Why Cash Balance Plans Can Blow Up on Doctors

Hinzugefügt: 2026-04-30

[00:00:00]Everyone is telling [music] you to start a cash balance plan, but no one is telling you how it can blow up. It is one of the most powerful tax strategies in the code and one of the fastest way to trap your future cash flow.

[00:00:15]And yes, you can generate six-figure deductions every year.

[00:00:19]>> [music] >> And the older you get, the more you can put away. Sounds like a no-brainer, right? But here's what most people miss.

[00:00:28]This is not a 401k. It's a defined benefit plan under IRC Section 401A.

[00:00:35]While you're not choosing contributions, you're committing to a benefit. [music] And that changes everything because now your S corp is responsible for funding that promise. Not just when your business is booming, but under required [music] funding rules, even when things slow down. So, what happens when life hits?

[00:00:55]You get sick, revenue drops, and your practice struggles? You can stop future accruals, but you don't erase what's been promised. So, if the plan is underfunded when you terminate it, you have to make up the shortfall before you can shut it down. What if it's overfunded?

[00:01:15]Now you've got a different problem.

[00:01:18]Reversion risk and excise tax of 20 to 50% under Section 4980.

[00:01:25]This isn't a loophole. This [music] is how defined benefit plans actually work.

[00:01:30]A cash balance plan is powerful, but it is not just a tax move. It's a long-term commitment. And if you don't understand how it ends, maybe you should consider not starting the story.