Dental offices, hygienists, and a cash balance plan

A dental office that wants a cash balance plan is usually a small business with one or two owner-dentists and a hygienist team that patients actually schedule. The hygienists are not a rounding error. They are often full-time, often long-tenured, and often paid well enough that a token retirement contribution will not carry a nondiscrimination test. Assistants, sterilization staff, and a front-desk lead sit on the same registers. An associate may be a W-2 employee, a prospective owner, or a contractor whose classification needs a lawyer rather than a plan slogan. Until that list is honest, the dentist does not have a pension design. The dentist has a wish.

Sterling Pension Group LLC in West Hartford administers plans and coordinates independent Enrolled Actuaries. We are not an actuarial firm. This briefing is education for a dentist-owner and the CPA who knows the practice. It is not tax, legal, or actuarial advice. The standing page is dentists. The general staff discussion is staff cost. A medical practice faces a related census problem, not an identical one, in /insights/physicians.

The limits that apply this month, and the limit that does not exist

2025 limits are in force. The deferral limit is $23,500. The age-50 catch-up is $7,500. Participants who attain age 60, 61, 62, or 63 in 2025 may use a catch-up of $11,250 instead, if the document permits it. The defined contribution annual additions limit is $70,000. The compensation cap is $350,000. The defined benefit annual benefit limit is $280,000. The IRA limit is $7,000. The IRS announcement is IR-2024-285. The COLA table is here: dollar limitations.

The benefit limit is a ceiling on an annual benefit, not a deposit the dentist may make because the practice had a strong January. The IRS explanation is defined benefit plan benefit limits. A cash balance credit is actuarial. Any dentist-level dollar figure in a proposal is illustrative until the enrolled actuary has the census, including the hygienists. There is no published "dental owner maximum." There is no lawful way to add $280,000 to $70,000 and call the sum a contribution cap.

If a 2024 plan-year deposit is still open, it stays on 2024 limits: benefit limit $275,000, compensation cap $345,000, additions $69,000, deferral $23,000, catch-up $7,500. February of 2025 does not promote last year's accrual into this year's ceiling. How to fund last year without inventing a figure is /insights/spring-funding-2024.

Hygienists are the design

Treat the hygienist schedule as the first page of the file, not as an attachment. For each hygienist, record date of birth, date of hire, usual days per week, hours actually worked in the prior year and expected this year, and compensation. A hygienist who works four days is often well past any hours threshold the plan might use for eligibility. A hygienist who works three long days may be as well. "Part-time" on the appointment book is not a legal exclusion. You count the hours and then ask whether the document you intend to sign may exclude that person. You do not write the document to match a hope that the hours were low.

Tenure matters because a waiting period only delays people who are actually new. A hygienist in the fifth year of employment is not postponed by a one-year wait. Eligibility that was meant to "keep the plan small" while the office grew quietly will, this year, have to face the people who have been there. That confrontation is cheaper in February than after a document has been signed and a staff meeting has been promised.

Compensation matters because testing uses pay the plan counts, subject to the $350,000 cap, which most hygienists will not approach and which some owner-dentists will. A highly paid hygienist and a modestly paid sterilization assistant do not present the same testing problem. Lumping "the staff" into one average wage is how an illustrative owner credit gets a false pass. List them one by one. The method is the same as in /insights/census-first.

Associates, family, and the second entity

An associate dentist on a W-2 is an employee. An associate on a 1099 may still be an employee. Classification is for counsel and for the CPA who has to live with employment tax. A retirement plan will not ratify a convenient invoice. If the associate is likely to buy in, the design has to say what happens when a second owner appears. A cash balance formula that was generous to one owner-dentist and silent about the next one becomes a negotiation at the worst time, which is after the promise exists.

Spouses on the payroll count. Children on a summer payroll can count. A spouse who owns a separate practice is not "unrelated" merely because the branding differs. Attribution and controlled-group questions are counsel's work. Bring them up before the illustration, not after you like the illustration.

A common dental structure puts the clinical entity, a management or staffing entity, and a real-estate entity side by side. The receptionist may be paid by the entity that does not employ the dentist. If those entities have to be aggregated, the receptionist is part of the census for the dentist's plan. Omitting the second payroll because it is "just the building company" is a recurring error. Ask your CPA which entities belong on one chart. If the chart ruins an illustrative credit, the credit was about a different employer than the one that writes the checks.

What a workable split looks like, without pretending it always works

Many dental designs that succeed are a 401(k) and a cash balance plan together. Deferrals, including a hygienist's deferral if the person chooses to make one, live in the 401(k), up to $23,500 plus the catch-up the person's age allows. An employer profit-sharing contribution is often the staff benefit that gives the arrangement a chance to pass testing. The cash balance credit is where the owner-dentist's larger accrual sits, if and only if the actuary's tests allow the split you want. The reason this pair shows up so often is /insights/combo-plan. Frequency is not a safe harbor. A pension with no defined contribution staff benefit can be harder to defend, not easier. A 401(k) alone, inside the $70,000 additions limit, can be the better practice decision when the hygienist cost of a pension is a cost you will not pay. That decision is described without apology on when it is not a fit and in /insights/not-a-fit.

Ask for staff cost in dollars. "A few percent" is not a number your office manager can budget. A dollar cost per hygienist, per assistant, and for the owner, next to an illustrative owner credit, is a number a partner meeting can vote on. Age still shifts the owner's side. A dentist at 45 and a dentist at 60, both capped at $350,000 of countable pay, will not see the same illustrative credit under a $280,000 benefit limit. The mechanism is /insights/age-shape. Do not let that mechanism erase the hygienist column. A larger owner credit that fails once the hygienists are included is not a larger credit. It is a sketch of a solo practice you do not have.

The illustrations and the calculator are teaching tools. They become misleading the moment they are run with a census of one for an office that employs six. The limits page will keep $280,000 from being mistaken for a deposit. The comparison of SEP, 401(k), and pension designs is the right page if the dollar staff cost ends the pension conversation, which it sometimes should.

Funding, once you know the hygienist cost

Minimum funding for a calendar-year defined benefit plan is generally due 8.5 months after year-end, on September 15 of the next year. Miss it and the excise tax on Form 5330 can be 10% of the unpaid minimum. That minimum includes the cost of the promise you made to staff, not only the owner credit that made the plan feel worthwhile. A thin month of collections does not cancel it. If the practice cannot fund a down year, do not adopt in an up year.

Deductibility is a different date. IRC 404(a)(6) often reaches the due date of the return, including extensions. Your CPA has to say which day that is for the entity that will claim the deduction. Do not tell the bookkeeper that everything is due September 15, and do not tell the bookkeeper that nothing is due until you feel like extending. The two clocks stay visible. A deposit made in the spring can still be a prior-year deduction when the CPA says so. It cannot be an illustrative number chosen because the hygienist cost was left out to make the deduction look cleaner.

The SECURE Act generally allows a new plan to be adopted by the filing deadline, including extensions. Employee deferrals generally cannot be withheld retroactively. If you want 2025 deferrals for yourself or for staff who will actually defer, payroll has to implement elections against checks not yet paid. Waiting until the hygienist math is perfect is sensible for the pension credit. Waiting until the last paycheck is not sensible for the $23,500. You can study the pension and still turn on the deferral.

PBGC, Roth catch-up, and the office you will still be running

PBGC coverage is plan-specific. Many small professional-service employers, a category that often includes dental practices, are exempt when the statutory conditions are met. Many small employers are not exempt. Being a dentist does not complete the test, and having fewer than some number of chairs does not complete it either. Do not tell a study club that all small dental plans are exempt. Read PBGC coverage guidance with counsel, against this employer and its related entities. If the plan is covered, put the premium in the same budget as the staff contribution. If it is exempt, record why, so the conclusion can be revisited when you hire.

Notice 2023-62 delayed mandatory Roth catch-up treatment through 2025. It is not in force. A dentist whose prior-year FICA wages exceeded $150,000 will eventually be inside the operational rule that begins January 1, 2026. That rule changes the catch-up in the 401(k). It does not change the cash balance formula, and it does not change what a hygienist must be provided. For the rest of 2025, do not force Roth catch-ups. Do make sure a hygienist who is age 60 to 63 is not locked out of an $11,250 tier that the owner is somehow given. Eligibility for the tier is age, not ownership.

Publication 560 is the IRS small-business booklet. It will not know your hygienist hours. It will keep a staff meeting from confusing a cash balance plan with a SEP the practice can skip. Form 5500 filing comes later: a calendar-year form is generally due July 31, extendable to October 15 with Form 5558, on EFAST2. Form 5558 can be e-filed. The Department of Labor's filing page is Form 5500 reporting. Participant counts on that form will include eligible hygienists. Build the census so those counts are unsurprising. Administration of that sort is the plan lifecycle, and the professional cost is part of fees.

How to talk about this in the office without over-promising

You do not need a staff meeting yet. You need a private meeting with your CPA and, when the list is ready, with the actuary and the administrator. Telling hygienists that a pension is coming, before eligibility and the dollar cost are known, creates expectations the test may not support. Telling them nothing forever, while an owner-only sketch circulates among colleagues, creates a different problem. The sequence is list, cost, decision, document, then communication that matches the document. Sterling can help you keep those steps from collapsing into a single enthusiastic email.

A solo dentist with no employees, no spouse on payroll, and no related employer is a different and simpler case. Confirm that simplicity from the registers rather than from memory. If it is real, the self-employed discussion and the formula comparison in /insights/db-versus-cash-balance are the next reading. If a hygienist is hired later, the plan you adopted as a solo has to be retested against a census that changed. Adoption is not a permanent exemption from the next hire.

What to do in the next two weeks

Let the hygienist list accept or reject the idea before you socialize it.

• Build a name-by-name census: hygienists, assistants, front desk, associates, spouses, with hours and pay, from every entity.
• Ask your CPA which entities must be aggregated. If you do not like the answer, do not shop for a different answer that preserves an illustrative credit.
• Request staff cost in dollars next to any illustrative owner credit under the $280,000 benefit limit for a 2025 accrual. If the staff cost is unacceptable, stop and stay with the 401(k), using $23,500 and the real catch-up.
• Separate September 15 minimum funding from the deduction date your CPA names. Do not fund a guess while the hygienist hours are still an estimate.
• Leave mandatory Roth catch-up off for 2025. It is delayed.

When the census is something you are willing to show, contact Sterling Pension Group. We will coordinate the design with an independent enrolled actuary. We will not design the hygienists out of a practice that employs them.