Retirement plans often come with clear annual contribution caps, but cash balance plans work differently. Instead of focusing on a set yearly limit, these plans aim for a predetermined balance at retirement age. That structure makes them especially attractive for high-earning business owners who want to save more than traditional defined contribution plans typically allow.
The amount you can put in each year isn’t the same for everyone. It depends on factors like your age, income, and how close you are to retirement. Because of this, an actuary must calculate and certify the exact figure.
In this article, we’ll walk through the 2026 cash balance plan limits and the key factors that determine how much you can contribute.
Also read: What is a Cash Balance Plan? How It Works, Features and Eligibility
Lifetime Limit
Cash balance plans are a type of defined benefit plan that allow tax‑deferred retirement savings. The IRS does not set a fixed lifetime balance for these accounts. Instead, it limits the annual benefit payable at retirement under Internal Revenue Code Section 415(b).
For 2026, the maximum annual benefit under a defined benefit plan is $290,000.
What this means in practice:
- Your cash balance plan contributions and projected account value must comply with the IRS annual benefit limit.
- Actuarial calculations convert the annual benefit into a lump‑sum equivalent for planning purposes.
- Once the plan approaches the actuarial limit, future contributions may be reduced to remain compliant, but the account can continue to grow through investment returns.
Hypothetical Example:
A 62‑year‑old business owner’s cash balance plan may approach the actuarial lump‑sum equivalent of the IRS limit. Contributions are adjusted to comply with the Section 415(b) rules, while investment growth continues.
Annual Benefit Limit
When you retire with a cash balance plan, you can decide how to take your benefits:
- Lifetime annuity payments
- A lump-sum distribution
- A tax-free rollover into an IRA or 401k
If you choose annuity payments, the IRS caps the maximum benefit you can receive. The limit is the lesser of:
- 100% of your average compensation for your highest three consecutive years, or
- A dollar limit set annually by the IRS.
IRS Annual Benefit Limits
| Year | Maximum Annual Benefit |
| 2026 | $290,000 |
| 2025 | $280,000 |
| 2024 | $275,000 |
| 2023 | $265,000 |
| 2022 | $245,000 |
| 2021 | $230,000 |
| 2020 | $230,000 |
| 2019 | $225,000 |
Source: Notice 2024-80, 2025 Amounts Relating to Retirement Plans | IRS
Hypothetical Example:
Suppose a participant’s highest three-year average compensation is $240,000. For 2026, the maximum benefit they can receive is $240,000 (since it is lower than the $290,000 IRS cap).
Note: These limits apply only to annuity benefits. Lump-sum distributions or rollovers are calculated based on actuarial values but remain subject to overall IRS contribution and funding rules.
Annual Compensation Limit
The IRS sets a maximum amount of annual compensation that can be used when calculating cash balance plan contributions. This ensures contributions remain proportional and within tax-qualified limits.
For 2026, the annual compensation cap is $360,000.
IRS Annual Compensation Limits
| Year | Maximum Compensation Considered |
| 2026 | $360,000 |
| 2025 | $350,000 |
| 2024 | $345,000 |
| 2023 | $330,000 |
| 2022 | $305,000 |
| 2021 | $290,000 |
| 2020 | $285,000 |
Source: COLA increases for dollar limitations on benefits and contributions | IRS
Hypothetical Example:
Even if a business owner earns $1 million in 2026, only $360,000 can be counted toward contribution calculations. A $100,000 contribution equals 27.8% of the $360,000 cap, not 10% of the full $1 million income.
What Counts as Compensation?
- Incorporated businesses: W-2 wages.
- Unincorporated businesses: Net earned income from self-employment, reduced by self-employment tax.
Illustrative 2026 Contribution Ranges
| Age Range | Cash-Balance Plan Max Contribution | Combined 401k + Cash Balance Total |
| 60 – 65 | $355,000 | $435,000 |
| 55 – 59 | $290,000 | $370,000 |
| 50 – 54 | $226,000 | $306,500 |
Note: These amounts assume the 2026 compensation cap of $360,000. Actual contribution limits will vary based on your plan design and must be confirmed by an actuary.
401k Profit Sharing Adjustment
When pairing a cash balance plan with a 401k, the profit sharing limit drops to 6% of compensation. Normally, the cap is:
- 25% for incorporated businesses.
- ~20% for unincorporated businesses.
Hypothetical Example:
A 60-year-old business owner with only a Solo 401k could generally contribute up to $83,250 in 2026 if eligible for the age 60–63 catch-up amount and the plan permits it (this total reflects the $72,000 annual additions limit plus the $11,250 catch-up amount).
📝 Note: Contribution strategies should always be coordinated with both your actuary and CPA to maximize deductions without exceeding IRS limits.
How Much Can You Contribute to a Cash Balance Plan in 2026?
Contribution limits for cash balance plans vary for each participant and must be calculated by an actuary. The formula considers factors such as:
- Your age
- Your level of compensation (subject to the $360,000 cap in 2026)
- Your desired balance at retirement
- Whether you have employees (since employer contributions to participant accounts are required each year)
In 2026, typical cash balance contributions range from $100,000 to $400,000 annually, depending on age and income.
Wrapping It Up
Cash balance plans can offer much higher contribution limits than a 401k alone, making them an attractive option for high earners and business owners who want to accelerate retirement savings.
Contribution amounts vary based on age, income, and plan design, so working with an actuary is essential to ensure compliance and maximize benefits.
Want to explore more retirement strategies and plan comparisons? You might find these articles helpful:
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