401(k) Combo Plan Optimization
Maximize owner contributions while controlling staff costs by layering a Cash Balance Plan on top of an optimized 401(k) Profit Sharing Plan.
The Power of the Combo Plan
A 401(k) combo plan design for business owners is the pinnacle of retirement tax strategy. By pairing a traditional 401(k) Profit Sharing Plan with a Defined Benefit Cash Balance Plan, business owners can shatter standard contribution ceilings.
This synergy allows high-income earners to maximize their own savings while keeping staff contribution costs highly efficient through advanced cross-testing and actuarial engineering.
Who Benefits Most?
- Owners Seeking Maximum Deferrals: If you are already maxing out your 401(k) and need more tax relief.
- Businesses with Employees: We use cross-testing to ensure owners receive the lion's share of contributions (often 85-95%+) while providing staff with a reasonable, compliant benefit (typically 5-7.5%).
- Partnerships with Varying Goals: Combo plans can be designed with different contribution tiers for different partners.
A Real-World Example
Consider a 55-year-old business owner looking to maximize tax-deductible contributions for the year.
*Example uses round numbers for illustrative purposes. Actual limits vary by age and IRS annual adjustments.
Why Kongruent?
- 15+ Years Experience: Deep expertise in cross-testing and plan integration.
- Enrolled Actuary: Direct access to the licensed actuary designing your plan.
- 100% Compliance Rate: Flawless execution and IRS adherence.
Combo Plan FAQs
What is the primary advantage of a 401(k) + Cash Balance combo?
The combo strategy allows you to maximize your own retirement contributions while using actuarial cross-testing to keep staff contribution costs highly efficient, often resulting in 85-95%+ of the total plan contributions going to the owners.
How much more can I contribute with a combo plan?
By layering a Cash Balance plan on top of a 401(k), total owner contributions can often exceed $250,000 to $300,000+ annually, depending on age and income levels.
Is a combo plan more expensive to administer?
While there is an additional cost for the actuarial valuation of the Cash Balance portion, the massive tax savings (often six figures) typically far outweigh the administrative fees.
Can I add a Cash Balance plan to my existing 401(k)?
Yes. We can often layer a Cash Balance plan onto your existing 401(k) profit-sharing plan, provided the plan documents are updated and the actuarial testing confirms the combo is compliant.
Stop Leaving Tax Deductions on the Table
Let our actuarial team engineer a 401(k) combo plan that works for your specific business structure.