Defined Benefit | Cash Balance | 401(k) Profit Sharing

Defined Benefit Plans

Defined Benefit Plans provide higher maximum tax deductible limits than 401(k) and Profit Sharing Plans.
At plan inception, the business owner decides the level of benefits to be earned for current and future years. The benefits accumulate in a predictable manner.
An actuary calculates the minimum required contribution and the maximum tax deductible contribution each year by comparing the accumulated value of benefits versus the total plan assets. The plan sponsor must contribute every year within this range.

Smaller annual contribution requirements and more year-to-year contribution flexibility.
The annual contribution amount is calculated based on the plan design and employee demographics. Past investment returns do not impact current contribution requirements.
Each employee can contribute up to $18,000 per year in 401(k) contributions plus an additional $6,000 in catch-up contributions starting in the year the employee turns age 50. Plus, the business owner can make employer contributions of up to $36,000 or up to 25% of compensation (if less).