Cash Balance & Defined Benefit Plans
Mele Consulting is an independent actuarial and plan administration firm. We design, build and administer defined benefit and cash balance plans for small businesses and independent professionals.
Independent firm · Working with owners, advisors & TPAs
Who We Help
That is the right place to start. These are the conversations we have most often — with medical practices, professional firms, and independent owners alike.
Medical & Dental Practices
“My 401(k) is maxed out. How do I save more — and lower this year’s tax bill?”
A cash balance plan layered on your 401(k) can allow substantially larger deductible contributions, scaled to your age and income. We model the numbers for your practice before you commit to anything.
Small Business Owners
“I want to reward the people who built this business with me — fairly.”
Plan design is a balancing act between owner benefits and staff costs. We show you that trade-off in plain dollars, then design a plan you can sustain in lean years as well as good ones.
Independent Professionals
“My income changes year to year. Is there a plan that can flex with it?”
Often, yes. Cash balance and defined benefit plans can be structured with funding ranges rather than a single fixed number, and we revisit the design as your practice income changes.
Advisors & TPAs
“My client needs an actuary behind their plan — not another sales pitch.”
We partner with financial advisors and other TPAs who need actuarial certification, valuations, and Schedule SB work done carefully and on time, under your client relationship.
Services
One firm for the full life of the plan — design, annual valuations, government filings, and the day-to-day administration in between.
A cash balance plan is a defined benefit plan that reads like a savings account — each participant has a stated balance that grows with pay credits and interest credits. For owners in their peak earning years, it can allow far larger tax-deductible contributions than a 401(k) alone. We also offer administration services for Traditional Defined Benefit plans.
A 401(k) plan is a defined contribution plan that allows for both Employee and Employer contributions. Many of our clients run a combination: a 401(k) with profit sharing for the whole team, and a cash balance plan on top for the owners. We help administer the full arrangement as one coordinated plan.
“The right answer is rarely one plan. It is the combination — designed once, then administered carefully, year after year.”
How It Works
No obligation at step one. We would rather show you the numbers and let you decide.
We learn your business — income, staff, ages, goals — and model two or three plan designs side by side, with owner benefits and staff costs in plain dollars.
You choose the design that fits. We set up the plan documents, coordinate with your CPA and advisor, and calendar every deadline so nothing is left to year-end scrambling.
Each year we complete the valuation, prepare the filings, and give you a short executive summary: what to contribute, what is deductible, and where the plan stands.
Resources
Retirement plan rules change every year. Our resource library explains them the way we explain them across the desk — starting with the figures owners ask about most.
Updated for 2026
Elective deferral limits, catch-ups, §415 maximums, the compensation cap, and the Social Security wage base — side by side for both years, from IRS Notices 2025-67 and 2024-80, with a printable PDF.
View the current limits →Tax Credits · §45E
Starting your first plan? Two federal credits can offset the cost — up to $5,000 a year toward start-up costs, and up to $1,000 per employee a year for employer contributions, on a five-year schedule.
Read the full breakdown →Explainer
What a cash balance plan is, how the “hypothetical account” actually works, and why owners in their 50s often benefit most.
Full article in the next draft
Planning
SECURE 2.0 changed the deadlines. In many cases a plan can still be adopted after year-end — here is the timeline that matters.
Full article in the next draft
Contribution Calculator
No personal or contact information needed, just provide your age, income and the number of years you have been in business.
The calculator will provide contribution options based on current IRS limits. You can also generate a summary or a full proposal report to provide to your CPA or Financial Advisor.
| Item | Amount |
|---|---|
| Compensation limit | $360,000 |
| 401(k) elective deferral limit | $24,500 |
| Deferral with catch-up, age 50+ (total) | $32,500 |
| Deferral with catch-up, ages 60–63 (total) | $35,750 |
| Profit sharing contribution | $47,500 |
Run the calculator with your own ages, compensation, and service to generate a summary or a full proposal report based on these limits.
Get Your Own Report →Questions We Hear
Very likely, yes. The 401(k) elective deferral limit for 2026 is $24,500 (plus catch-ups). A cash balance plan has no fixed dollar cap of that kind — the allowable contribution is actuarially determined, and for older, highly compensated owners it can be several times the 401(k) amount. Your actual figure depends on your age, income, and plan design, which is exactly what our design study works out.
Generally, yes: tax-qualified plans must cover staff on a nondiscriminatory basis, and there are minimum contribution requirements for employees when owners benefit. That staff cost is part of every design we present — you will see it in dollars next to your own benefit before you decide, never after.
Defined benefit and cash balance plans do carry required minimum contributions, so they suit businesses with reasonably stable profits. Within the rules there is real flexibility — funding ranges, credit balances from good years, and plan amendments for changed circumstances. We design conservatively from the start for exactly this reason.
Yes. A large part of our work is actuarial-only: valuations, certifications, and Schedule SB preparation for plans administered by another TPA or advised by your existing financial advisor. Your relationships stay intact — we supply the actuarial work behind them.
About Mele Consulting
Mele Consulting, Inc. is an independent actuarial consulting and third-party administration firm based in Bountiful, Utah, on the Wasatch Front. We provide consulting and administration for all types of employee benefit plans, specializing in defined benefit and cash balance plans.
Our clients are the owners of small businesses and professional practices — many of them medical and dental practices, alongside consultants, firms, and independent professionals of every kind. They share one situation: a successful business, a high tax bill, and a retirement gap a 401(k) alone will not close.
Because we are small and independent, the people who design your plan are the people who value it each year and answer your questions themselves.
A first conversation costs nothing and commits you to nothing. If a cash balance or defined benefit plan is not right for you, we will say so — and tell you what is.
Resources · IRC Section 45E
Starting a Retirement Plan? Two Tax Credits Can Offset the Cost.
If your business is starting its first retirement plan, federal law offers two separate credits — one for the cost of setting the plan up, and one for contributions you make for your employees. Many small employers qualify for both.
Both credits use the same definition of an eligible small employer. You may qualify if all of the following are true:
Businesses under common control are combined for the employee headcount. A credit reduces tax owed dollar for dollar — unlike a deduction, which only reduces taxable income.
Credit 1 — Start-up Costs
Up to $5,000 per year for 3 years toward set-up and administration costs.
Credit 2 — Employer Contributions
Up to $1,000 per employee per year counted, paid back on a declining schedule over 5 years — up to $3,500 per employee in total.
This credit covers the ordinary and necessary costs of establishing or administering a new plan and educating employees about it. It applies to qualified plans — including defined benefit and cash balance plans — as well as SEP and SIMPLE plans. Employer contributions are not start-up costs; they are covered by Credit 2.
| 1–50 employees | 100% of qualified costs |
|---|---|
| 51–100 employees | 50% of qualified costs |
Annual cap: the greater of $500, or the lesser of $250 multiplied by the number of non-highly compensated employees eligible to participate, or $5,000.
The credit lasts 3 years — the year the plan is established (or, by election, the year before it) plus the next two years. At the maximum cap every year, that is $15,000 in total.
Added by the SECURE 2.0 Act, this second credit pays back a percentage of the contributions you make as the employer — employee salary deferrals do not count. It applies only to a new defined contribution plan, such as a 401(k) or profit sharing plan, a 403(a) annuity plan, a SEP, or a SIMPLE plan. It does not apply to defined benefit plans, including cash balance plans — a defined contribution plan adopted alongside one can still earn it.
Only the first $1,000 of employer contributions per employee, per year counts. Contributions count only for employees with FICA wages of $100,000 or less for the year. That threshold is adjusted for inflation. Employers with 51–100 employees: the credit is reduced by 2% for each employee over 50.
| Year 1 | 100% |
|---|---|
| Year 2 | 100% |
| Year 3 | 75% |
| Year 4 | 50% |
| Year 5 | 25% |
| After | 0% |
Over the five years, the maximum is $3,500 per employee ($1,000 × 350%). Also available: a separate credit of $500 per year for 3 years if the plan includes an automatic enrollment feature.
A business with 15 eligible non-highly compensated employees starts a 401(k) plan. Start-up credit: the annual cap is the lesser of $250 × 15 = $3,750 or $5,000 — so up to $3,750 per year for 3 years, at the 100% rate, if qualified costs are at least that much. Contribution credit: 10 of the employees earn $100,000 or less and each receives a $1,200 employer contribution. Only $1,000 per employee counts, giving $10,000 in each of years 1 and 2, $7,500 in year 3, $5,000 in year 4, and $2,500 in year 5 — $35,000 over five years.
File IRS Form 8881 with your business’s federal tax return. The total flows into the general business credit on Form 3800. The credits are nonrefundable — they offset tax owed, but do not generate a refund on their own. Unused credit carries back 1 year and forward 20 years. There is no double benefit: your deduction for the same set-up costs and contributions is reduced by the amount of credit claimed. Partnerships and S corporations claim the credit at the business level and pass it through to the owners on Schedule K-1.
You are likely eligible if you can check all of these:
General information about Internal Revenue Code Section 45E, as amended by SECURE 2.0. Not tax advice. Amounts depend on your employee count, compensation, plan type, and costs — consult your tax advisor before establishing a plan or claiming a credit.
Contribution Calculator
See the contribution options for a 401(k), a cash balance plan, and the two combined — based on current IRS limits.
No personal or contact information needed, just provide your age, income and the number of years you have been in business. Enter your own figures and choose Calculate — your results are computed from what you enter, using current IRS limits.
Your Results
| 401(k) Only | Cash Balance Only | CB + 401(k) Plan | |
|---|---|---|---|
| Owner | |||
| Spouse | |||
| Total |
At a 38% tax rate, applied to the total contributions above.
| 401(k) Only | Cash Balance Only | CB + 401(k) Plan | |
|---|---|---|---|
| Total tax savings at 38% |
These are illustrations based on the figures you entered and current IRS limits, not a recommendation. Your figures depend on your business, staff, and plan design.
Take these options further with a full proposal report, or start with the shorter executive summary — both built from the same inputs.
Run the Live Calculator →Full Proposal
The complete report for these inputs — contributions, tax savings, plan provisions, and a ten-year funding schedule — to share with your CPA or financial advisor.
View Full Proposal Report →Summary
A shorter summary of the same options — the contribution figures and tax savings on a few pages, for a first look before the full proposal.
View Executive Summary →Illustration only. Contributions are actuarially determined and depend on age, compensation, years of service, employees, and plan design. Tax savings assume a 38% rate and depend on your own tax situation — consult your tax advisor.
Full Proposal
Cash Balance Plan plus 401(k) Profit Sharing Plan
This report is built from the figures you enter on the calculator page. Enter your age, income, and years of service there and choose Calculate — then open the Full Proposal again and it will be filled in with your numbers.
Go to the Calculator →2026 Plan Year
| Compensation | |
|---|---|
| Age | |
| Years in Business |
| Owner | Spouse | |
|---|---|---|
| Compensation | ||
| Age | ||
| Years in Business |
Maximum retirement plan savings over the next 10 years
| Contribution | Based on Maximum Benefit |
|---|---|
| Crediting Rate | 5% |
| Plan Start Year | 2026 |
Plans must be adopted by the tax filing deadline with extensions, but not later than 9/15/2027.
Contribution amounts shown are maximum deductible, plan can be designed for lower amounts.
Plans generally must be maintained a minimum of 3-5 years.
Cash Balance Plan contributions are generally required, but can be minimized if necessary.
401(k) Employee Deferrals should be done by last payroll date.
Employer contributions to both plans due by the earlier of tax filing or 8 1/2 months after plan year end.
These projections show the maximum funding amounts that can be accumulated by the participant over the next 10 years, assuming no changes to the income amount provided.
| Owner | Spouse | Total | |
|---|---|---|---|
| Level annual contribution amount to reach max benefit in 10 years |
A retirement plan is considered a tax qualified retirement plan if it meets the requirements for such a plan outlined in the IRS code.
Contributions to a tax qualified retirement plan are generally fully deductible for income tax purposes as a business expense.
A Defined Benefit Plan is a type of tax qualified retirement plan that is characterized by the nature of the retirement benefit that it provides. A DB plan provides a guaranteed monthly benefit as defined by the plan benefit formula and payable as an annuity for the life of the plan participant, or the plan participant and the plan participants spouse.
Although a DB Plan is based on providing a guaranteed annuity benefit, the annuity form of benefit is not required for distribution of benefits.
In practice, most DB Plans for business owners and independent professionals will payout benefits in the form of a tax-deferred lump sum roll-over to an IRA.
A DB plan is subject to the minimum funding requirements outlined in the tax code. The funding for all DB plans must be certified by an Enrolled Actuary annually.
The Plan Actuary will calculate the Minimum Required and Maximum Deductible contribution for the plan each year.
A Cash Balance Plan is a subcategory of Defined Benefit Plans, so it must follow all of the tax laws and regulations as all other DB plans.
A CB plan still provides a guaranteed monthly benefit amount payable as an annuity, but the monthly benefit is based on a Hypothetical Account Balance rather than a benefit formula.
The Hypothetical Account Balance is made up of Pay Credits and Interest Credits.
The Pay Credit can be a flat dollar amount or a percentage of pay. The Pay Credit is generally credited to the participants account balances as of the end of the plan year.
The Interest Credit can be defined as a fixed interest rate, or it can be tied to an indexed rate. Most CB plans use a fixed rate of around 5%. Interest credits are generally applied annually at the end of the plan year.
As with a DB plan, the CB plan can payout participant benefits as a lump sum. The lump sum at any time is equal to the Hypothetical Account Balance, which is the sum of the Pay Credits and Interest Credits.
Minimum and Maximum Contribution are determined annually by the Plan Actuary.
A 401(k) Plan is characterized by the nature of contributions made to the plan. Contributions to a 401(k) Plan can consist of Employee Salary Deferrals and Employer Matching or Profit Sharing.
Contribution limits for 401(k) Profit Sharing plans are defined in the IRS Code and indexed annually, please refer to the current limits on our home page.
Benefits payable from a 401(k) Profit Sharing Plan equal the account balance from Employee Deferrals & Employer Matching and/or Profit Sharing contributions.
A Cash Balance Plan has a required annual contribution determined by the Plan Actuary. The Business adopting the plan (the Plan Sponsor) is making a commitment to fund the plan annually. The plan can be amended to adjust this contribution level if necessary, but the initial funding level should be set at an amount that the Plan Sponsor can comfortably afford to make each year based on expected income and cash flow.
The Actuary will determine the annual funding requirement and maximum deductible amount annually. Any contribution amount between the minimum and maximum is generally acceptable. However, severe over-funding should be avoided. Annual contributions should be determined based on consultation with the Plan Actuary, CPA and Financial Advisor.
The 401(k) Plan is generally optional and many business owners choose not to set up a separate 401(k) plan in the event that the contributions to the Cash Balance Plan are sufficient to meet their funding goals.
Employer contributions to a 401(k) Profit Sharing Plan are generally optional each year. Employee contributions are always optional.
Distributions from a tax qualified retirement plan can occur when the plan terminates or when the participant reaches the Early or Normal Retirement Age for the plan (generally not earlier than Age 62 unless the plan is terminating).
I have employees, do I need to put them in the plans?
Generally the answer is yes for full time employees. Any employee who at least age 21 and has worked full time in your business for 1 or more years will be eligible to participate. If you do have employees, we have strategies that will minimize the plan expense related to the employees. Please complete our “proposal request form” and submit it to us for a full proposal. Many times we can design the plan to allocate 90%, or more, of the total contributions to the business owners.
I use an employee leasing company. Are my leased employees eligible to participate in the plans?
Generally the answer is yes, if you have leased employees, they will be treated like regular employees for purposes of the plan. If you have leased employees, please submit the full proposal request.
I use independent contractors that get a 1099 for income earned from my business, are they eligible to participate in my plans?
Generally the answer is no, but you should consult with your tax advisor to determine whether or not you are correctly classifying the employees as independent contractors. If the IRS audits your business and determines that the independent contractors should have been treated as W2 employees, these employees will become eligible for the retirement plans retroactively. If you use independent contractors, please review their employment status with your tax advisor prior to establishing any new retirement plan.
| 12/31/2026 | Documents and Amendments signature deadline |
|---|---|
| 2/15/2027 | Return Data Request (12/31/2026 assets, 2026 employee census, and contributions made to date.) |
| 3/15/2027 | Tax deadline for corporations. Contributions should be made or tax return extended. |
| 3/15/2027 | Deadline to amend plan to increase benefits for 2026 plan/tax year. This deadline is automatically extended if you extend your tax filing. |
| 3/15/2027 | Deadline to decrease benefits for the current plan/tax year (2027). |
| 3/31/2027 | If not previously provided, return data to administrator, this is the deadline for the first actuarial certification. Failure to provide data by this date may result in restrictions to future contributions. |
| 4/15/2027 | Tax deadline for Sole Proprietor. Contributions should be made or tax return extended. |
| 7/31/2027 | Deadline to file form 5500 (unless extended) |
| 9/15/2027 | Deadline for Contributions to plan (if tax return extended), this date also applies to Sole Proprietors even if your extended tax filing deadline is 10/15 |
| 10/15/2027 | Deadline to file form 5500 (with extension) |
After you have reviewed this information with your tax advisor and financial advisor, please complete the proposal request form and submit it to us for a final plan design.
Once you review the final plan design, if you decide to move forward with the plan, please sign and submit the services agreement.
Mele Consulting will complete the Plan Document and Administrative forms within one week of receiving the signed services agreement.
All Plan Documents must be signed prior to the end of the tax year for which you will deducting the contribution.
We provide our plan set up and administration services on a flat fee basis.
The set up and administration cost is separate for each plan.
We generally do not publish our fees. Please send us an email to request a fee quote. Our fees are extremely competitive and easy to understand.
Please feel free to contact us at 801.273.7005.
Executive Summary
This summary is built from the figures you enter on the calculator page. Enter your age, income, and years of service there and choose Calculate — then open the Executive Summary again and it will be filled in with your numbers.
Go to the Calculator →2026 Plan Year
| Compensation | |
|---|---|
| Age | |
| Years in Business |
| Owner | Spouse | |
|---|---|---|
| Compensation | ||
| Age | ||
| Years in Business |
| Contribution | Based on Maximum Benefit |
|---|---|
| Crediting Rate | 5% |
| Plan Start Year | 2026 |
The information provided in this proposal is an estimate based on data provided and should not be relied on for tax or legal purposes.
