Cash Balance Plan 2026: $290,000 Is a Benefit Limit, Not a Deposit

What a cash balance plan is, and what it is not

The Department of Labor’s plain-language FAQ says: “A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan.” The Code gives the same idea a legal name. Section 411(a)(13)(C) treats a plan as an applicable defined benefit plan when the accrued benefit is “calculated as the balance of a hypothetical account maintained for the participant or as an accumulated percentage of the participant’s final average compensation.”

Four features follow from that, each in a primary source:

• The account is notional. The DOL says these accounts are called hypothetical “because they do not reflect actual contributions to an account or actual gains and losses allocable to the account.”
• The employer carries the investment risk. The DOL: “Thus, the investment risks are borne solely by the employer.” The employee’s promised balance grows by the plan’s formula, whatever the plan’s assets earn.
• Vesting is fast. Section 411(a)(13)(B) requires an employee with at least 3 years of service to have “a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions.”
• It is not a salary-deferral plan. The DOL notes that participation “generally does not depend on the workers contributing part of their compensation to the plan,” unlike a 401(k).

The DOL publication is dated January 2014 and describes typical plans; the statute and regulation below are the current rules. An owner reading this page should keep one fact in view: the plan covers employees as well as the owner. Section 401(a)(26) requires a defined benefit plan to benefit at least “the lesser of” 50 employees or “the greater of” 40 percent of all employees or 2 employees, with a one-employee exception: “(or if there is only 1 employee, such employee).” A practice with several staff will have to fund their accounts too, and we did not read the nondiscrimination rules that set how much (not verified).

What the $290,000 measures

Notice 2025-67 says it in one sentence: “the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) of the Code is increased from $280,000 to $290,000.” The IRS COLA table shows the run: $265,000 in 2023, $275,000 in 2024, $280,000 in 2025 and $290,000 in 2026. The 2026 notice was announced on November 13, 2025 (IR-2025-111).

The statute’s own text is the $160,000 base that section 415(d) indexes. What the limit applies to is spelled out in four places in section 415(b):

Source: 26 U.S.C. 415(b) (Legal Information Institute, Cornell Law School) and IRS Notice 2025-67. The last column is our arithmetic and our reading.

The numbers that convert the limit between starting ages and forms of payment are set in section 415(b)(2)(E): the interest assumption “shall not be less than the greater of 5 percent or the rate specified in the plan,” and “the mortality table used shall be the applicable mortality table (within the meaning of section 417(e)(3)(B)).” The mortality table is the one that changes each year, which matters for 2027 (see the section on 2027 below).

The ten-year phase-in, year by year (our arithmetic)

A new plan does not begin at $290,000. Applying the fraction in section 415(b)(5)(A) to the 2026 figure:

Source: our arithmetic from 26 U.S.C. 415(b)(5)(A) and the $290,000 in IRS Notice 2025-67. Section 415(b)(5)(B) applies the same fraction to the 100 percent of pay test using years of service with the employer, and section 415(b)(5)(C) sets a floor of one-tenth. These are limits on the annual benefit starting at 62 to 65, not deposits.

Is there a table of contributions by age? We found none

Searches for this page keep returning a table of maximum cash balance contributions by age. We looked for an official one and did not find it. The IRS cash balance pages we tried returned 404 errors on October 26, 2026, and the IRS “Defined benefit plan” page says only that these plans provide “a fixed, pre-established benefit” and that “businesses can generally contribute (and therefore deduct) more each year than in defined contribution plans.” We treat any age table as the product of someone’s assumptions, not an IRS schedule (not verified).

What decides the dollar figure, from the sources above:

• The benefit formula in the plan document, such as a percentage of pay credited each year (the DOL’s example is “5 percent of compensation”).
• The age benefits start and the 10-year phase-in, which set the section 415(b) ceiling.
• The interest and mortality assumptions that convert the benefit limit between ages and forms (section 415(b)(2)(E): at least 5 percent and the 417(e)(3)(B) table), and the separate funding assumptions under section 430.
• The plan’s asset value on the valuation date, because the deduction is the funding target and cost less assets (section 404(o)(2)).
• The compensation counted, which is capped at $360,000 for 2026 (Notice 2025-67; section 401(a)(17)).

This is why two people of the same age with the same pay can have different amounts: it is what the plan says and what the assets are.

The deduction: section 404(o)

For a single-employer defined benefit plan, section 404(a)(1)(A) sends the deduction limit to section 404(o). The amount “shall be equal to the greater of” two things: the sum of the section 404(o)(2) amounts, “or (B) the sum of the minimum required contributions under section 430 for such plan years.”

The first amount is built from three pieces, less the plan’s assets: “the funding target for the plan year, (II) the target normal cost for the plan year, and (III) the cushion amount for the plan year, over (ii) the value (determined under section 430(g)(3)) of the assets of the plan.” The cushion is “50 percent of the funding target for the plan year” plus the effect of expected pay increases (section 404(o)(3)(A)), with the actuary assuming the limits in section 404(l) and section 415(b) apply (section 404(o)(3)(B)).

Timing helps a business owner. Section 404(a)(6): a payment is deemed made on the last day of the preceding taxable year if it is “on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).” What counts as the return date for a given business is in the estimated tax page and your own return’s extension.

The cost of putting in too much is in the Code. Section 4972(a) imposes “a tax equal to 10 percent of the nondeductible contributions under the plan.” The IRS lists the same pair of excise taxes on its defined benefit page: one if the minimum is missed and one if excess contributions are made.

For where that deduction sits against income tax rates, see our 2026 tax brackets page.

Minimum funding: you cannot skip a year

Once the plan exists, the contribution is not discretionary. Section 430(a)(1) defines the minimum required contribution, when assets are below the funding target, as the sum of “(A) the target normal cost of the plan for the plan year, (B) the shortfall amortization charge (if any) for the plan for the plan year determined under subsection (c),” plus any waiver amortization charge. Section 430(j)(1) sets the date: “8½ months after the close of the plan year.” For a calendar-year plan that is September 15 of the following year, so September 15, 2027 for 2026 (our arithmetic).

A plan with a funding shortfall for the preceding year is on a quarterly schedule, and missing an installment adds 5 percentage points to the interest charged (section 430(j)(3)(A)). Under section 4971(a)(1) the excise tax is “10 percent of the aggregate unpaid minimum required contributions for all plan years remaining unpaid.” The IRS page lists the compliance side: “Need to annually file a Form 5500 with a Schedule SB” and “Have an enrolled actuary determine the funding levels and sign the Schedule SB.”

The IRS also says a plan “Can’t retroactively decrease benefits,” and that “Generally, a defined benefit plan may not make in-service distributions to a participant before age 59 1/2.” An owner who wants to stop contributing is looking at plan termination, which we have not covered (not verified).

The interest credit: what rate a plan can promise

Each year the hypothetical account gets a pay credit and an interest credit. Section 411(b)(5)(B)(i)(I) limits the second: any interest credit “shall be at a rate which is not greater than a market rate of return.” Section 411(b)(5)(B)(i)(II) adds preservation of capital: a negative credit may “in no event result in the account balance or similar amount being less than the aggregate amount of contributions credited to the account.”

Treas. Reg. 1.411(b)(5)-1(d) turns “market rate” into a list. A plan stays inside it by using one of the following:

Source: Treas. Reg. 1.411(b)(5)-1(d) (Legal Information Institute) and the IRS “Minimum present value segment rates” page, latest row Aug-26: 4.65, 5.75 and 6.73. The comparison column is our arithmetic and our reading; a plan sets its own credit in its document, and the table lists the regulation’s deemed safe harbors, not the plan’s choices.

What changes when rates move: a plan that credits a fixed rate promises that rate whatever happens to the assets, and the DOL says the employer bears that risk. A plan that credits the actual return on its assets passes the risk to the account (including losses, down to the capital floor above). That is our reading of the sources; the funding effect of a given rate for a given plan is an actuarial calculation we have not made and do not publish.

Next to a 401(k): three separate limits

The limits do not share one pot, and the IRS says so: a defined benefit plan “Can have other retirement plans.” The pieces for 2026, all from Notice 2025-67 unless noted:

For how the $72,000 and the catch-up combine in a 401(k), see our 2026 401(k) and IRA limits page; for a solo owner’s choices between a 401(k) and a self-directed IRA, the solo 401(k) comparison.

The deduction limit that can pull them together

The Code adds a second ceiling when a business deducts for both kinds of plan. Section 404(a)(7)(A): the total deduction under a defined contribution plan and a defined benefit plan “shall not exceed the greater of— (i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans,” or the contributions to the defined benefit plan up to the minimum funding amount. Three exceptions follow in subparagraph (C):

• Elective deferrals only. If the only money going into the defined contribution plan is elective deferrals, the 25 percent limit does not apply (section 404(a)(7)(C)(ii)).
• Up to 6 percent of pay. If employer contributions to the defined contribution plan “do not exceed 6 percent of the compensation otherwise paid or accrued,” the paragraph does not apply to them. At the $360,000 pay limit, 6 percent is $21,600 and 25 percent is $90,000 (our arithmetic; pay for this example is an assumption).
• Plans covered by the PBGC. “any single-employer plan covered under section 4021 of the Employee Retirement Income Security Act of 1974 shall not be taken into account” (section 404(a)(7)(C)(iv)).

The third bullet is where a small practice differs from a larger company. ERISA section 4021(b)(13) excludes from PBGC coverage a plan “established and maintained by a professional service employer which does not at any time after September 2, 1974, have more than 25 active participants in the plan.” “Professional individuals” “includes but is not limited to, physicians, dentists, chiropractors, osteopaths, optometrists, other licensed practitioners of the healing arts, attorneys at law, public accountants, public engineers, architects, draftsmen, actuaries, psychologists, social or physical scientists, and performing artists.”

Our reading, not a conclusion about any case: a plan that is outside PBGC coverage is not covered by the section 404(a)(7)(C)(iv) carve-out, so the combined limit can apply to it, while a plan inside PBGC coverage escapes the combined limit. Whether the exemption applies depends on who owns and controls the business and on its principal business, which are facts of the case.

PBGC premiums, if the plan is covered

For a plan that is covered, the PBGC publishes the premium table. Its single-employer rates, last updated October 14, 2026:

Source: PBGC “Premium rates” page, single-employer plans, read October 26, 2026. The page notes that the variable-rate premium rate is no longer indexed from 2024 and the other rates and the cap continue to be indexed.

For three participants the flat premium is $333 for 2026 and $348 for 2027 (our arithmetic), before any variable-rate premium. The premium is a cost of coverage, not a cost of the benefit; a plan outside PBGC coverage is not subject to these premiums (our reading).

What it costs to run: no official figure

The IRS calls a defined benefit plan the “Most costly type of plan” and the “Most administratively complex plan,” and requires an enrolled actuary’s signature on Schedule SB and an annual Form 5500. We found no official source for the actuary’s or administrator’s fee and we do not print one (not verified). The price a provider quotes you depends on participants, assumptions and services, and the quote is the only number that counts.

What changes in 2027

The 2027 section 415(b) limit is the main unknown, and the plan’s other dollar limits move with it. Some 2027 items are already out:

Source: IRS Notice 2025-67, the IRS COLA page, the PBGC premium table (updated October 14, 2026) and IRS Notice 2026-27.

Notice 2026-27 says it also “includes a modified unisex version of the mortality tables for use in determining minimum present value under § 417(e)(3)” for “stability periods beginning in the 2027 calendar year,” and updates the static tables used for funding for valuation dates in 2027. Section 415(b)(2)(E)(v) points to the 417(e)(3)(B) table, so the table in force when benefits are measured changes with the year; how much it changes any plan’s maximum is not something we have computed. Our pension lump sum page shows how that table and the segment rates move a lump sum.

The IRS announced the 2026 limits on November 13, 2025 (IR-2025-111). We have no date for the 2027 notice, and we do not repeat projected figures from other sites, which are not IRS numbers. This row will need a refresh when the notice posts.

What a reader can do with this

• Separate the two numbers. Write down the benefit limit ($290,000 for 2026 before the age and 10-year adjustments) and, separately, whatever deposit a calculation produces for your age, pay and plan formula. The first is a ceiling; the second is the output.
• Check the pay test. Your average pay in your highest three years sets the other half of the section 415(b) cap.
• Find out if the plan would be PBGC-covered. The 25-active-participant professional-service exemption and the section 404(a)(7) carve-out turn on that answer.
• Look at the funding calendar. A minimum contribution for a calendar-year plan is due 8½ months after year-end, and the excise tax on a missed one is 10 percent.
• Hold the 2027 figures until the notice. The 415(b) limit, the $72,000 limit and the $360,000 pay limit all move together on the day the IRS publishes.

This is analysis of public documents, not investment, legal or tax advice. Whether a plan fits is a question of your own facts, including your staff, pay history and cash flow, and it is answered with your CPA or benefits attorney.

FAQ

Sources, read and saved on October 26, 2026: IRS Notice 2025-67 (irs.gov/pub/irs-drop/n-25-67.pdf) and news release IR-2025-111 of November 13, 2025; IRS “COLA increases for dollar limitations on benefits and contributions” and “Defined benefit plan” pages; IRS “Minimum present value segment rates” page; IRS Notice 2026-27; 26 U.S.C. 401, 404, 411, 415, 430, 4971 and 4972 and Treas. Reg. 1.411(b)(5)-1 (Legal Information Institute, Cornell Law School); 29 U.S.C. 1321 (ERISA section 4021); PBGC “Premium rates” page, last updated October 14, 2026; U.S. Department of Labor, Employee Benefits Security Administration, “Cash Balance Pension Plans” (January 2014). Calculations marked “our arithmetic” are ours. This is analysis of public documents, not investment, legal or tax advice.