What Does It Take to Set Up a Cash Balance Plan?

You’ve probably heard that Cash Balance Plans (CB plans) can be a powerful way to reduce taxes and accelerate retirement savings. But let’s be honest. If you’re like most partners, your first thought might not be, “How much can I save?” But rather, “How much of a hassle is this going to be?”

We get it. Between IRS rules, plan design, trust accounts, and year-end filings, it sounds like a lot. Especially if you’re already stretched managing your firm and client work.

But here’s the truth: setting up and maintaining a CB plan is far easier than most people expect. If you’ve ever onboarded a new team member, filled out a health insurance form, or handled payroll, you already have the skills required to get this done, especially with the right team guiding you.

This article walks you through what happens—step by step—from the day you decide to set up a CB plan through the end of your first year. You’ll get a clear view of the timeline, what needs to be done, how much time it takes, what it costs, and how ongoing compliance works, so you’re not left wondering what’s around the corner.

What Setting Up a Cash Balance Plan Involves

Here’s what setting up a CB plan looks like. While most of the work is handled behind the scenes, there are a few points where your decisions and approvals are needed:

Step 1: Quick Intake and Goal-Setting

It starts with a discovery call, which lasts between 30-45 minutes. You’ll share your income, business structure, and goals. The objective is simple: make sure your plan is tailored to your needs, not just plugged into a template. This step also identifies any special considerations, such as fluctuating income or plans to add or remove employees.

Step 2: Custom Plan Design

Based on the intake, your actuary creates a personalized plan proposal. It outlines how much you can contribute, how flexible the structure can be, and how to include employees. You’ll review the plan design together, make any necessary adjustments, and ask questions about contribution ranges and timelines. This is where your financial goals and IRS rules intersect in a clear and guided way.

Step 3: Plan Document Signing

Once you approve the design, the plan documents are drafted and sent to you for review and signature. These include the formal plan agreement, adoption agreement, and IRS-required terms. You don’t need to write or interpret anything; these are IRS pre-approved forms and your plan administrator handles the heavy lifting. Most partners complete this step with one electronic signature packet followed by a quick confirmation that everything is on file.

Step 4: Trust Account Setup

Every CB plan must have a separate trust account to hold plan contributions. Your administrator will recommend a custodian if you don’t already have one, and they’ll walk you or your office manager through the process of opening the account. Most financial institutions are familiar with these accounts, and typically require only a short application to complete.

Step 5: Employee Notices (if applicable)

If your plan includes employees, federal rules require that they receive a written notice explaining how the plan works. You don’t need to draft these notices yourself; your plan provider will prepare them using standard templates, tailored to your plan design. Your job is simply to confirm delivery, typically via email or an internal handout.

Step 6: CPA and Payroll Coordination

To ensure contributions are made correctly, your administrator will coordinate directly with your CPA or payroll provider. This includes sharing contribution amounts, deadlines, and trust account information. If you don’t have a payroll provider, this step may be as simple as scheduling your transfer into the trust account. Either way, it’s a one-time setup that helps keep things smooth during tax season.

Most partners complete these steps with two to three brief calls, a few document reviews, and minimal time away from their work. You’re not building the plan yourself; you’re just guiding the setup.

How Long Does It Take to Set Up a Cash Balance Plan?

Most CB plans are fully set up in 30 to 60 days. For some, it’s faster, especially if you already have your financials and team in place. For others, it may take a few extra weeks if you’re including employees, coordinating with multiple partners, or working around your CPA’s calendar.

But here’s the key takeaway: most of that timeline doesn’t involve you. After your initial strategy call and plan review, your administrator will handle the remaining tasks, including drafting legal documents, running actuarial calculations, opening the plan trust account, and preparing compliance materials.

Your role is limited to a few key decisions and approvals. There are no standing meetings, no ongoing admin work, and no chasing paperwork. Just clear steps, handled with support.

And if you’re working against a hard deadline, like contributing before year-end or the tax return deadline, the process can often be fast-tracked in under 30 days. The sooner you start, the smoother the process will be.

What Does It Cost to Set Up & Maintain a Cash Balance Plan?

The cost of a CB plan is often significantly less than partners expect, especially when considering the tax savings it can unlock. There are two components to consider: one-time setup fees and ongoing annual administration.

Setup costs typically range from $1,600 to $3,500, depending on the complexity of your business structure and whether you’re including employees. This covers everything from plan design and legal documentation to account setup and notices.

Annual maintenance costs typically range from $2,500 to $4,500 per year, which includes actuarial calculations, preparation of IRS Form 5500, trust account compliance, and required notices. The business pays these costs, and they are fully tax-deductible.

When comparing options, consider that lower-cost providers may not offer fully customized plan design and comprehensive actuarial and compliance support, which means the plan may not be the best fit for your business and tax planning goals. With the right provider, everything is streamlined for you.

Also worth noting: these fees are often a fraction of the tax savings a well-designed plan can deliver. Many partners recoup the annual fee several times over in the first year alone.

Once your CB plan is in place, ongoing maintenance is consistent and manageable, and nearly all of it is handled for you. Here’s what happens each year to keep your plan compliant and working in your favor:

Annual Contribution Calculations

Your actuary calculates your annual contribution range based on your income, plan design, and IRS guidelines. You’ll receive a detailed breakdown with a clear funding deadline, so there are no surprises or guesswork. These calculations are based on your income, age, and plan design, and are optimized each year to give you the highest allowable tax deduction while keeping your plan in compliance.

IRS Form 5500 & Schedule SB Filing

Your administrator prepares and files the required annual reports, including the annual IRS Form 5500 and actuarial Schedule SB. These filings, submitted to the Department of Labor and IRS, demonstrate that your plan is adequately funded and operating by federal rules. Form 5500 is the main compliance report for retirement plans, and Schedule SB, signed by a credentialed actuary, certifies that your contribution meets actuarial standards. You won’t be responsible for preparing these forms; you simply review and sign off, if needed. Everything is prepared for you and submitted on time.

Participant Notices (If You Include Employees)

If your plan includes employees, you're required to provide them with an annual notice explaining how the plan works and the benefits to which they’re entitled. This ensures your plan remains compliant with IRS and ERISA rules, and it also helps reinforce your role as a long-term employer investing in your team. You don’t need to draft anything from scratch. Your plan administrator will guide you on what needs to be sent, and in many cases, standard templates or sample language are provided.

Trust Account Monitoring and Updates

Your CB plan contributions are held in a dedicated trust account, which must remain properly funded and aligned with your plan’s investment strategy. Each year, your administrator reviews the account to ensure everything checks out, contributions were made on time, balances match the funding requirements, and there are no compliance flags.

If any adjustments are needed, such as updating custodians, reallocating funds, or rebalancing based on performance, you’ll be notified with clear next steps. For most partners, this is a quick annual review and nothing more.

CPA Coordination

Each year, your plan administrator connects directly with your CPA to confirm that contributions are properly recorded, reported, and deducted. This ensures that everything aligns between your plan documents and your tax filings, eliminating mismatches and scrambling at year-end. The coordination is handled professionally, and in most cases, requires no action from you beyond a simple approval or confirmation.

Your annual involvement typically adds up to less than two hours a year. You approve the contribution, sign what’s needed, and move on with your business. Meanwhile, your plan is delivering powerful tax savings and staying fully compliant behind the scenes.

What Could Go Wrong (and Why It Rarely Does)

It’s reasonable to have concerns about adding something new to your financial structure, especially one that involves IRS filings, employee considerations, and multi-year contributions.

Partners often ask:

• What if my income changes and I can’t contribute one year?
• What if I hire or let go of staff?
• What if something slips through the cracks on the compliance side?

The short answer: these concerns are common, and they’re accounted for in how your plan is structured and maintained.

Contribution ranges are established up front to allow for year-to-year flexibility. If you have a low-income year, there are options to adjust contributions within IRS limits or, in some cases, to reduce them within IRS-approved ranges. If your staffing changes, your plan’s eligibility and participation rules can be revisited and updated accordingly.

As for compliance, the risk isn’t in having a plan; it’s in trying to manage one without proper support. That’s why ongoing administration, actuarial guidance, and CPA coordination are so important. They prevent missteps before they happen.

Plans that are carefully structured from the start, with expert oversight throughout the year, rarely run into issues. And when changes do arise, you’re not left to figure them out on your own; you have a team in place to help make adjustments and keep everything on track.

More Tax Savings This Year, Not Someday

A well-designed CB plan can mean significant tax savings this year, not years from now. You don’t have to become an expert to get it done.

With expert design, coordinated CPA support, and full-service plan management, you can move from decision to deduction in as little as 30 days. From trust setup to IRS filings, nearly everything is handled for you.

If you’ve outgrown basic tools like a 401(k) or SEP, it’s time to upgrade your strategy. You focus on your business, we’ll handle the plan.

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.