With a cash balance plan, a medical group adds a pension layer above the 401(k), and Assante Wealth Management reviews its funding, investments and payout in the years before you leave. Partners who leave plan assets mostly in stocks into their final year can end up helping repay a funding shortfall.
If the plan falls below 80 percent funded, the lump sum is generally capped at half. That is the mistake many late-saving physicians discover when they compare a $1 million statement balance with the amount the plan can actually pay at retirement. Miriam, a 58-year-old radiologist in a private group, faces that choice while weighing retirement at 60, 62 or part-time work.
Why add a cash balance plan after maxing a 401(k)?
A cash balance plan gives a physician or dentist a pension layer after the 401(k) contribution ceiling has been reached. A late saver who began at 40 after paying off loans may hit the IRS 2026 total defined contribution limit of $72,000, including employee and employer contributions, while still earning enough to save more. Cash balance contributions sit outside that limit.
That combination usually appears in private medical and dental groups with steady profits and several partners within about fifteen years of leaving. At 58, an enrolled actuary may calculate a contribution well above the 401(k) amount, but the number depends on age, compensation, existing credits and the plan document.
Assante Wealth Management keeps the household view simple. We look at the group plan, the 401(k), the likely retirement date and the accounts that will receive the payout, then reduce the decision to one page the client can explain at home.
- Late start after student loans
- Maxed 401(k) contributions
- Steady group profits
- Several partners nearing retirement
Can I skip a contribution after a bad year?
No. A cash balance plan does not work like a profit-sharing contribution that a group can simply skip. An enrolled actuary certifies the required contribution each year under the minimum funding rules, usually leaving a range between the minimum required amount and the maximum deductible amount for a lean year.
The plan document sets pay credits and the interest crediting rate. That rate may be fixed, Treasury-based or tied to actual plan returns. Credits already earned cannot be cut. Lower future pay credits require a plan amendment and advance written notice to participants.
The IRS expects the plan to be permanent. Closing it after only a few years without a business reason can draw questions, and standard termination generally requires full funding. A late joiner should also know that the defined benefit limit shrinks by one-tenth for every year she falls short of ten years of participation. Professional service groups with no more than 25 active participants usually fall outside PBGC coverage, so no federal insurer stands behind the plan.
Doing nothing in the final two years can change the payout
A cash balance statement shows a promised account balance, not a pile of assets assigned to one partner. When plan assets fall short, partners fund the gap over several years under the funding rules. The partnership agreement controls the split; the example below uses equal shares, and shortfall contributions do not increase anyone's account.
Hypothetical: Miriam, 59, has $1 million in her group's cash balance plan and expects to roll a lump sum to an IRA at 60. Her group has five partners, and each version of the plan begins fully funded with $3 million. The only difference is how the plan invests.
Plan A holds short-term bonds and loses 2 percent in a bad year. The arithmetic is $3 million x 2 percent = $60,000 lost; $3 million - $60,000 = $2.94 million; $2.94 million divided by $3 million = 98 percent funded. The partners owe $60,000 in total, or $60,000 divided by five = $12,000 each.
Plan B is mostly stocks and loses 25 percent. The calculation is $3 million x 25 percent = $750,000 lost; $3 million - $750,000 = $2.25 million; $2.25 million divided by $3 million = 75 percent funded. Each partner owes $750,000 divided by five = $150,000, even though Miriam's statement still shows $1 million.
Below 80 percent funded, Plan B can generally pay only half of Miriam's lump sum, or $1 million divided by two = $500,000, until funding improves. Below 60 percent, a lump sum is generally not allowed until the plan recovers. Applying generic advice to stay invested for the long run can expose a partner leaving at 60 to a bad final year. We'd rather the plan's assets sit close to its crediting rate in the last two years, because a departing partner cannot wait out a recovery.
Plan assets and the IRA receiving the rollover can both lose value, so recovery may arrive too late for a partner who is leaving. The first thing Assante Wealth Management asks for is the actuary's latest funded percentage. If you expect the lump sum within two years, request that percentage now. A 12 percent asset drop takes a 90 percent funded plan to about 79 percent, just under the 80 percent line where lump sums are generally limited to half.
| Plan | Funded percentage | Partner shortfall | Lump sum at 60 |
|---|---|---|---|
| Plan A | 98 percent | $12,000 | $1 million |
| Plan B | 75 percent | $150,000 | $500,000 |
Assante Wealth Management lines up the payout with taxes and beneficiaries
Miriam can move her lump sum straight from the plan to an IRA by direct trustee-to-trustee rollover, which generally avoids current tax. If the plan pays the check to Miriam herself, it normally withholds 20 percent federal tax, and she would need other money to deposit the full amount. The years from 60 to 67 may offer a lower-income window for partial Roth conversions. A conversion at 63 can still raise her Medicare premiums at 65, because each year's premium is set by the tax return filed two years before.
If Miriam retires at 60, she can wait until Social Security full retirement age, 67 for people born in 1960 or later. The 2026 earnings test applies only if she claims benefits before 67 and keeps working part-time. In that case, benefits are temporarily withheld once her earnings pass $24,480 a year. If she delays her claim, part-time pay does not trigger the test. Her new IRA also needs its own beneficiary form, because the cash balance plan's form does not carry over. As a divorced participant, she generally does not need spousal consent for a lump sum, but divorce paperwork and any QDRO should be checked first.
Assante Wealth Management puts the rollover, income draws and beneficiary choices on the same page. Consolidating the cash balance lump sum and group 401(k) into one IRA may reduce the number of accounts, but consolidation has tax and investment consequences that should be checked before assets move.
The timeline answers a practical question: which deadline or review belongs to each age if Miriam leaves at 60?
| Age | What happens | What to do |
|---|---|---|
| Age 58 | Actuary's annual funding report arrives | Ask for the funded percentage |
| Age 59 | Last full year of pay credits | Ask partners to move assets toward crediting rate |
| Age 60 | Leaves the group | Elect lump sum, direct rollover to IRA |
| Age 62 (if part-time) | Smaller pay credits on lower pay | Check the plan still earns its cost |
| Age 67 | Social Security full retirement age | Claim or keep delaying |
| Age 75 | RMDs start on the rolled IRA | Set income draws before then |
Should I keep a cash balance plan this close to 60?
Two situations make a review timely: a partner who maxes the 401(k), has steady income and can commit to several years of contributions, or a participant already in the plan who expects a lump sum within two years.
A cash balance plan is a poor fit when group income swings widely, partners may leave soon or no one can commit to required funding. Miriam also cannot change the plan's investments or credits alone; those decisions belong to all partners.
Send Assante Wealth Management the latest cash balance statement and the actuary's annual funding report through the site's request form. We review the funded percentage, compare plan investments with the crediting rate and outline the rollover steps in a one-page note. We handle the work remotely by video or telephone, so physicians and dentists anywhere in the country can use it. Assante Wealth Management requires at least $500,000 in investable assets.
- Maxed 401(k) contributions
- Several years of steady profits
- Lump sum within two years
- Funding report available
Your questions about a cash balance plan, answered
What happens if my group closes the cash balance plan the year after I retire?
If the group closes the cash balance plan after you retire, the plan generally must be fully funded before standard termination. Your accrued benefit does not simply disappear, but the actuary must calculate the settlement and the plan administrator must follow the document and funding rules. A qualified professional should review the termination paperwork before you choose a payout.
My cash balance statement shows a smaller interest credit than last year. Did I lose money?
A smaller interest credit does not necessarily mean you lost money. The plan document sets the interest crediting rate, which might be fixed, Treasury-based or tied to actual returns. Your account still receives the credits already earned under the document, while plan assets can rise or fall separately from the statement balance.
Can the partners lower future pay credits later if practice income drops?
Partners can generally lower future pay credits only through a plan amendment and advance written notice to participants. Credits already earned cannot be cut. A contribution may still be required after practice income drops, although the plan usually has a range between the minimum required contribution and the maximum deductible amount.
Does a cash balance plan count against my $72,000 401(k) limit?
No. The cash balance plan contribution sits outside the IRS limit for 2026 of $72,000 on combined employee and employer contributions to a 401(k). The cash balance plan has its own defined benefit limits and funding calculation, so the actuary must determine the permitted contribution for each participant.
Sources and further reading
This is general information, not advice tailored to your finances or circumstances. Investing involves risk, including the possible loss of principal. Before making any decision about money, taxes or your practice, talk with a professional who knows your full situation.