What a Defined Benefit plan is
A DB plan is a pension. Unlike a 401k where you choose how much to contribute, a DB plan promises you a specific retirement benefit, and you contribute whatever an actuary calculates you need to fund that benefit.
For high earners close to retirement, the required contribution can be massive — $150k, $250k, $350k+ per year. All deductible against your business income.
Who qualifies
- Self-employed with consistent high income ($200k+ net SE)
- Few or no employees (or willing to fund the same benefit for them)
- Typically 40+ years old (younger means smaller contribution calculation)
- Plans to keep the business open for 3+ years
The contribution math
The actuary works backwards from a target pension. The 2025 max annual benefit is $280,000/year. To fund that benefit by normal retirement age, the contribution varies by your age and years to retirement.
| Age | Typical annual contribution (illustrative) |
|---|---|
| 40 | $80k–$120k |
| 50 | $150k–$220k |
| 55 | $200k–$280k |
| 60 | $240k–$340k |
| 65 | $270k–$380k |
Actual numbers depend on your specific income, age, chosen benefit formula, and plan assumptions.
Stacking with a Solo 401k
You can have both a DB plan and a Solo 401k. The Solo 401k adds up to $30,000 of employee deferrals (catch-up if 50+) on top of the DB contribution. The combined deduction can exceed your entire W-2 wages in some cases.
Worked example
- DB plan actuarial contribution: $250,000
- Solo 401k employee deferral: $23,500 + $7,500 catch-up = $31,000
- Solo 401k employer (small, after DB offset): ~$10,000
- Total tax-deferred: $291,000
- At a 35% marginal federal + 13.3% CA state: $141,000 in tax savings Year 1
The real costs
- Setup fees: $2,000–$5,000 one-time
- Annual administration: $1,500–$3,500/year
- Annual actuarial valuation: included in admin, but required
- Form 5500 filing: handled by the admin
For a high earner saving six figures in tax, $3k/year in admin is trivial. For someone at $100k SE income, it's not worth it.
The commitment
Once set up, a DB plan requires annual contributions for at least 3 years. If you skip or underfund, the plan can be disqualified and you face retroactive taxes plus penalties.
Income volatility is the main reason people avoid DB plans. A great year requires massive contribution. A bad year still requires contribution.
Who administers these
- Emparion — specialist in solo DB plans, $2k setup typical
- DB Plans Direct — online-first, cost-effective
- Schwab / Fidelity — refer out to third-party administrators; don't handle in-house for solos
- Local actuaries — ask a CPA who specializes in high-earner self-employed clients
When it's right for you
- You're 45–70 with consistent high business income
- You've already maxed your Solo 401k and want more tax shelter
- You can commit to 3+ years of contributions without strain
- You don't plan to hire many employees (or you're willing to fund for them)
- Your marginal tax rate is 32%+ federal (combined with state, often 40%+)
When it's wrong for you
- Volatile income year to year
- Business may close or pivot
- Income under ~$200k net
- Under age 40 (contribution room is too small to justify admin cost)
- Plan to hire 5+ employees soon
Cash balance plans — a modern variant
A Cash Balance plan is a hybrid: looks like a 401k from the outside (individual account balances) but is a DB plan under the hood. More portable, easier to communicate to employees if you have any. Growing in popularity among solo and small-business owners.
Contribution math is similar to a traditional DB plan. For most solopreneurs, the difference is cosmetic.
The exit
After 3+ years of contributions, you can terminate the plan. Roll the balance into an IRA. Continue investing it. The deductions stay claimed; you just stop the plan going forward.
Many solo earners run a DB plan for 5–10 years during peak income, then close it and switch back to just a Solo 401k in semi-retirement.
Is a DB plan the move for you?
We show your projected DB contribution range based on age and income — and the tax savings vs. Solo 401k alone.