Hiring in 2026 after the plan was designed on last year's census

April is when practices hire. The associate starts in May, the hygienist was promised thirty-two hours, the paralegal is replacing someone who left in February, or a spouse is finally going on payroll. The cash balance plan, if you have one, was illustrated on a census that did not include that person. The illustration is not a contract with the IRS, and it is not a promise that the same deposit will still pass once the payroll changes. Do not rely on last year's census once you have made an offer. Tell the administrator before the start date, not at the contribution meeting in September.

Sterling Pension Group LLC in West Hartford administers the plan. We are a third-party administrator, not an actuarial firm. An independent Enrolled Actuary certifies the valuation after the census is real. This briefing is not tax, legal, or actuarial advice. It is the list of facts a hire changes.

The census is the design, not a spreadsheet attachment

A cash balance plan is tested and funded on people. The inputs are dates of birth, dates of hire, hours, ownership, family relationships, and compensation as the document defines it. Last year's illustration used last year's people. If those people are the same and their pay is the same, the picture can be updated for the 2026 limits and left in the same shape. A new employee is not an update. It is a different population.

Some hires do not enter the plan this year, and that is the first question rather than the last. The statute lets a plan require age 21 and a year of service, often measured as 1,000 hours, before a person must be included. A plan may be more generous than that. It may not be harsher. If your document has a one-year wait, a May 2026 hire often enters in 2027, and the 2026 test may still look like last year's. If your document has immediate entry, or a short wait, or counts six months, the new person can be a participant before the summer is over. Read the entry dates. Do not guess them from a summary someone remembers.

Hours matter for people who are not full time. A hygienist, a part-time associate, or a seasonal employee can cross 1,000 hours without anyone intending them to. Long-term part-time rules are a 401(k) deferral topic under the SECURE Acts. They are not a cash balance accrual rule, and they are easy to mix together in a combo plan. Ask the 401(k) recordkeeper how the deferral side treats part-time service. Ask the pension administrator, separately, who accrues a pay credit. Those answers are allowed to differ. They are not allowed to be improvised at year-end from a payroll download no one checked.

Family members are not "outside staff" because they share your name. A spouse on payroll is an employee. Attribution rules can treat ownership as shared. A child who summer-clerks, if paid and if hours add up over years, can become a participant later. Tell the administrator about the relationship when you tell them about the hire. The staff cost discussion is built on this kind of fact. It is not built on a percentage someone quoted before the offer letter went out.

What can break when the headcount changes

Coverage under section 410(b) asks whether the plan covers enough of the non-highly compensated employees relative to the highly compensated ones. Nondiscrimination under section 401(a)(4) asks whether the benefits discriminate in favor of the highly compensated group. A cash balance plan is usually tested on the benefits it promises, not on the raw dollar of the deposit. That is why an older owner can have a larger pay credit than a younger staff member and still have a design that passes. Add a highly paid associate who is close to the owner's age, and the arithmetic that used to pass can stop passing. Add several lower-paid employees, and the staff cost that was acceptable in January can become the dominant number.

Minimum participation under section 401(a)(26) applies to defined benefit plans, including cash balance plans. The plan generally has to benefit the lesser of 50 employees or 40 percent of employees. A very small plan that was fine with two participants can fail if the firm grows and the formula benefits only the owners. This is a headcount rule, not a politeness rule. It is one reason a hire is an administrator's problem even when you intend the new person to receive only a modest benefit.

If the cash balance plan is paired with a 401(k) profit-sharing plan, the combo has its own testing. Cross-tested designs often rely on a gateway contribution to non-highly compensated employees, frequently discussed as a percentage of pay in the profit-sharing plan. The percentage is a feature of the regulations and of your document, not a flat tax you can look up next to the deferral limit. When the census changes, the gateway changes with it. A design that put most of the deductible dollar on the owners last year can require a larger staff contribution this year, or a smaller owner credit, or both. Combo plans are where this shows up. The pension does not absorb the problem by itself.

Top-heavy rules can add a minimum for non-key employees when the owners hold most of the benefits. A new key employee, or a change in who is key, moves that test. The key-employee dollar threshold is indexed; for 2026 the compensation figure used in the officer test is higher than it was several years ago, and the right response is to let the recordkeeper and the administrator run it, not to memorize a hallway number. The point for April is simpler. A hire can create a contribution you did not budget.

Controlled groups and affiliated service groups can pull in employees you do not think of as yours. The billing company, the staffing company you own with a partner, the second office that has its own employer identification number, all of them belong in the question. Hiring into the "other" company does not hide the employee if the group is tested together. The administration file should already list related employers. If it does not, April is the month to correct that, before the new person completes a probationary period you assumed would keep them out.

The 2026 limits, and the wage you put in the offer

The limits in force were announced in IR-2025-111 on November 13, 2025, and set out in Notice 2025-67. They are collected on the IRS cost-of-living adjustment page. The elective deferral limit is $24,500. The age-50 catch-up is $8,000. The catch-up at ages 60 through 63 is $11,250. Defined contribution annual additions are capped at $72,000. Compensation the plan may count is capped at $360,000. The defined benefit ceiling is an annual benefit of $290,000, described on the IRS benefit limits page. None of these is a cash balance contribution cap. There is no flat IRS cash-balance contribution cap. Any deposit figure in last year's illustration was illustrative, and it was illustrative on last year's people.

The compensation cap does something specific to a high offer, and nothing at all to an ordinary one. An associate offered $400,000 is seen by the plan as $360,000 if the cap applies to that formula. Raising the offer above the cap does not raise the plan's considered pay. An employee offered $90,000 is seen as $90,000. The cap is not a staff-cost ceiling. Publication 560 states the compensation limit and the benefit limit in the IRS's own vocabulary. Hand it to the office manager who has been told that "nobody above the cap costs anything in the plan." That sentence is backwards. People under the cap cost what the formula gives them. The owner over the cap simply stops getting credit for the excess wage.

Roth catch-up is operational in 2026, and a new highly paid employee can walk into it. If prior-year FICA wages from the employer exceeded $150,000, the 401(k) catch-up generally has to be Roth. The rule applies to the 401(k) catch-up. It does not apply to cash balance pay credits. Final regulations are stricter in 2027. For 2026 the working standard is good-faith operational compliance. A new hire's prior-year wages from you are often zero, so the rule may not bite in the first year, and it may bite in the second. Ask the 401(k) recordkeeper. Do not try to solve Roth catch-up inside the pension formula.

Illustrations that should be thrown out

Treat any of the following as stale, even if the PDF is only a few months old. The illustration assumed no new hires. The illustration assumed a person who has since quit would work all year. The illustration used 2025's compensation cap of $350,000 and 2025's benefit limit of $280,000 out of habit. The illustration showed a single deposit with no staff line, and you have now offered a job to a clinician. The illustration was a range, and someone in the office circled the top of the range and put it in the budget.

Ask for a new illustrative range after you send the offer, the expected hours, the start date, and the age. Two ranges are more honest than one: the deposit if the new person enters this year, and the deposit if the document's waiting period keeps them out until next year. Both are illustrations. Neither is a limit. The enrolled actuary replaces them when the valuation is done. If the new range is smaller than the number you had already described to your CPA as "the deduction," the smaller range is the one that matters. The limits page is the corrective if anyone in the meeting calls the cash balance deposit a published IRS maximum.

Owners sometimes respond to a disappointing update by cutting the new hire's hours on paper so the person stays under the eligibility threshold. If the hours are real, the paper will not save you. If the hours are being manipulated after the fact, you have a worse problem than staff cost. Design the offer so the hours you intend are the hours the plan will see.

PBGC and the twenty-sixth participant

Coverage by the Pension Benefit Guaranty Corporation is plan-specific. Many small professional-service plans are exempt. Not all. The professional-service exemption generally requires that kind of employer and a plan that does not have more than 25 active participants. Hiring is how plans cross that line without anyone thinking about insurance. The twenty-sixth active participant is not a reason to avoid a necessary hire. It is a reason to know, before the offer, whether this hire changes coverage, premiums, and termination rules. The PBGC's coverage guidance is the reference. A practice that is not a professional-service employer does not get the exemption because the staff is friendly and the plan is young.

What to do in the next two weeks

Send the administrator four facts for every open offer and every person who started since January: name, date of birth, expected start date, expected hours, and expected pay. Add a note if the person is a relative, an owner, or a rehire. Rehires can bring old service with them. That single fact has put people into plans that the new offer letter assumed had a fresh waiting period.

Ask whether the document's entry dates put anyone new into the 2026 test. If the answer is yes, ask for a revised illustrative owner credit and a revised staff cost before you promise the candidate a benefits package you have not priced. If the answer is no, write down the year they will enter, and put a reminder on the calendar ninety days before that date.

If a 401(k) is part of the hire's offer, confirm with the recordkeeper when deferrals can start and whether Roth catch-up will apply next year. Do not describe the cash balance pay credit as a match. It is a pension formula. Then send us the census change while the offer is still editable. A start date is a much cheaper moment to adjust a formula than a W-2 issued in January.