Accelerate retirement savings. Substantially reduce current-year taxable income.

A Defined Benefit plan is a qualified employer-sponsored retirement plan that promises a specific retirement benefit (the "defined benefit") at retirement. Annual contributions are determined by actuarial calculations based on the target benefit, the participant's age, income, and years to retirement. Defined Benefit plans allow significantly larger annual contributions than 401(k) plans, particularly for older high-income participants. Contributions are tax-deductible to the business and grow tax-deferred until distribution.

A Cash Balance plan is a type of Defined Benefit plan that expresses each participant's benefit as a hypothetical account balance — making it look and feel more like a 401(k) while retaining the high contribution limits of a traditional pension. The "account" grows each year by a contribution credit and an interest credit, both defined by the plan. Cash Balance plans tend to be more predictable and flexible than traditional Defined Benefit plans, which is why they have become the more common choice for many small business owners.

A hybrid plan combines a Defined Benefit or Cash Balance plan with a Solo 401(k) (typically including a profit-sharing component). This stacking maximizes total annual deductible contributions, because each plan layer allows its own contribution within IRS limits. For most high-income owners, a hybrid structure produces the largest combined contribution capacity, often two to four times what a 401(k) alone allows.

It depends on your age, your income, the plan design, and the IRS limits in effect. As a rough range, a 55-year-old high-income owner with a well-designed hybrid Cash Balance + 401(k) plan may be able to contribute $200,000 to $350,000 or more per year. An older owner with a Defined Benefit plan may be able to contribute even more. The specific number for your situation is what the free proposal calculates.

If you have employees, the plan must satisfy IRS nondiscrimination testing, which generally requires some contribution on behalf of eligible employees. The plan can be designed to favor the owner mathematically when the owner's compensation is substantially higher than the staff's, but employee contributions cannot be avoided entirely if the testing requires them. For solo practitioners with no employees (or only a spouse on payroll), this is not an issue. We model employee cost as part of every proposal so you see the full picture before deciding.

From a signed engagement to a funded plan, typical timelines run six to ten weeks. The proposal phase itself is faster — usually one to two weeks from when we have your data. Plan design with the actuary takes another two to four weeks. Recordkeeping setup, document review, and initial funding take the remainder. Plans must be established by the business's tax filing deadline (including extensions) to deduct contributions for that tax year.

Annual costs typically include a third-party actuarial and administration fee, a recordkeeper fee, and our investment management fee on plan assets. Combined annual costs are generally a small fraction of the annual contribution capacity, and are tax-deductible to the business as plan expenses. The proposal includes a specific cost estimate so you can evaluate the full economics before deciding.

Yes, but with planning. Defined Benefit and Cash Balance plans are generally expected to remain in place for at least three to five years. Terminating earlier than that can create issues with the IRS. Plans can be amended to reduce future contributions if your business income changes, and they can be terminated when their useful life is over — typically when you are ready to retire or sell the business. We design plans with realistic time horizons and discuss exit planning as part of the engagement.

Index Gurus is a fee-only fiduciary. We accept no commissions, no referral fees, and no third-party compensation. Our fees for retirement plan engagements include a plan-setup fee and an ongoing investment management fee on plan assets, fully disclosed in writing during the proposal phase and in Form ADV Part 2A. Third-party actuarial, recordkeeping, and custody fees are separate and paid directly to those providers.

Yes. Plan design has direct implications for the business's tax return, the owner's personal return, and quarterly estimated tax planning. We routinely coordinate with the client's CPA throughout the proposal, setup, and ongoing management phases. If you do not currently have a CPA familiar with this type of planning, we can recommend professionals we have worked with successfully.