If your firm already makes 401(k) profit-sharing contributions, you can layer on a Cash Balance Plan without materially increasing what you must contribute to employees—meaning you’ve effectively already “covered the cost” needed to satisfy nondiscrimination testing.
Most firms already have a 401(k) and may even offer profit sharing. Each year, the firm contributes meaningful dollars toward employee benefits, rewards the team, and checks the compliance box.
But here’s the part almost all partners miss:
The employer dollars currently going to staff profit sharing are the same dollars that satisfy the employee inclusion requirements of a Cash Balance Plan (CB plan). In other words, the “expense” that partners assume is the barrier to a CB plan is already built into your budget.
Most partners feel they’ve maxed out retirement planning when they:
While helpful, this ceiling is low compared to the potential deductions available through a Cash Balance Plan. The structure you currently fund is the starting point, not the ending point.
Many firms assume that offering a CB plan means giving “extra” benefits to employees. In reality:
Yet none of that spending is unlocking the six-figure deduction potential for partners.
A CB plan does not necessarily increase staff costs; it reorganizes what you’re already spending into a structure that creates dramatically larger partner deductions.
Most professional practices contribute 10–15% of staff payroll to profit sharing. For a small law firm, this often means:
The structure is funded—the design simply isn’t optimized.
| Plan Design | Total Firm Contribution | To Partners | To Staff | Approx. Partner Deduction |
| 401(k) + PS | $100,000 | $85,000 | $15,000 | $85,000 |
| Plan Design | Total Firm Contribution | To Partners | To Staff | Approx. Partner Deduction |
| 401(k) + PS + CB Plan | $415,000 | $400,000 | $15,000 | $400,000 |
The staff cost doesn’t rise.
The firm’s total spending increases modestly.
A CB plan operates under a different IRS framework than a 401(k). It allows:
If your firm is already contributing 10–15% of staff payroll to profit sharing, you’ve already funded the employee side of the CB plan.
Typical partner contribution limits:
The staff portion stays roughly the same.
The partner portion increases dramatically.
Compliance remains intact.
The same dollars that once served as a fixed compliance expense now become the key to a high-impact tax strategy.
For partners in 32% or 37% brackets, every additional dollar contributed:
Law firm economics—steady revenue and predictable margins—make this design especially effective.
A layered structure keeps your 401(k) intact and adds a second channel for employer contributions:
Because the staff requirements are already met through the 401(k) profit sharing, the CB plan directs the majority of new contributions to partners.
This creates a structure where:
Most skeptics say:
But once the numbers are shown, partners realize:
A firm contributing $100,000 to profit sharing—$15,000 of which goes to staff—is already funding the inclusion requirement for a CB plan. With proper design, partners could contribute an additional $300,000–$400,000 per year, fully deductible.
This is not an added expense.
This is improved efficiency.
A CB plan restores balance in a way 401(k)s cannot. In a 401(k):
A Cash Balance Plan corrects this by:
Staff benefits remain competitive.
Partner benefits finally reflect contribution and responsibility.
Your firm is already investing in staff retirement benefits each year. Those dollars fund the foundation of a Cash Balance Plan, but:
A short review can reveal:
This isn’t a sales pitch.
It’s a diagnostic.
And most firms are shocked by what the math shows.
You already fund employee benefits. The only question left is:
See how your existing dollars could produce significantly greater tax savings and partner benefits.
Disclosure: The information provided on this website is for general informational and educational purposes only and is not intended as legal, tax, or investment advice. Actual tax savings will vary based on your individual circumstances, including filing status, income level, existing retirement plans, and other deductions. Cash Balance Plans and other retirement strategies must be carefully structured and administered to comply with IRS regulations. You should consult with a qualified tax advisor, financial planner, and/or pension specialist before implementing any strategy discussed here.