You’ve followed the standard advice—set up a SEP or 401(k), contribute the maximum, maybe add in profit sharing. And if you're like most partners earning $300,000 or more, you’ve already hit the limit on what those tools can do.
The problem isn’t that they’re wrong. It’s that they’re basic.
These plans were built for small business owners and consultants, not for law firm partners with predictable profits and significant tax exposure. They give you some deduction, but they cap out quickly, and leave a lot of taxable income on the table.
High-earning partners are using Cash Balance Plans (CB plans) to attain significant tax savings. These plans go far beyond 401(k) limits, offering major deductions with full compliance and minimal complexity. Keep reading to see how they work, when they make sense, and what it takes to put one in place.
If you’ve already maxed out your SEP or 401(k), it doesn’t mean you’re done. There are other IRS-qualified plans, such as Cash Balance Plans, that allow high-income partners to contribute significantly more, reduce their current taxes, and retain a greater portion of their earnings.
SEP IRAs and 401(k)s are helpful, but they weren’t designed for partners who bring in steady, high incomes year after year. They offer some tax efficiency, but they cap out well before most partners hit their potential. And once your income crosses $300,000, they start falling short fast.
The main issue is the cap. Between employee and employer contributions, the combined annual limit is typically around $69,000 to $76,500, depending on age. That might have felt like a solid deduction at one point. However, when your tax bill exceeds $150,000, it's not even close.
These plans are also one-size-fits-all by design. They’re easy to set up, and most financial advisors and payroll providers recommend them by default. But they don’t account for the way your firm is structured or what your actual income goals are.
If you’re writing big checks to the IRS and only using a 401(k) or SEP, you’re missing out on better tax strategies. You’re following the standard path, but for your income level, there’s a stronger option. It’s time to move past starter tools and start utilizing tax strategies tailored to your income level.
When you’ve already hit the cap on your SEP or 401(k), it doesn’t mean you’ve exhausted your options. It simply means you’ve been using the most common strategies, those designed for the average small business, rather than for high-income professionals. Here are four alternatives that offer greater contribution potential and more flexibility:
Many firms start with a SEP IRA, but a profit-sharing plan (usually within a 401(k)) is the next logical step. It allows for discretionary employer contributions, often pushing total annual retirement funding up to $66,000–$76,500 depending on age.
This is a step up from a SEP, and the ability to adjust contributions annually makes it a good fit for firms with variable income. But even when layered with a 401(k), you're still capped by IRS §415(c) limits, which can be frustrating for partners earning $300,000 or more.
This type of plan can make sense for firms with moderate earnings or inconsistent profits, but for those looking to make a serious dent in the tax bill, it simply won’t get the job done.
Best for: Firms with fluctuating profits and mid-six-figure partner earnings.
NQDCs let you push income into future years, which sounds appealing at first, but they’re not as useful for most small or midsize law firms as they might seem.
You don’t get a current-year deduction. The income is simply deferred, not removed from your tax picture. And because these plans are “nonqualified,” they don’t fall under ERISA protections or enjoy tax-preferential growth like qualified plans do. The deferred amounts are still subject to the firm’s risk and performance over time.
That’s why these plans are more common in larger firms or corporate settings where long-term payout models are part of the structure. If your goal is to reduce this year’s taxable income, there are better tools to reach for, especially if you’re a partner trying to keep more of what you earn now.
Best for: Larger firms with multi-year compensation models or succession planning needs.
Most people think of traditional Defined Benefit Plans (DB plans) as pensions, structured to provide a set retirement income based on years of service and compensation. On paper, they appear to offer stability and structure. In practice, they’re a poor fit for small firms.
They’re rigid. They require a long-term funding commitment based on actuarial projections, and they come with a level of administrative complexity that’s rarely worth it. Contributions aren’t easy to adjust, and participants often have no idea what their benefit amounts to until retirement.
Traditional DB Plans are often confused with CB plans. But they serve very different purposes. DB plans were built for governments and large corporations. CB plans are the modern alternative, IRS-qualified, partner-friendly, and designed for flexibility.
Best for: Historical context only. Not recommended for high-income professionals today.
This is the plan most partners don’t hear about until they’re ready for something more strategic. CB plans are IRS-qualified retirement plans that allow significantly higher contributions than a 401(k)—often between $100,000 and $300,000+ per partner, every year. And those contributions are fully deductible.
Unlike traditional pensions, CB plans are built to feel more like individual accounts. Each partner’s benefit is tracked as a personal balance that receives annual pay credits and interest credits. And when you leave the firm or retire, that balance can be rolled into an IRA, no waiting for a monthly benefit.
What sets CB plans apart is the control they offer. You can adjust your contributions within a defined range each year, based on your income and the firm’s cash flow. Employee costs typically amount to about 5% to 7% of the partner’s own contribution.
If you’re paying more than $100,000 in taxes each year, and your current retirement plan only lets you deduct $66,000, a CB plan changes the equation entirely. It converts high-tax income into long-term, tax-deferred savings. And it does it without creating compliance risks. Everything is handled for you, from design to filings to annual testing.
Ideal for: Partners earning $300,000+ who want to reduce current tax exposure and build personal wealth.
There’s no one-size-fits-all plan. The right choice depends on how much income you’re working with, what your team looks like, and what you’re trying to achieve: more flexibility, bigger deductions, or long-term deferral.
The best place to start isn’t with the plan itself, it’s with a number: How much of your income would you rather shift into tax-deferred savings this year?
Once you know your target deduction, everything else — plan design, employee costs, compliance — can be tailored around it. That’s what most generic retirement advice misses. It’s about solving for your actual goals.
| Plan Type | Annual Contribution Potential | Deductible? | Flexible? | Employee Cost | Best Use Case |
| SEP IRA | Up to ~$66,000 | Yes | Limited | Moderate | Solo or small firms with modest income |
| 401(k) + Profit Sharing | Up to ~$66,000–$70,000 | Yes | Yes | Moderate | Firms earning $200,000–$300,000 |
| NQDC | No IRS cap | Not upfront | Yes | None | Large firms or multi-partner payout strategies |
| Defined Benefit Plan (Traditional) | Varies (rigid formulas) | Yes | No | High | Legacy pension setups, not recommended |
| Cash Balance Plan | $100,000–$300,000+ | Yes | Yes | Low (≈5%) | Firms with $300,000+ income and steady profits |
Once your income crosses $300,000, and especially once you’re writing massive checks to the IRS each year, CB plans start to outperform every other option on the table. Here’s a simple breakdown of when CB plans tend to become viable:
| Annual Partner Income | Team Size | Best-Fit Plan Types |
| $200,000–$300,000 | Solo or 2–3 staff | 401(k) + Profit Sharing Plan |
| $300,000–$500,000 | Small team (3–10) | 401(k) + Cash Balance Plan |
| $500,000+ | 5+ employees | Cash Balance Plan or Cash Balance Plan + NQDC |
If you’re earning $300,000+ and still relying only on a SEP or 401(k), you’re likely leaving a substantial amount of income fully exposed to tax, when there are compliant, flexible strategies to fix that.
At Cash Balance Plan Partners, that’s where we begin. You give us a number, and we work backwards from there, designing a retirement plan that fits your income goals, your firm structure, and your comfort level with employee contributions. It’s not about choosing between acronyms; it’s about choosing what works for you.
This is one of the most frequently asked questions we hear, and it’s a valid one. If CB plans are legitimate, IRS-qualified, and capable of unlocking substantial deductions, why isn’t your CPA already talking about them?
The short answer: most CPAs don’t design retirement plans. And most law firm partners don’t realize that retirement planning, tax strategy, and compliance are separate specialties.
A good CPA helps you stay compliant, file on time, and avoid mistakes. But unless they specialize in advanced planning for high earners, they’re probably sticking to the same tools they use with every other client: SEP, 401(k), maybe profit sharing. These are easy to administer and widely understood, but they’re also limited.
CB plans fall into a different category. They require actuarial design, third-party administration, and ongoing oversight. They’re not something most CPAs build in-house, and they’re not something they’re likely to recommend unless they know a specialist they trust to handle it.
That’s why we work directly with your CPA, not around them. We coordinate with their office, explain the plan design, walk them through the tax impact, and ensure everyone is on the same page before anything moves forward. You stay in control, and your CPA stays central to your advisory team.
If you’ve never heard of a CB plan before, that’s not a red flag. It’s just a sign that you’ve reached the point where standard strategies no longer match your income. That’s a good place to be, and now you’ve got access to tools designed for the level you’ve reached.
It’s a fair question and one we hear from nearly every partner we work with.
You’ve already invested in your team. You’ve paid fair salaries, offered benefits, maybe even contributed to a 401(k). So when you hear about a retirement plan that requires employee contributions, the natural concern is: Is this just going to become another expense?
The short answer: no, not if the plan is designed correctly.
CB plans are built to prioritize partner deductions first. That means the employee component is structured to meet IRS minimums, but not exceed them. In most plans we design, total employee cost comes out to around 5% of what partners contribute for themselves.
So, for example, if you’re contributing $250,000 toward your own retirement and tax deduction, you might be putting in just $12,000–$15,000 total across all eligible staff. That’s not a burden. That’s overhead that makes the whole plan work and unlocks a massive deduction in the process.
And the best part is that you’re not guessing. We run the numbers upfront, show you precisely what the employee cost looks like, and build it into the plan from day one. There are no surprises
If you’ve been holding off because you assume it’s too employee-heavy, you’re not alone. But that assumption has probably cost you far more in taxes than a well-structured plan ever would.
In most plans, it’s just 5%, and it gets you 20 times the deduction.
Many partners assume that a CB plan is simply another version of a traditional DB plan—the old-school pension model that promises a fixed retirement income and comes with layers of complexity.
It’s a reasonable assumption. Technically, CB plans fall under the same IRS classification. But in structure and experience, they couldn’t be more different.
Traditional DB plans are built around formulas that calculate future benefits, typically based on age, years of service, and compensation history. The problem is, those numbers don’t mean much to a working partner in a small firm today. Contributions are rigid, and the benefit projections often feel abstract until the plan is fully matured.
CB plans were designed to address those issues
They express the benefit as an account balance, not a formula, so you can see exactly how much is being contributed and how it’s growing. You get annual pay credits and interest credits, and the full balance is portable. Most partners roll the funds into an IRA at retirement. You’re not waiting on a monthly payout from your plan.
They also offer the one thing traditional DB plans don’t: flexibility. You can adjust your contributions within a defined range each year, based on income and cash flow. You’re not stuck with fixed payments, and you’re not left guessing what your benefit will be down the road.
Here’s how they compare:
| Feature | Traditional Defined Benefit Plan | Cash Balance Plan |
| Benefit Structure | Promised monthly income at retirement | Account-style balance with annual growth |
| Transparency | Complex formulas, complicated to track the value | Clear, trackable benefit in dollars |
| Contribution Flexibility | Fixed, often inflexible | Adjustable annually within the IRS-defined range |
| Portability | Limited, monthly income stays in the plan | Portable, can roll balance into an IRA |
| Suitability for Small Firms | Poor fit—designed for large, legacy institutions | For small professional firms and closely held businesses |
| Administrative Burden | High, actuarial projections, complex filings | Streamlined, fully managed by a third-party administrator |
| Employee Communication | Hard to explain to team members | Easy to understand and communicate |
| IRS & DOL Support | Yes, but limited flexibility | Yes, with decades of supporting legislation and guidance |
In short, CB plans offer everything and more than traditional DB plans were supposed to, minus the complexity.
If you’re earning $300,000 or more, a SEP or 401(k) isn’t doing enough. You’re capped at around $66,000 in deductions while writing big checks to the IRS.
There are better options:
When your income grows, so does your tax exposure. But that doesn’t mean you have to settle for handing over a substantial amount of your income to the IRS every year. Partners who keep more aren’t working harder. They’re simply using the strategies tailored to their income level.
CB plans are already helping firm owners like you save significantly, without changing how they operate or hiring new staff. If you're earning $300,000+ and still relying on basic retirement strategies, it's time to upgrade from default tools to high-impact planning.
The opportunity is real. The plan is flexible. The next move is yours.
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.