TL;DR
Get smart everyday buys delivered free with Prime
- Fast, free delivery on millions of items
- Prime Video, Amazon Music and more included
- Member-only deals all year
A Kiplinger report describes how eligible business owners may pair a 401(k) with a cash balance defined-benefit plan to make larger tax-deferred contributions. Its contribution examples are estimates, not universal limits; actual amounts depend on age, compensation, plan design and actuarial calculations. The report says a cash balance plan generally must be established by Dec. 31 to claim a deduction for that tax year.
Kiplinger has published a report describing how business owners may combine a 401(k) with a cash balance defined-benefit plan to increase retirement contributions and potentially reduce current taxable income. The report says the plans can operate in the same tax year, but stresses that cash balance contributions depend on an actuary’s calculations and that a plan generally must be established by Dec. 31 to seek a deduction for that tax year.
The report identifies the 401(k) as the first layer of retirement saving. It cites 2026 limits of $24,500 for employee contributions and a combined employee-and-employer limit of $72,000. It also says people 50 or older may make an $8,000 catch-up contribution, while eligible participants ages 60 to 63 may have an $11,250 super catch-up if their plan allows it. These are figures reported for 2026, not a guarantee of what an individual can contribute: plan terms and eligibility matter.
A cash balance plan is a type of defined-benefit plan, not an additional 401(k) account. The report says contributions are calculated actuarially, with allowable amounts affected by factors such as age, compensation and the plan’s promised retirement benefit. It gives illustrative annual contribution estimates of about $175,000 or more at age 50 and nearly $290,000 at age 60, but those figures are not universal contribution limits or individualized projections.
Kiplinger also presents estimated combined savings by business revenue: roughly $172,000 to $222,000 for businesses with $500,000 in gross revenue; $222,000 to $272,000 at $1 million; and $247,000 to $362,000 or more at $2 million or above. The report labels the cash balance figures estimates and advises readers to consult a licensed enrolled actuary and qualified tax adviser before adopting a plan. Gross revenue alone does not establish eligibility or determine a business owner’s contribution.
How the Two Plans Can Work Together
The potential significance is the difference between a 401(k)’s familiar contribution framework and a defined-benefit plan whose permitted funding can be much higher for some older, well-compensated owners. If a business has steady profits and its owner qualifies, using both plans may allow more income to be directed to retirement accounts on a tax-deferred basis. That could affect the owner’s current-year tax position, but the report’s examples do not establish that every business owner will save a particular amount in taxes.
The arrangement also brings costs and obligations that are not captured by a headline contribution estimate. A cash balance plan needs actuarial work and ongoing administration, and its design must account for eligible employees as well as the owner. A larger tax-deferred balance can also mean taxes are due later when money is distributed. The report raises estate planning as a related concern, noting that many non-spouse beneficiaries generally must distribute inherited retirement accounts within 10 years under current SECURE Act rules. Individual exceptions and tax outcomes can vary, so that point requires advice specific to the account and beneficiary.
Products Worth Considering
FLEXISPOT 60 × 24-Inch Electric Standing Desk, White
Apple Mac mini (2026) with M5 Pro chip and AppleCare+ (3‑year)
Dell XPS 13 9350 Copilot+ Laptop, 13.4-inch 120Hz Display, Intel Core Ultra 7 256V, 16GB RAM, 512GB SSD, Ubuntu Linux 24.04 LTS
As an affiliate, we earn on qualifying purchases.
The Year-End Adoption Deadline
The report distinguishes the timing rules for a 401(k) from those for a cash balance plan. It says a 401(k) may in some cases be established and funded by the tax-filing deadline, including extensions, while a cash balance plan generally must be established during the calendar year for which the deduction is sought. On that account, a business owner considering a cash balance plan for a particular tax year should not assume that filing an extension creates extra time to adopt it.
Kiplinger frames its guidance for profitable business owners who already contribute to a 401(k), especially those with consistent earnings. It describes a three-part retirement “stack”: a 401(k), a cash balance plan, and then taxable investing and tax or estate planning. The report’s central point is that the second layer may be worth evaluating, not that it is suitable for every company. It offers no independently verified study showing how many owners qualify or how much the approach saves across businesses.
“A cash balance plan and a 401(k) can run simultaneously.”
— Kiplinger report
Eligibility and Contribution Amounts Vary
The report does not provide enough information to calculate whether a specific owner qualifies, what the plan would cost to administer, or what contribution the actuary would approve. Its revenue-based examples are broad estimates and do not account for each business’s workforce, compensation, cash flow, existing retirement benefits or plan design. Nor does it quantify the tax savings for the owners cited in its examples.
The report’s deadline guidance concerns establishing a plan for a given tax year, but readers should confirm the applicable requirements and timing with qualified advisers. Tax rules and contribution limits can change, and individual circumstances may affect both deductions and distributions. The article’s discussion of inherited accounts likewise does not resolve how a particular beneficiary or estate would be taxed.
What Owners Should Verify Before Year-End
Business owners considering the strategy should first ask a qualified adviser and enrolled actuary to assess eligibility and model contributions using the company’s actual compensation, workforce and financial outlook. They should also obtain estimates of setup and ongoing administration costs and consider whether profits are consistent enough to support the plan’s funding obligations.
Anyone seeking a deduction for the current tax year should confirm the plan-adoption deadline and required steps promptly rather than rely on the 401(k) filing-extension timetable. The next practical milestone is an individualized plan and tax review; the report provides no indication that a particular owner has adopted a plan or that a specific tax outcome will follow.
Key Questions
Can a business owner have both a 401(k) and a cash balance plan?
Yes, they may be operated in the same tax year, according to the Kiplinger report. Whether the combination fits a particular business depends on plan rules, workforce considerations and professional review.
How much can a cash balance plan accept each year?
There is no single annual amount in the report that applies to everyone. Contributions are actuarially determined and vary with age, compensation, benefit targets and plan design. The report’s examples are estimates, not promises or individual limits.
Why does Dec. 31 matter?
The report says a cash balance plan generally must be established by Dec. 31 of the tax year for which the owner seeks a deduction. It says a tax-filing extension does not provide the same additional adoption time described for some 401(k) arrangements. Confirm the applicable deadline with a qualified adviser.
Are the report’s revenue-based contribution estimates guaranteed?
No. They are illustrative estimates and do not determine an individual’s eligibility or allowable contribution. A licensed enrolled actuary and tax adviser would need to review the business’s specific circumstances.
Source: kiplinger.com
