Why Cash Balance Plans Can Protect Physician Assets

Cash Balance (CB) plans are tax‑qualified defined benefit plans under the Internal Revenue Code. When the plan is covered by ERISA Title I (i.e., it covers at least one common‑law employee), federal law requires an anti‑alienation clause—benefits “may not be assigned or alienated.” Practically, that means plan benefits are generally shielded from most creditors and lawsuits. :contentReference[oaicite:5]{index=5}

In bankruptcy, the U.S. Supreme Court’s Patterson v. Shumate decision held that ERISA’s anti‑alienation protection excludes ERISA‑qualified plan assets from the bankruptcy estate, adding another layer of creditor protection for participants. :contentReference[oaicite:6]{index=6}

Owner‑Only vs. ERISA‑Covered: Why It Matters

Many physician practices start as owner‑only (e.g., you and a spouse). Plans that cover no common‑law employees typically aren’t subject to ERISA Title I—so the strong federal anti‑alienation rule doesn’t apply. Protection then relies on state exemptions and bankruptcy rules. If you later add a common‑law employee, the plan generally becomes ERISA‑covered and gains Title I protections. :contentReference[oaicite:7]{index=7}

Florida Perspective: Strong but With Guardrails

Florida law provides robust protection for tax‑qualified retirement funds from creditor claims, reinforcing federal protections for many physicians practicing in the state. At the same time, Florida statutes expressly limit exemptions for fraudulent transfers or conversions. In short: adopt and fund for legitimate retirement purposes, not to sidestep an imminent claim. :contentReference[oaicite:8]{index=8}

Important Limits & Exceptions

• IRS levies and certain federal judgments: Anti‑alienation doesn’t block federal tax levies; regulations acknowledge this exception. :contentReference[oaicite:9]{index=9}
• QDROs (divorce orders): Plans must honor a valid Qualified Domestic Relations Order despite anti‑alienation. :contentReference[oaicite:10]{index=10}
• Criminal restitution orders: Courts have allowed access in certain cases under federal restitution statutes. :contentReference[oaicite:11]{index=11}
• Owner‑only plans: As noted, protections differ if the plan isn’t ERISA‑covered. :contentReference[oaicite:12]{index=12}

Designing Cash Balance for Doctors: Protection + Efficiency

For physicians, the real power is combining protection with predictable, high contributions—often in the low‑ to mid‑six figures when coordinated with a 401(k). We design per‑class or per‑employee formulas (within compliance), model coverage and nondiscrimination before adoption, and set a funding policy that fits practice cash flow.

Book a 15‑minute Fit Check →
 | 
Talk with a plan designer →

Quick FAQ