Why high-income business owners who are already maximizing their 401(k) should evaluate whether layering profit sharing and a cash balance plan could significantly increase retirement contribution capacity while potentially reducing current taxable income.

And for some businesses, it may not be too late to take action for 2025. September 15, 2026, is a critical deadline.

By Kevin C. Webb | GAMSG Financial Advisors

If you're a highly profitable business owner, maximizing your 401(k) may still leave you with two major financial challenges:

1. A significant current tax liability.

2. A retirement contribution limit that may be far below what you can actually afford and need to save.

For many successful business owners, physicians, dentists, attorneys, technology entrepreneurs, and other highly compensated professionals, the traditional 401(k) is an excellent starting point.

But it may not be the finish line.

If your business is generating significant income and you're already maximizing your 401(k), the more important question may be:

Are you taking full advantage of the retirement and tax-planning opportunities available through your business?

A properly designed retirement program may combine:

401(k) + Profit Sharing + Cash Balance Plan

For the right business owner, layering these plans together may create an opportunity to direct substantially more money toward retirement on a tax-deferred basis, potentially reducing current taxable income while dramatically accelerating retirement accumulation.

That's the real opportunity.

Instead of simply asking:

“Did I max out my 401(k)?”

the conversation becomes:

“How much can my business potentially contribute toward my retirement, and what could that mean for my current tax liability?”

For some owners, the difference can be substantial.

Consider a hypothetical 57-year-old business owner whose plan design supports:

• $80,000 through a 401(k), profit-sharing and catch-up structure

• An illustrative $290,000 cash balance contribution

• $370,000 of combined qualified retirement contributions

At an assumed 45% combined federal and state marginal income tax rate, that could represent approximately:

$166,500 of Illustrative Potential Current Income Tax Savings

And depending on age, compensation, employee demographics, and actuarial plan design, the potential retirement contribution could be even larger.

But there is another reason business owners should evaluate this strategy right now.

Your 2025 Tax-Planning Window May Still Be Open

For certain calendar-year businesses that filed a valid extension for their 2025 tax return, there may still be an opportunity to evaluate employer-funded retirement plan contributions attributable to 2025.

The window, however, is closing.

September 15, 2026 Is a Critical Deadline

For a calendar-year cash balance or defined benefit plan, the minimum required contribution is generally due no later than:

September 15, 2026

For calendar-year S corporations and partnerships, September 15 is also generally the extended 2025 tax-return deadline.

Some C corporations and sole proprietors may have an extended tax-return deadline of October 15, but that does not generally extend the September 15 minimum-funding deadline for a calendar-year defined benefit/cash balance plan.

That distinction is critical.

You may be thinking:

“My tax return isn't due until October. I still have time.”

If a cash balance plan is part of the strategy, that may not be the case.

Plan design, employee census analysis, actuarial calculations, plan documents, account establishment, and funding all require time.

If potentially reducing your 2025 tax liability while significantly increasing retirement savings is important to you, now is the time to determine whether an opportunity exists.

Why Your 401(k) May Not Be Enough

A 401(k) is an excellent retirement savings vehicle.

But there are limits to how much can be accumulated through a defined contribution plan each year.

2025 and 2026 Retirement Plan Limits

For 2026, the basic employee 401(k) elective deferral limit is $24,500.

Participants age 50 or older may generally make an additional $8,000 catch-up contribution.

Eligible participants ages 60 through 63 may qualify for the higher $11,250 catch-up contribution.

The overall defined contribution annual additions limit for 2026 is $72,000 before applicable catch-up contributions.

That means an eligible participant age 50 or older could potentially have as much as $80,000 allocated through the 401(k)/defined contribution structure when the general catch-up is included.

For an eligible participant aged 60 through 63, that amount could potentially reach $83,250 when the higher catch-up applies.

Those are significant retirement contributions.

But imagine a successful business owner earning several hundred thousand dollars, or more, every year.

Your business may now be generating the income you worked decades to create.

But with that success may come a much larger tax bill.

At the same time, you may realize that traditional 401(k) limits simply don't allow you to move enough money toward retirement to accomplish your goals.

That's when the conversation should change.

The question becomes:

Can I use my business retirement plan more strategically to potentially reduce current taxable income while putting significantly more money toward my retirement?

Potentially.

That's where profit sharing and a cash balance plan come into the picture.

Profit Sharing Creates the Second Layer

Suppose a business owner makes the maximum $24,500 employee 401(k) deferral in 2026.

The defined contribution annual additions limit is $72,000.

In a simplified example, assuming no other employer contributions reduce the available amount:

$72,000 Defined Contribution Limit

– $24,500 Employee 401(k) Deferral

= $47,500 Potential Employer Contribution Capacity

That additional employer contribution may potentially come through profit sharing, subject to plan terms, employee demographics, nondiscrimination testing, compensation, and applicable deduction limits.

For an eligible owner age 50 or older:

401(k) Employee Deferral: $24,500
Employer Profit Sharing: $47,500
Age 50+ Catch-Up: $8,000

Potential Combined Defined Contribution Amount: $80,000

That's meaningful.

But for a high-income owner looking to save substantially more, and potentially create a much larger current deduction, the next question becomes:

Can we go beyond $80,000?

For the right business owner, the answer may be yes.

The Third Layer: The Cash Balance Plan

A cash balance plan is an IRS-qualified defined benefit pension plan.

It can be established alongside a 401(k) profit-sharing plan.

Unlike the 401(k), cash balance plan funding is not determined by one universal annual contribution limit.

Funding is actuarially determined based on factors that may include:

• Age

• Compensation

• Years of service

• Employee demographics

• Existing retirement plan design

• Interest-crediting assumptions

• Prior defined benefit plan participation

• Retirement objectives

For the right high-income business owner, that may create substantially greater tax-deferred retirement contribution capacity than a 401(k) alone.

There is no single universal cash balance plan contribution limit.

It is also important to understand that the $290,000 defined benefit figure for 2026 is an annual benefit limit, it is not a $290,000 statutory cash balance contribution limit.

The actual cash balance contribution must be calculated by the plan's enrolled actuary.

What Could the Tax Savings Look Like?

Let's look at a hypothetical example.

Hypothetical Business Owner

Assume a 57-year-old business owner:

• Owns a consistently profitable closely held business

• Has strong and predictable cash flow

• Earns sufficient compensation to support the illustrated plan design

• Is already maximizing the available 401(k)

• Wants to potentially reduce current taxable income

• Wants to significantly accelerate retirement savings

• Has spent years reinvesting money into the business

• Has employee demographics that support the illustrated plan design after actuarial testing

Instead of stopping at the traditional 401(k), the owner evaluates:

401(k) + Profit Sharing + Cash Balance Plan

Hypothetical 2026 Retirement Contribution

Now consider the potential tax impact.

For illustration purposes only, assume:

• $370,000 total qualified retirement plan contribution

• 45% combined federal and state marginal income tax rate

• The full illustrated contribution qualifies for deduction in the applicable tax year

The simplified calculation becomes:

$370,000 × 45% = $166,500

Illustrative Potential Current Income Tax Savings: $166,500

This is why the strategy can be so compelling.

The business owner isn't simply attempting to find another tax deduction.

The objective is potentially to redirect substantially more current income toward building retirement wealth.

Rather than potentially paying an additional $166,500 in current federal and state income taxes under the assumptions above, significantly more capital may potentially be directed into qualified retirement savings.

That doesn't mean the taxes permanently disappear.

Traditional qualified retirement plan contributions generally provide tax deferral, and distributions may ultimately be taxable when received.

But there can be a substantial financial difference between paying taxes on income today and potentially redirecting more of that income toward a qualified retirement plan designed to help fund your future.

Could the Potential Tax Savings Exceed $200,000?

Under certain hypothetical circumstances, yes.

Consider an older highly compensated owner whose company demographics and actuarial plan design support approximately:

401(k) + Profit Sharing: $80,000

Illustrative Cash Balance Contribution: $397,000

That could potentially produce:

$477,000 of Combined Qualified Retirement Contributions

Using the same hypothetical 45% combined marginal federal and state income tax rate:

$477,000 × 45% = approximately $214,650

or approximately:

$214,600 of Illustrative Potential Current Income Tax Savings

Now we are having a very different conversation than:

“Did you maximize your 401(k)?”

Instead:

“How much could we potentially redirect from current taxable income toward your retirement?”

That's the retirement and tax-planning conversation high-income business owners should be having with their financial advisor, CPA, and retirement plan professionals.

However:

$477,000 is not a universal maximum contribution.

And:

$214,600 is not a universal maximum tax savings amount.

Actual results depend on factors including:

• Owner age

• Compensation

• Compensation history

• Years of service

• Business entity

• Employee demographics

• Existing retirement plans

• Prior defined benefit plan participation

• Actuarial assumptions

• Plan design

• Required employee contributions

• Applicable federal and state tax rates

• Deduction limitations

• Business cash flow

These examples illustrate the potential magnitude of the opportunity, not a guaranteed result.

You Built the Business. Now the Business May Be Able to Help Build Your Retirement.

Many successful entrepreneurs spend decades putting the business first.

You build the company.

Hire employees.

Purchase equipment.

Acquire real estate.

Expand locations.

Pay down debt.

Reinvest profits.

Support your family.

And often, retirement savings get whatever is left over.

Eventually, though, the business reaches another stage.

Profitability increases.

Cash flow improves.

Your income rises.

And the tax bill rises with it.

At that point, the question shouldn't only be:

“How can I reduce my tax bill?”

The better question may be:

“Can I potentially reduce my current tax liability while redirecting more of that income toward my own retirement?”

For the right business owner, a properly designed:

401(k) + Profit Sharing + Cash Balance Plan

may help address both objectives.

Who Should Evaluate This Strategy?

A cash balance plan is not appropriate for every business.

But this strategy may warrant serious evaluation if several of the following apply to you:

• Your business is consistently profitable.

• Your cash flow is relatively predictable.

• You are already maximizing or approaching your 401(k) limits.

• Your annual tax liability has become substantial.

• You want to potentially reduce current taxable income.

• You want to save significantly more for retirement.

• You are age 40 or older.

• You are age 50 or older and need to accelerate retirement accumulation.

• You own a closely held business or professional practice.

• You can make ongoing qualified-plan contributions.

• You want to improve benefits for key employees.

• You want your CPA, financial advisor, TPA, and actuary working together.

Businesses frequently worth evaluating include:

• Healthcare and medical practices

• Technology companies

• Law firms

• Accounting firms

• Consulting firms

• Engineering firms

• Construction and trade businesses

• Dental practices

• Veterinary practices

• Family-owned companies

• Other profitable closely held businesses

What Could This Look Like in Different Types of Businesses?

One of the most important things to understand about this strategy is that it is not limited to any one profession or industry.

The common denominator is typically a profitable business, highly compensated owners or partners, sufficient and reasonably predictable cash flow, and a desire to potentially reduce current taxable income while accelerating retirement savings.

Here are three examples of the types of businesses where the strategy may warrant evaluation.

Example 1: A Profitable Healthcare Practice

Consider a physician who owns a successful medical practice.

The physician may have spent years completing medical school, residency, and specialized training before reaching peak earning years. Then additional capital may have gone toward buying into or building the practice, hiring staff, purchasing equipment, acquiring real estate, and paying down debt.

Now the practice is mature and highly profitable.

The physician is maximizing the 401(k), but would like to:

• Potentially reduce current taxable income

• Significantly increase retirement savings

• Catch up for years when retirement contributions were lower

• Provide competitive retirement benefits to key employees

• Coordinate the strategy with the practice CPA

A properly designed 401(k) + Profit Sharing + Cash Balance Plan may warrant analysis.

But healthcare is only one example.

Example 2: A Successful Technology Company

Consider the founder of a profitable closely held technology company.

The owner may have spent years directing most available capital toward:

• Software development

• Hiring engineers and technical staff

• Sales and marketing

• Product development

• Infrastructure

• Business expansion

The company is now consistently profitable, and the founder is earning substantial W-2 or business income.

The owner already maximizes the 401(k), but the traditional plan limits may represent only a small percentage of what the owner can afford to save.

The owner may now have two objectives:

Reduce current taxable income where appropriate.

and

Convert more of the company's profitability into personal retirement wealth.

An optimized 401(k) profit-sharing plan layered with a cash balance plan may create additional retirement contribution capacity, subject to employee demographics, plan testing, and actuarial analysis.

The same strategy may also help the company strengthen retirement benefits as it competes for talented employees.

Example 3: A Profitable Law Firm

Now consider a law firm with several highly compensated partners.

The partners may already maximize their 401(k) contributions and receive profit-sharing contributions.

But partner compensation may be substantially higher than the amount that can be efficiently directed into the firm's existing defined contribution plan.

Some partners may also be in their 50s or 60s and have a limited number of peak earning years remaining before retirement.

The firm's questions may include:

• Can the partners save substantially more for retirement?

• Can retirement plan contributions potentially reduce current taxable income?

• How should benefits be allocated among partners of different ages?

• What employee contribution is required?

• How does the plan work alongside the existing 401(k) profit-sharing structure?

• Can the economics work for both the partners and the firm?

A census-based actuarial analysis can help answer those questions.

Again, the strategy is not simply:

“Start a cash balance plan.”

It is:

“Design the combination of qualified retirement plans that best fits the owners, employees, cash flow, and financial objectives of the business.”

The Industry May Change. The Planning Opportunity Is Similar.

A medical practice may have physicians.

A technology company may have founders and engineers.

A law firm may have partners, associates, and support staff.

A construction company may have owners, project managers and field employees.

A consulting firm may have several highly compensated principals and a relatively small professional staff.

Their employee demographics are different.

Their cash flows are different.

Their compensation structures are different.

That means their retirement plans should not simply be copied from one another.

But the core planning question can be the same:

“Is our current retirement plan allowing the owners to efficiently save as much as they reasonably can, or is there another layer we should evaluate?”

That's why every case starts with an employee census and a customized plan-design analysis.

What About My Employees?

This is one of the first questions successful owners ask.

And it should be.

Qualified retirement plans are subject to IRS nondiscrimination, coverage, and participation requirements.

You generally cannot simply create an enormous retirement benefit for yourself while completely excluding eligible employees.

That is precisely why sophisticated plan design matters.

The TPA and enrolled actuary analyze your employee census and model how combinations of:

• 401(k)

• Safe harbor contributions

• Profit sharing

• Cash balance benefits

may work together.

There will frequently be a cost associated with providing benefits for employees.

The real analysis isn't simply:

“How much can the owner contribute?”

It's:

“How much can the owner potentially contribute, what does the employee benefit cost, what may be deductible, and does the overall economics of the strategy make sense?”

That's the analysis we want.

Start With an Employee Census, Not a Guess

You may see advertisements saying:

“Put $200,000 into a cash balance plan.”

That number may be possible for someone.

It may not be possible for you.

The appropriate way to evaluate the opportunity is to analyze:

• Owner ages

• Employee ages

• Compensation

• Ownership percentages

• Dates of hire

• Hours and service

• Current retirement plan

• Desired owner contribution

• Business cash flow

Then the TPA and enrolled actuary model the plan.

At GAMSG Financial Advisors, we don't want to sell you a generic contribution number.

We want to answer:

“Based on my actual company, how much could I potentially contribute, what could the tax impact be, and does the strategy make economic sense?”

And It May Not Be Too Late for 2025

The ability to establish certain employer-funded qualified retirement plans after the end of the tax year is commonly attributed to SECURE 2.0.

The retroactive plan-adoption authority actually originated under Section 201 of the original SECURE Act of 2019, now reflected in Internal Revenue Code Section 401(b)(2).

Generally, the rule may allow an employer to adopt a qualified pension or profit-sharing plan after year-end but by the employer's tax-return due date, including a valid extension, and elect to treat the plan as adopted as of the last day of the prior tax year.

That means some businesses acting in 2026 may still have an opportunity to evaluate employer-funded contributions attributable to 2025, assuming all applicable requirements are satisfied.

This does not generally mean you can go back and create 2025 employee 401(k) salary deferrals.

Employee salary deferrals operate under separate rules.

The current planning opportunity primarily involves potential:

Employer Profit-Sharing Contributions

and

Cash Balance / Defined Benefit Contributions

That distinction is important.

September 15 Is Coming

For a calendar-year cash balance/defined benefit plan, the minimum funding deadline is generally 8½ months after the end of the plan year.

For 2025:

September 15, 2026

That is why this conversation needs to happen now.

A properly designed plan may require us to:

1. Confirm your company's 2025 tax filing status with your CPA.

2. Gather an owner and employee census.

3. Review your existing 401(k).

4. Analyze your existing profit-sharing formula.

5. Establish your desired retirement contribution.

6. Establish your potential tax-reduction objective.

7. Have the TPA/enrolled actuary model the plan.

8. Determine the required employee contribution cost.

9. Review the potential deduction with your CPA.

10. Prepare and execute plan documents.

11. Establish the investment/custodial accounts.

12. Complete funding by the applicable deadline.

Do not wait until September 14.

If a significant 2025 deduction may be available, we need enough time to determine whether the economics work and implement the strategy correctly.

How GAMSG Coordinates the Process

As your financial advisor, my role is to bring the pieces together around your financial objectives.

1. Discovery

We start with the big questions:

How much are you earning?

How much are you paying in taxes?

How much are you currently saving for retirement?

How much would you like to save?

What retirement plan do you have today?

2. Census and Feasibility Analysis

We gather the owner and employee information necessary for an actuarial analysis.

3. Plan Design Illustration

Then we compare alternatives such as:

Current 401(k)

versus

Optimized 401(k) + Profit Sharing

versus

401(k) + Profit Sharing + Cash Balance Plan

Now the decision becomes quantitative.

We can evaluate:

• Owner contribution

• Employee contribution

• Total company contribution

• Estimated plan costs

• Potential tax deduction

• Ongoing cash commitment

4. CPA Coordination

Your CPA remains an essential part of this process.

GAMSG does not replace your CPA's tax advice.

We coordinate the proposed contribution and plan design with your CPA so that tax treatment, deduction timing and business cash flow can be reviewed before implementation.

5. Implementation and Investment Management

Once the plan design is selected, we coordinate with the TPA and other professionals to implement the plan and develop an investment strategy appropriate for the qualified plan.

Want to See How the Numbers May Work for Your Business?

I've prepared a more detailed guide for business owners covering:

• 401(k) contribution limits

• Profit-sharing opportunities

• Cash balance plan design

• Potential tax benefits

• Ideal candidate profiles

• 2025 timing

• The September 15 deadline

• GAMSG's planning process

CLICK HERE TO VIEW THE: GAMSG BUSINESS OWNER 401(k) + PROFIT SHARING + CASH BALANCE PLAN GUIDE

The First Question Isn't “Should I Start a Cash Balance Plan?”

It's:

“Am I potentially paying more in current taxes than necessary because I haven't evaluated all of the retirement plan strategies available through my business?”

If you operate a highly profitable business, are already maximizing your 401(k), and want to save significantly more for retirement, this is a conversation worth having.

You do not need to know the answer before scheduling the meeting.

That's what the analysis is designed to determine.

I've created a dedicated Business Owner 401(k) Profit Sharing + Cash Balance Plan Consultation for this purpose.

During our 30-minute discussion, we can evaluate your:

• Current 401(k)

• Profit-sharing plan

• Business structure

• Number of employees

• Owner ages

• Income

• Retirement savings goals

• Desired contribution level

• Potential cash balance opportunity

If the opportunity looks promising, we'll gather the census and request a customized actuarial plan-design illustration.

Potentially Reduce Tax Liability. Supercharge Retirement Savings. Find Out What's Possible for Your Business.

CLICK BELOW TO:

SCHEDULE YOUR 401(k) PROFIT SHARING + CASH BALANCE PLAN CONSULTATION

If potentially reducing your 2025 tax liability while significantly increasing retirement savings is important to you, don't wait until the September 15 deadline to begin the analysis.

About Kevin C. Webb

Kevin C. Webb
GAMSG Financial Advisors

Kevin works with business owners, executives, and high-income professionals to develop coordinated retirement, investment, and wealth-management strategies. Through GAMSG Financial Advisors, he works alongside clients' CPAs, retirement plan administrators, actuaries, and other professionals to help align qualified retirement plan strategies with broader financial objectives.

GAMSG Financial Advisors
385 Astoria Way
McDonough, GA 30253

404-769-1401
855-937-3882
kwebb@gamsg.biz
www.gamsg.com

Important Disclosures

GAMSG Financial Advisors is a registered investment adviser. Registration does not imply a certain level of skill or training.

This material is provided for educational and informational purposes only and should not be construed as individualized investment, tax, legal, or accounting advice, or as an offer or solicitation to buy or sell any security.

Retirement plan design, contribution levels, deductions, minimum funding requirements, nondiscrimination testing, tax consequences, and implementation deadlines depend on the specific facts and circumstances of the employer, the plan's provisions, and applicable law.

Cash balance plan contribution amounts are determined actuarially and will vary based upon factors including age, compensation, service, employee demographics, plan design, actuarial assumptions, prior plan participation and other considerations. Cash balance contribution amounts shown in this article are hypothetical illustrations and are not statutory contribution limits.

The tax-savings examples are hypothetical and assume a 45% combined federal and state marginal income tax rate and that the illustrated qualified retirement plan contributions are fully deductible in the applicable year. Actual tax rates, deductions, and tax consequences vary. Illustrations do not reflect employee contribution costs, administrative expenses, payroll tax considerations or other potential tax or financial effects.

References to potential tax deductions, tax savings, reductions in taxable income or reductions in tax liability are not guarantees of results. Qualified retirement plan contributions generally provide tax deferral rather than permanent elimination of income tax. Distributions from traditional qualified retirement plans may be taxable when received.

Business owners should consult their CPA or other qualified tax professional regarding their individual tax circumstances.

Employers should consult their CPA, ERISA counsel, third-party administrator and/or enrolled actuary before implementing or modifying a qualified retirement plan.

The September 15, 2026 deadline discussed herein generally relates to minimum funding for a calendar-year 2025 defined benefit/cash balance plan. Tax-return deadlines, plan-adoption deadlines, deduction deadlines, and minimum-funding deadlines are separate requirements and may differ based on entity type, plan year, tax year, extensions, and other circumstances.

Investing involves risk, including possible loss of principal. Tax laws, retirement plan limits and regulatory guidance are subject to change.