My Journey to Saving Clients Millions in Current Taxes Using Cash Balance Plans

When I first heard about cash balance plans, I brushed them off.

They sounded complicated. Too niche. And frankly, like something that didn’t apply to the companies with which I typically work. Most of my clients were already maxing out their 401(k)s and didn’t need another retirement vehicle—or so I thought.

But one conversation changed that.

A long-time client of mine, a business owner running a successful company, sat across from me and asked, “Steve, what else can I be doing to reduce taxes this year?” After more than 30 years in the insurance industry, I’ve had just about every type of conversation you can imagine with business owners and professionals, but that question kept coming up. I didn’t have a great answer at the time, and that didn’t sit well with me. So I went digging.

That’s when I had my lightbulb moment.

What I found was that cash balance plans, especially when paired with permanent life insurance, could dramatically increase pre-tax contributions, help clients build meaningful retirement wealth, and reduce current tax liability, sometimes by six figures or more.

It turns out life insurance isn’t just about what happens after you’re gone. When used strategically, it can be one of the most powerful tools for living well—especially when it comes to taxes.

Let me show you what I’ve learned.

The Lightbulb Moment

I remember working with a client – Emily, a lawyer in her mid-50s – who had a solid income, a thriving practice, and a growing feeling she was behind on retirement. She sat across from me and said, “I’m tired of handing over a third of my income to the IRS every year. There has to be a better way.”

And you know what? There was.

We rolled up our sleeves and went to work. We designed a cash balance plan for her business, layered in permanent life insurance, and came up with a strategy that allowed Emily to put away over $300,000 per year on a tax deductible basis. Ten years later, she had built up a multi-million-dollar retirement account and secured a sizable, tax-free death benefit for her kids.

I thought to myself, this is a strategy more people need to know about.

What’s a Cash Balance Plan?

If you’ve never heard of one, don’t worry. Most people haven’t.

A cash balance plan might be best described as a cross between a pension plan and a 401(k) plan.  It offers guaranteed returns, higher contribution limits and some serious tax perks.

Individuals – especially as they get older – might have the opportunity to contribute several hundred thousand dollars per year.  That’s not a typo. It’s real money, real deductions—and real retirement growth.

A Golf Analogy

I like to think of cash balance plans as comparable to using a rangefinder on the course.

When I was younger, I used to make constant tweaks to my golf swing.   Sometimes the results would be accurate, while other times (all too often) the ball would land in a bunker, water hazard or out of bounds. But once I started using a rangefinder, I was able to better gauge distances and obtain much better results.

That’s effectively what a well-structured cash balance plan does. Instead of encountering obstacles and muddling through how much income is swallowed up by the IRS, individuals can lock in real numbers and obtain a clear target:

• How much can be deducted

• How much can be saved

• How much heirs will receive

And let’s be honest: hitting it close to the pin from 185 yards out feels pretty darn good.

Why It Works So Well for High Earners

Cash balance plans have become increasingly popular, and it’s easy to see why:

• Business owners can deduct contributions

• Funds grow tax-deferred

• Life insurance death benefits are typically income-tax-free

• Contributions go way beyond 401(k) limits

You can even set up cash balance plans after the year ends (thanks to the SECURE Act). And when permanent life insurance is added to the mix, you obtain a two-for-one benefit: enhanced tax savings now and legacy protection later.

A Few Real-World Examples

Let’s go back to Emily for a second. She ended up:

• Saving over $190,000 in taxes

• Building more than $4 million in retirement assets

• Leaving a $2.5 million tax-free death benefit for her kids

 All without setting up a trust, opening a family office, or hiring an army of attorneys.

Or take John, a 60-year-old consultant who wanted to supercharge his retirement.  He:

• Contributed $400,000 a year

• Saved $140,000 in taxes annually

• Built a plan worth over $8 million, including $3 million in life insurance

You’re probably wondering, “Why include life insurance in a cash balance plan?”

Good question! Let’s review the benefits.

• Tax Deferral

  • Employer contributions are fully deductible

  • Employee accounts grow tax-deferred

  • When funds are eventually withdrawn (usually at retirement), they’re taxed at what’s often a lower bracket.

  • If your business contributes $500,000 to your plan, that’s $500,000 off your business’s taxable income.

• Tax-Free Distributions

  • Life insurance death benefits are typically income-tax-free.

  • For high-net-worth families, this avoids liquidating estate assets just to pay estate taxes.

  • If your estate is $3 million, you might fund a $1 million life insurance policy through a cash balance plan. The death benefit would offset the taxes, allowing your family to keep your house, business, and portfolio intact.

• Higher Contribution Limits

Incorporating life insurance lets you increase contributions by 20% to 40%, depending on plan design and age.

Age	Maximum Contribution without Insurance	Maximum Contribution with Insurance
35	$92,000	$110,000 - $120,000
40	$118,000	$140,000 - $155,000
45	$152,000	$180,000 - $200,000
50	$195,000	$230,000 - $250,000
55	$250,000	$295,000 - $320,000
60	$321,000	$375,000 - $400,000
65	$333,000	$390,000 - $415,000

“Isn’t It Too Late to Do This for Last Year?”

Not necessarily. Thanks to a change in the law under the SECURE Act of 2019, business owners and self-employed individuals can establish and fund a cash balance plan after the end of the tax year, as long as they do so before their tax filing deadline, including extensions.

The IRS allows taxpayers to file for an extension by April 15, which gives them until October 15 to finalize their return without incurring penalties. That means individuals have until October to go back and make a sizable deductible contribution for the previous year.

I like to think of this opportunity as a second serve in tennis.

Maybe you missed your first serve and were too busy running your business or unaware of the opportunity. But the rules give you another chance. And if you make that second serve count, it can lead to some serious tax relief and long-term planning wins.

One of my clients, Susan, did exactly that. She realized, after the year had ended, that her income was higher than expected and her tax bill was going to sting. We filed for an extension, and in May 2025 she set up a cash balance plan for her 2024 income. The results?

• A $400,000 deductible contribution

• An estimated $148,000 in tax savings (at a 37% federal rate)

• A $3 million tax-free death benefit for her family

That’s a textbook second serve and a win-win-win in my book.

So, Who’s a Good Fit?

Individuals who meet the following criteria typically benefit the most from cash balance plans:

• Age 45+

• Own a business or are part of a pass-through entity

• Want to put away more than the 401(k) limit

• Desire tax savings, retirement growth, and estate planning all in one

If that’s you – or someone you care about – it might be time to explore a plan like this.

“Can My Business Utilize a Cash Balance Plan?”

Cash balance plans are not just for small professional groups, they can be powerful tools for mid-sized and large businesses looking to reduce taxes, reward leadership, and strengthen employee retention.

I've seen firms use cash balance plans to:

• Fund executive benefits

• Retain top talent

• Offset estate taxes

• Protect key people

When paired with permanent life insurance, cash balance plans offer a strategic way to fund executive benefits, legacy planning, and key-person protection, all using pre-tax dollars. Companies can implement a dual-plan structure that maximizes retirement contributions while remaining compliant with IRS guidelines. For executives, this structure creates long-term financial security through tax-deferred growth and tax-free death benefits. For employers, it offers meaningful savings and a way to attract and retain top talent.

Two examples featured in the appendix—a 100-person engineering firm and a 1,000-person tech company—illustrate how businesses can tailor plan design to meet specific goals. In both cases, executives received enhanced retirement and insurance benefits without triggering additional W-2 compensation, while staff still benefited from generous contributions. The results were significant:

• Millions in corporate tax savings

• Substantial insurance coverage for partners and executives

• Stronger benefit packages across the organization

These case studies highlight the real-world impact of aligning retirement planning with corporate strategy.

Whether you’re running a boutique business or a large company, cash balance plans provide a multi-pronged opportunity to provide substantial benefits.

Final Thoughts

Over the years, I’ve learned that the best financial strategies aren’t necessarily the flashiest, they’re the ones that quietly work year after year, helping families keep more of what they earn and pass it on wisely.

Cash balance plans paired with life insurance are one of the most overlooked tools out there. They don’t make headlines. They don’t come with flashy commercials. But they do something far more important: provide successful people with a way to build wealth intentionally, reduce unnecessary taxes, and protect what really matters: family, legacy, and peace of mind.

If you're looking for a way to play smarter in the second half of your financial life, this strategy deserves a serious look. And if you’ve had a great year and don’t want to see a third of it disappear to taxes, now’s the time to act.

If you’re considering mitigating your current income taxes, I encourage you to explore how a cash balance plan with life insurance might fit into your overall financial strategy.

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Appendix

Example #1: 100-person company

• Industry: Engineering & Design

• Structure: C-Corporation

  • 10 Owners/Executives

  • 90 Staff (mix of salaried engineers, admin, and support)

• Annual Payroll: $10 million

• Corporate Profit (Pre-tax): $6 million

• Company Objectives:

  • Maximize retirement contributions for senior partners

  • Reduce corporate tax burden

  • Improve benefits to retain top engineers

  • Fund key-man and legacy planning with life insurance

• Plan Design Strategy

  • Dual-Plan Structure

    • Cash Balance Plan: Provides fixed annual pay credits + interest for all eligible employees

    • 401(k)/Profit Sharing Plan: Maximized to safe harbor and profit-sharing limits

  • Life Insurance Integration (for executives only)

    • 10 partners are covered with whole life policies

    • Life insurance is integrated into the cash balance plan under the “incidental benefit” rule (insurance cost ≤50% of contributions for each participant)

			Contribution Breakdown
Category	Executives (10 employees)	Staff (90 employees)	Total (100 employees)
Cash Balance Contributions	$2.5 million	$1.5 million	$4.0 million
401(k) + Profit Sharing	$600,000	$400,000	$1.0 million
Life Insurance Premiums	$500,000	$0	$500,000
Total Contributions	$3.6 million	$1.9 million	$5.5 million

• Corporate Tax Savings: Approximately $2 million (assuming 37% effective tax rate)

• Insurance Death Benefits for Executives: Approx. $20 million total

• Cash Value Accumulation: Executives build non-taxable assets usable in retirement

• Benefits to the Company

  • Massive Tax Efficiency: $5.5 million deductible contributions

  • Executive Legacy Planning: $20 million in life insurance benefit, outside of the estate if structured properly

  • Employee Retention Tool: Generous benefits improve morale and retention among engineers

  • Risk Mitigation: Life insurance funds key-person needs for founders and executive

  • Long-Term Savings: Company locks in future retirement benefits with fixed costs

Example #2: 1,000-person company

• Industry: Technology & Software Services

• Structure: Privately Held C-Corporation

  • 30 Executives/Partners

  • 970 Staff (developers, managers, operations, support)

• Annual Payroll: $120 million

• Net Profit (Pre-Tax): $35 million

• Objectives

  • Reduce overall corporate tax liability

  • Increase executive retirement and estate planning efficiency

  • Enhance staff retention and morale

  • Utilize permanent life insurance for key-man risk and legacy planning

• Plan Design Strategy

  • Dual Retirement Structure:

    • Cash Balance Plan (Defined Benefit)

      • Covers all eligible employees

      • Tiered benefit formula (higher for executives

      • Life insurance included only for executives

    • 401(k) with Profit Sharing (Defined Contribution)

      • Safe harbor + 25% profit-sharing component

  • Life Insurance Integration:

    • 30 executives participate in the cash balance plan with life insurance

    • Funded with whole life policies, structured for long-term cash accumulation and guaranteed death benefit

    • Life insurance premiums kept within IRS limits for "incidental benefit" (typically ≤50% of employer contributions)

			Contribution Breakdown
Category	Executives (30 employees)	Staff (970 employees)	Total (1,000 employees)
Cash Balance Contributions	$12 million	$18 million	$30 million
401(k) + Profit Sharing	$1.2 million	$8.8 million	$10 million
Life Insurance Premiums	$4.5 million	$0	$4.5 million
Total Contributions	$13.2 million	$26.8 million	$40 million

• Average Executive Contribution: Approximately 440,000 each

• Total Tax Deduction for Company: $40 million

• Tax Savings (at 21% corp. tax rate): $8.4 million

• Death Benefit Coverage for Executives: $150 million – $200 million total

• Strategic Benefits

  • For the Company:

    • Massive reduction in taxable income

    • Retention strategy for senior developers and mid-level managers

    • Enhanced executive compensation through non-W-2 mechanisms

    • Key-person protection via life insurance

    • Builds goodwill among staff with meaningful retirement support

  • For Executives:

    • High annual tax-deferred contributions

    • Accumulating cash value in permanent insurance

    • Tax-free death benefit for heirs (with proper structuring)

    • Asset protection and long-term planning flexibility

    • Build lasting financial security for the owners and their estates