Cash Balance Plans & Asset Protection for Doctors

Cash Balance

Why Cash Balance Plans Are a Powerful Asset-Protection Tool for Doctors

Focus: asset protection & retirement plan design for physicians
Last reviewed:

Key takeaways for physicians

  • ERISA anti-alienation generally protects benefits in qualified plans (like Cash Balance) from most creditors when the plan covers common-law employees (ERISA Title I).
    29 U.S.C. §1056(d)
  • Patterson v. Shumate confirms that assets in ERISA-qualified plans are excluded from the bankruptcy estate.
    504 U.S. 753 (1992)
  • Owner-only plans (no common-law employees) typically are not ERISA Title I; protection then depends on bankruptcy law and state exemptions.
    29 C.F.R. § 2510.3-3
  • Exceptions to protection include:
  • Florida provides strong statutory protection for qualified retirement assets and also makes clear there’s no exemption for fraudulent transfers or asset conversions.
    F.S. 222.21 ·
    F.S. 222.29 ·
    F.S. 222.30

For doctors, risk is part of the job—malpractice exposure, business liabilities, and personal creditors. A well-designed Cash Balance plan, often paired with a 401(k), can deliver six-figure, tax-deductible savings while placing assets in a regulated trust structure that’s generally protected from most creditors when ERISA applies. Below is a plain-English guide to what’s protected, what isn’t, and how to design it right.

Why Cash Balance Plans Can Protect Physician Assets

Cash Balance (CB) plans are tax-qualified defined benefit plans. When a 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,” which generally shields plan benefits from most creditors and lawsuits.
See 29 U.S.C. §1056(d).

In bankruptcy, the U.S. Supreme Court’s Patterson v. Shumate held that ERISA’s anti-alienation protection excludes ERISA-qualified plan assets from the bankruptcy estate, creating another layer of protection for participants.
504 U.S. 753 (1992).

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. See
29 C.F.R. § 2510.3-3.

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.
F.S. 222.21 ·
F.S. 222.29 ·
F.S. 222.30.

Important Limits & Exceptions

  • IRS levies and certain federal judgments: Anti-alienation does not block a federal tax levy. Treasury regulations expressly allow enforcement of federal tax levies against plan benefits.
    26 C.F.R. § 1.401(a)-13(b)(2). See also IRS IRM levy guidance:
    IRM 5.11.6.
  • QDROs (divorce orders): Plans must honor a valid Qualified Domestic Relations Order despite anti-alienation.
    IRS QDRO guidance.
  • Criminal restitution orders: Federal restitution can be enforced against retirement assets under statute.
    18 U.S.C. § 3613.
  • Owner-only plans: As noted, protections differ if the plan isn’t ERISA-covered.
    29 C.F.R. § 2510.3-3.

Practical tip: protection is strongest while funds remain inside the plan. Once distributed to a personal account, creditor protections depend on other laws and facts.

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.

What we configure

  • Pay-credit tiers (owner/associate/staff) or age/service bands
  • Interest crediting (fixed or Treasury-linked)
  • CB + 401(k) integrated testing to keep staff cost efficient
  • Funding ranges (min/target/max) to manage cash-flow volatility

Compliance guardrails

  • ERISA/Code rules on anti-alienation and plan operations
  • Florida limits on fraudulent transfers/conversions
  • Documented Funding & Investment Policy
  • Exit-aware planning (freeze/terminate) if circumstances change

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Quick FAQ

Do Cash Balance plans protect me from malpractice judgments?

When ERISA applies, qualified plan benefits are generally protected from most creditor claims, and ERISA protection can extend into bankruptcy. There are exceptions (IRS levies, QDROs, certain federal restitution). Your overall risk plan should still include appropriate malpractice coverage.

I’m an owner with no staff—do I get the same protection?

Usually not. Owner-only arrangements typically aren’t ERISA Title I plans; protection then depends on state law and bankruptcy exemptions. Adding a common-law employee changes the ERISA analysis.

Can I “load up” a plan if I’m sued?

No. Contributions must follow plan rules and funding ranges for legitimate retirement purposes. Florida law specifically limits exemptions for fraudulent transfers or conversions.

Is there a Florida-specific advantage?

Yes—Florida provides strong statutory protections for many retirement assets. Combined with ERISA (when applicable), physicians often get layered protection. Always coordinate with counsel for your facts.

Next step:
See a practice-specific illustration with owner targets, staff cost, and testing in one pass.
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Important: This page is for educational purposes only and does not constitute legal, tax, or investment advice.
Pension Services, Inc. is not a law firm and no attorney–client relationship is created. Asset-protection outcomes depend on
ERISA coverage, plan terms, and state law; results vary by facts. We are not acting as an ERISA 3(21) or 3(38) investment adviser
through this content. References to statutes, regulations, and cases are provided for convenience; external sites are third-party
resources and we are not responsible for their content. Please consult qualified counsel and advisors before taking any action.
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