When a cash balance plan is not a fit.

Cash balance and defined benefit plans are the wrong tool more often than the ads suggest. The useful test is whether you can fund a formula for several years, not whether this December looks prosperous.

Walk away, for now, if

• Pay is under about $200,000 and unstable. The administrative cost and the funding promise eat the tax benefit.
• You may sell or wind down within a year. A new plan can sometimes be adopted late, but a practice sale with a brand-new pension is a messy combination. Read the lifecycle note.
• Staff is large relative to owners and you have not priced their benefits. Do that on staff cost before anyone quotes a deduction.
• You want optional deposits, the way a SEP feels optional. A pension has a minimum-funding rule. Missing it can mean an excise tax. The calendar separates that date from the tax-return date.

The IRS explains the defined-benefit limit as a benefit, not a savings goal, on its benefit-limit page. Publication 560 is the small-employer overview. If you are close to a fit but not sure, the briefing from the week you are in is a better start than a generic brochure. Then talk to us with a census, not a hunch.