Cash Balance Plan Turns Unexpected Board Income into a Retirement Deduction

How one executive deferred about $250,000 in retirement savings in a single year by opting for a cash balance plan.

Client

The client is the chief executive officer of a privately held organization, where they hold a minority ownership stake. Their executive compensation already covers their financial needs, so the more interesting part of their financial picture sits outside their day job. Alongside running that organization, the executive also holds a board seat elsewhere and earns fees for that service.

The board income is reported separately on a Schedule C, which effectively makes it a small, self-employed activity running in parallel with a demanding executive role. In 2025, the individual's total income climbed past $1 million, and the board fees came in well above what anyone had projected for the year.

The Challenge

When Schedule C income like this shows up, the standard move is almost automatic: open a Simplified Employee Pension (SEP) and contribute to it. A SEP is simple to run and carries no real administration, but it also has a limit. For someone in this situation, it would have allowed a deductible contribution of roughly $70,000, or about 20% of the net board earnings.

With income over $1 million and a high combined federal and California tax rate, deferring only $70,000 left a meaningful amount of the board income fully taxable in a year when the executive did not need it for living expenses. The question the tax team raised was a simple one. Was there a way to defer more?

Approach

A Coordinated Referral

EisnerAmper already prepared the executive's individual tax return, which is a complex one given the mix of executive compensation, ownership interest, and outside board income. Rather than default to the usual SEP, the Private Client Services team brought in EisnerAmper's retirement plan professionals to look at whether a larger deduction was available. Because both teams sit inside the same firm, much of the analysis happened behind the scenes. The retirement plan team worked directly from the income figures the tax team was already developing, without asking the client to gather or re-explain anything.

Introducing a Cash Balance Plan

The recommendation was a cash balance plan, which is a type of defined benefit plan whose deductible contribution limits are driven by age and income rather than a flat dollar cap. Those two factors worked strongly in the executive's favor. At over 55 years old and with board income well into six figures, the plan supported a far larger deduction than a SEP could. The design was also unusually clean because the board activity had no employees attached to it. With no staff to cover, the executive did not have to weigh the cost of funding contributions for others or decide who would appreciate them, which is often the hardest part of the conversation for organizations that do have employees.

How the Plan Works

Once income is known each year, EisnerAmper's actuarial team sets up the plan's deductible contribution range. The executive's balance sits in a hypothetical account that earns two credits annually: a pay credit tied to income and an interest credit that generally runs between 4% and 6%. Contributions go in pretax and grow tax-deferred, and the executive pays tax only when they withdraw the money in retirement, by which point their tax bracket is likely to be lower than it is during these peak earning years.

Putting the Plan in Place

Setting up the plan itself was straightforward. The executive signed the plan's legal document and established an investment account to receive the contribution. Timing mattered because the documents had to be signed and the plan funded by the due date of the tax return. The team completed the setup ahead of the 2025 filing deadline to capture the deduction for that year. The executive kept their existing outside investment advisor to manage the account, and the money was invested with a moderate-return strategy that tracks the plan's interest credit. For clients who do not already work with an advisor, EisnerAmper's wealth management group can set up and hold the account, though that was not needed here.

Committing to a Cash Balance Plan

A cash balance plan is a bigger commitment than a SEP. Unlike a SEP, which has essentially no compliance requirements, a cash balance plan carries annual administration, actuarial work, and a required contribution every year until the plan is terminated. Before moving forward, the executive understood exactly what they were taking on: the ongoing fees, the compliance obligations, and the expectation that some level of contribution would be required each year. That clarity is part of what made the plan the right fit.

The Results

For the 2025 tax year, the plan produced a deductible contribution of approximately $250,000.

Beyond the numbers, the engagement shows what it looks like when one firm handles the whole picture. The executive did not have to assemble a separate roster of advisors or reconstruct their income for a new provider. The tax return and the retirement plan were built from the same information, by teams that talk to each other, and the client experienced it as a coordinated relationship rather than a set of disconnected services.

The executive deferred roughly $250,000 on a tax-deferred basis for 2025, compared with the $70,000 a SEP would have allowed, which is an increase of about $180,000 in a single year.

Because the deferral landed at a high combined California and federal marginal rate, the current-year tax reduction was substantial.

The plan was documented and funded before the 2025 filing deadline, capturing the deduction for the prior year rather than pushing it forward.

The contribution went to work immediately as tax-deferred retirement savings, invested through the advisor the executive already trusted.

How EisnerAmper Can Help

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Whether you already sponsor a retirement plan or are weighing your options for the first time, EisnerAmper's Retirement Plan Administration and Consulting team can model the numbers, design a plan around your goals, and handle the actuarial and compliance work that keeps it running.