Cash Balance Plan Contribution Limits (2025): The Complete Guide
Understand 2025 cash balance plan contribution limits, how age affects funding,
investment options and plan loans, ERISA coverage, and how a 401(k)/profit sharing pairs with a cash balance plan.
2025 limits at a glance
These limits are referenced frequently when designing cash balance (DB) plans and paired 401(k)/profit sharing (DC) plans:
| Item | 2025 limit | Notes |
|---|---|---|
| Defined benefit annual benefit limit (IRC §415(b)) | $280,000 | Upper bound on annual DB benefit; cash balance funding is tied to this. |
| Defined contribution annual additions (IRC §415(c)) | $70,000 | Relevant to 401(k)/profit sharing employer+employee total (excl. catch‑up). |
| 401(k) elective deferral (IRC §402(g)) | $23,500 | Employees may also have catch‑up: $7,500 (50+) and special $11,250 for ages 60–63 in 2025. |
| Compensation cap (IRC §401(a)(17)) | $350,000 | Max compensation that can be considered for qualified plan purposes. |
Maximum contribution to a cash balance plan
There isn’t a single fixed “max contribution” like a 401(k). In a cash balance plan, the maximum employer contribution is the
actuarial amount needed to fund the largest permitted DB benefit under IRC §415(b). It depends on age,
compensation (subject to §401(a)(17)), your benefit formula (pay credits), the plan’s interest crediting rate, and funding status.
Older owners can often fund substantially more due to fewer years remaining to fund the promised benefit.
Cash balance plan contribution limits by age
Age isn’t a limit by itself—age changes the math. Two people on the same pay can require very different contributions
to fund the same promised benefit because the time horizon differs. Contribution ranges rise with age as the
plan seeks to fund the permitted benefit under §415(b).
Minimum contribution (funding rules)
Cash balance plans are DB plans subject to annual minimum funding requirements. Each year you must contribute at least
the Minimum Required Contribution (MRC) under IRC §430. Underfunding can trigger excise taxes and benefit restrictions.
A stable design and funding policy help avoid surprises.
Investment options & how to invest assets in a cash balance plan
You choose an interest crediting rate (ICR) in the plan (fixed, Treasury‑linked, or market‑based) subject to the hybrid plan regulations.
Then you invest the plan trust to support that ICR and your funding goals:
- Fixed or Treasury‑based ICR: many sponsors use liability‑aware, high‑quality bond portfolios to track the ICR and dampen volatility.
- Market‑based ICR (MBCBP): interest credits equal the trust’s actual return (often with a cumulative floor). Use a diversified portfolio consistent with the policy.
- Participants typically do not direct investments; assets are managed at the trust level.
Cash balance plan loans
Loans are optional. If permitted by the plan document, they must follow IRC §72(p): generally the lesser of
$50,000 or 50% of the vested accrued benefit (with a small‑balance exception), level amortization, and a
5‑year maximum term (longer for a primary residence). Many small CB plans simply choose not to offer loans.
Cash balance plan design
- Eligibility & vesting (e.g., 1‑year wait; 3‑year cliff vesting common).
- Pay credits (flat %, service‑ or age‑graded, owner group).
- Interest crediting rate (fixed, Treasury‑indexed, or market‑based per hybrid regs).
- Form of payment (annuity; many plans allow lump sums per §417(e)).
- Funding policy (target stability; comply with §430).
Profit sharing & cash balance plan (and 401(k))
Pairing a cash balance plan with a 401(k)/profit sharing plan is common. Employees can defer up to $23,500 (2025) plus applicable
catch‑ups into the 401(k). Employer profit sharing helps pass testing for staff, while cash balance funding targets older/owner employees.
The DC limit §415(c) = $70,000 and the DB annual benefit limit §415(b) = $280,000 are separate caps in 2025.
Are cash balance plans subject to ERISA?
Yes. In the private sector, cash balance plans are defined benefit plans subject to ERISA’s funding, fiduciary, and reporting rules.
Most are also PBGC‑covered (statutory exceptions apply for certain plans).
Who contributes?
The employer funds the plan to deliver the promised benefits. Participants typically do not make elective deferrals to the cash balance plan itself; deferrals occur in the separate 401(k), if offered.
FAQ
Cash balance plan contribution limits 2025?
Key 2025 anchors: DB §415(b) annual benefit $280,000; DC §415(c) annual additions $70,000;
401(k) §402(g) deferral $23,500; compensation cap §401(a)(17) $350,000; standard catch‑up $7,500;
special catch‑up $11,250 for ages 60–63 (2025).
Cash balance plan contribution limits by age—how does age change it?
Older participants can fund more because fewer years remain to fund the permitted DB benefit; exact amounts require an actuarial calculation.
Cash balance plan investment options?
Choose a compliant interest crediting rate and invest the trust accordingly (liability‑aware for fixed/Treasury; diversified for market‑based designs).
Cash balance plan loans?
Optional; if allowed, they must meet §72(p) on amount and term.
Cash balance range?
The contribution range varies with age, pay, ICR, and funded status; it is whatever funds the permitted benefit under §415(b).
Cash balance plan and 401(k)—can we have both?
Yes. It’s a common pairing that helps owners maximize deductible funding while supporting staff benefits.
References
- IRS Notice 2024‑80 (2025 COLA for retirement plans)
- IRS—Retirement plan contribution limits (overview)
- DOL Fact Sheet—Cash Balance Pension Plans
- IRS—Cash Balance Pension Plans
- IRS—Retirement Plan Loans (IRC §72(p))
- IRC §430—Minimum funding rules for single‑employer DB plans
- IRS—Hybrid DB plans resources (interest crediting rules)