focused on minimizing expenses, giving Eileen a competitive edge in hiring without pulling resources away from reinvesting in her growing business.
By using tax credits, her design allowed her to stay compliant, attract top talent, and keep her financial priorities aligned.
*These are hypothetical clients with hypothetical situations and plan designs.
Learn more: The Retirement Plan Stack | Cash Balance vs. Defined Benefit | Dentists | Attorneys | About Us
Yes. Eligible employees must be covered, and the plan must pass IRS testing. But the plan can require age 21 and a year of service before employees join, and use vesting so short-term staff forfeit benefits.
It depends on staff ages, pay, and turnover. When a cash balance plan is combined with profit sharing, staff commonly receive around 5% to 7.5% of pay in total.
Cash balance limits are age-based, so older, higher-paid owners can receive much larger contributions than younger staff while the plan still passes testing. Eligibility rules and new comparability profit sharing help further.
A defined benefit plan must benefit at least 40% of eligible employees or 50 employees, whichever is fewer, and at least two people if the business has two or more employees.
Generally, employees who work fewer than 1,000 hours a year can be excluded from a cash balance plan. Long-term part-time rules may still give them the right to make 401(k) deferrals.
Cash balance plans can require up to three years of service before employees are fully vested.
No. Salary deferrals come from the employee’s own pay. The business cost is the employer contributions, such as profit sharing, safe harbor, and cash balance credits.
Life, Inc. Retirement Services does not offer tax advice. Please always consult your tax professional about your eligibility for tax credits.
Life, Inc. Retirement Services is a Registered Investment Advisory Firm of the state of Ohio and licensed in Florida and Maryland. All emails and communication are meant to be informative and educational and should not be considered a sale of security until proper notification and disclosures are given.