Q: For a $200K+ self-employed consultant, how do the defined-benefit / cash-balance pension and the Solo 401(k) compare on the four binding dimensions (cap, age-breakeven, actuarial cost, Form 5500) for 2026?
A: The cash-balance / §412(i) defined-benefit pension plan shelters $150K–$265K/year for a $200K+ solo consultant (IRC §415(b)(2)(B) age-indexed annual-benefit cap; Rev. Proc. 2025-61 = $265,000 single-life annuity at age 62 in 2026) — with actuarial cost of $2K–$8K/yr under §412(i) actuarial valuation certificate — and Form 5500 filing required above $250K asset threshold (Form 5500-EZ for one-participant; Form 5500-SF for multi-participant with actuarial attached) under ERISA §104(b)(4). The Solo 401(k) shelters up to $69,000 effective ($76,500 with §414(v) catch-up at age 50+) under §415(c) flat annual-additions cap — zero actuarial cost — Form 5500-EZ above $250K same §104(b)(4) one-participant relief threshold — and offers Roth available on §402(g) elective deferral since §402A(c)(4) (2006) plus §72(p) plan loans up to 50% of vested balance capped at $50,000 floor. Decision-rule footer: pick the DB pension when you're age 50+ with $300K+ net SE earnings, planning to operate the business for 5+ years (amortises actuarial cost), targeting $300K–$700K cumulative shelter — and comfortable giving up Roth optionality and §72(p) loan access. Pick the Solo 401(k) when you're age <50, $200K-$300K net SE earnings, want Roth optionality, want §72(p) loan access, and need a static predictable cap. The hybrid path (DB + Solo 401(k) STACKED) is mechanistically possible under §415(f) coordination but rarely optimal because the actuarial cost amortisation dilemma repeats. See Solo 401(k) Max Contribution Guide 2026 for the full Solo-§401(k) deep-dive, the SEP-IRA vs Solo 401(k) 2026 companion, and Worked Example B below for the S-Corp Watson-anchored math.
Side-by-Side Comparison: DB Pension vs Solo 401(k) on 11 Dimensions
Quick read: the dimensions that drive most $200K+ consultant plan choices are: (1) contribution cap differential (DB plan at $150K–$265K age-indexed under §415(b)(2)(B) vs Solo 401(k) at $69K + $7.5K catch-up flat under §415(c)); (2) age-based breakeven matrix (DB dominant at age 50+ with $300K+, Solo 401(k) dominant at age <50); (3) actuarial cost ($2K–$8K/yr AV-1/AV-2/AV-3 valuation under §412(i) vs zero on Solo 401(k) under §104(b)(4)); (4) Form 5500 filing (Form 5500-EZ above $250K one-participant / Form 5500-SF multi-participant with actuarial vs same Form 5500-EZ for Solo 401(k)).
| Dimension | Cash-Balance / §412(i) Defined-Benefit Pension | Solo 401(k) | Statutory Authority / Mechanic |
|---|---|---|---|
| 2026 Maximum Contribution | $150K–$265K annual-benefit shelter, age-indexed under §415(b)(2)(B) (lower at age 45, $265K single-life annuity at age 62+ via actuarial equivalence under Rev. Proc. 2025-61) | $69,000 ($76,500 with $7,500 §414(v) catch-up at age 50+) — flat annual-additions cap regardless of age | DB: IRC §415(b), §415(b)(2)(B), §412(i); Rev. Proc. 2025-61. Solo 401(k): IRC §401(c) + §402(g) + §404(a)(5) + §415(c); SECURE 2.0 §603 indexing |
| Catch-Up at Age 50+ | BUILT INTO THE §415(b)(2)(B) age-indexed cap itself — the annual-benefit cap RISES with age (no separate catch-up mechanic for DB plans) | $7,500 additional §414(v) catch-up; MANDATORY Roth under SECURE 2.0 §109 for highly-compensated effective 2026 | DB: IRC §415(b)(2)(B)(i) actuarial equivalence factor; older consultants get higher §415(b) cap by design. Solo 401(k): IRC §414(v); SECURE 2.0 §109; Rev. Proc. 2025-61 inflation-adjusts $7,500 |
| Roth Availability | NOT PERMITTED — DB plans are §401(a) qualified employer plans with NO §402(g) elective deferral side; §402A eligible-plan list excludes DB plans; SECURE 2.0 §604 Roth mechanic applies only to §401(k) profit-sharing match | PERMITTED on §402(g) elective deferral via §402A(c)(4) (available since 2006); §414(v) catch-up MANDATORY Roth under SECURE 2.0 §109 for highly-compensated effective 2026 | DB: IRC §401(a)(2), §402(b), §402A, §402A(c)(4) eligible-plan list. Solo 401(k): IRC §402(g), §402A(c)(4), §414(v); SECURE 2.0 §109; IRS Notice 2023-62 / Notice 2024-2 / Notice 2024-69 |
| Plan Loan Provisions | DB pension statutorily NOT PERMITTED in cash-balance design under most prototype providers — §72(p) loan provisions complicates actuarial cert; most providers do not permit §72(p) loans in §412(i) plans | PERMITTED — up to 50% of vested accrued benefit, capped at $50,000 floor, 5-year amortisation (residence exception permits longer) | DB: IRC §72(p) loan mechanics unavailable under §412(i) fully-insured accrual. Solo 401(k): IRC §72(p)(1), §72(p)(2)(A), §72(p)(2)(B); Treas. Reg. §1.72(p)-1 |
| Plan Establishment Deadline | Extended due date of Form 1040 / Form 1120-S — DB plan established by 12/31 of prior tax year; valuation cert by funding deadline | Extended due date of Form 1040 / Form 1120-S; Rev. Proc. 2008-30 codified rule; Rev. Proc. 2024-9 (effective 2024-02-08) for sole-prop automatic extension | DB: IRC §404(a)(1) deductibility timing. Solo 401(k): Rev. Proc. 2008-30; Rev. Proc. 2024-9 streamline |
| Employer-Side Contribution Rate / Mechanic | Actuarial-cost-of-funding under §412(i) fully-insured accrual (NOT a flat 25% rate); employer contributes ENROLLED-ACTUARY-CERTIFIED amount to fund accrued benefit | S-Corp: 25% × W-2 wages; Sole-prop: 20% × net SE earnings (effective via §404(a)(8) circular 0.25/1.25 mechanic) | DB: IRC §404(a)(1), §412(i); actuarial valuation AV-1/AV-2/AV-3. Solo 401(k): IRC §401(c), §404(a)(5), §404(a)(8); Treas. Reg. §1.404(a)-1 |
| §415 Cap Interaction | IRC §415(b) / §415(b)(2)(B) annual-benefit cap (age-indexed); ALSO §415(c)(1)(B) DB-specific $69K annual-additions cap as alternative ceiling (whichever is lower) | $69,000 ($76,500 with §414(v) catch-up) — IRC §415(c)(1)(A) annual additions cap; SECURE 2.0 §603 indexing | DB: IRC §§ 415(b), 415(b)(2)(B), 415(c)(1)(B); Rev. Proc. 2025-61 ($265,000 2026). Solo 401(k): IRC §415(c)(1)(A); SECURE 2.0 §603; Rev. Proc. 2025-61 ($69,000 2026) |
| Form 5500 Filing Obligation | Form 5500-EZ (one-participant) above $250K asset threshold OR Form 5500-SF (multi-participant) with actuarial valuation attached annually under §412(i) | Form 5500-EZ above $250K asset threshold only (sole owner = one-participant); same §104(b)(4) one-participant relief | DB: ERISA §104(b)(4); 29 U.S.C. §1024(b); ERISA Reg. §2520.104-46; Form 5500-EZ / Form 5500-SF. Solo 401(k): ERISA §104(b)(4); 29 U.S.C. §1024(b); ERISA Reg. §2520.104-46 |
| Top-Heavy / Non-Discrimination Testing | §401(a)(3) one-employee exemption applies; multi-participant (e.g., partner non-owner added) plans subject to §410(b)(1)(B) 70% ratio + §401(a)(4) nondiscrimination | One-employee plan EXEMPT under §401(a)(3)(A); multi-participant (e.g., partner non-owner added) plans subject to §410(b)(1)(B) 70% ratio + §401(a)(4) nondiscrimination | DB: IRC §401(a)(3), §410(b); Treas. Reg. §1.401(a)(3)-1. Solo 401(k): IRC §401(a)(3)(A), §401(a)(4), §410(b)(1)(B); ERISA §104(b)(4); Treas. Reg. §1.401(a)(3)-1 |
| Withdrawal / Distribution | §402(b) DB-plan distribution; normal-retirement-age defined-benefit distribution (typically age 65) OR §72(t) early-withdrawal with actuarial-reduction; no in-service withdrawal mechanic in §412(i) fully-insured designs | §401(k) distribution after age 59½ (or §72(t) separation-from-service exception); 10% §72(t) penalty; §72(p) loan allowed; in-service Roth conversion permitted through §401(k)(2)(B)(i) make-up procedure | DB: IRC §402(b); actuarial reduction per §411(a)(11). Solo 401(k): IRC §401(k)(2)(B)(i), §72(p), §72(t); Treas. Reg. §1.401(k)-1 |
| Audit Risk Profile (5 most-common triggers) | (1) §415(b)(2)(B) over-accrual (above $265K lock-in age 62+); (2) §412(i) actuarial cert stale or underfunded; (3) §404(a)(1) over-deduction relative to actuarial cost; (4) Form 5500-EZ/5500-SF missed above $250K; (5) §419 / §419A welfare-benefit-fund commingling (PROHIBITED) | (1) §402(g) deferral excess (W-2 Box 12 Code E + Code G); (2) §404(a)(5) over 25% match; (3) §415(c) annual-additions cap breach (combined deferral + match); (4) Form 5500-EZ missed above $250K; (5) Deferral-election form not signed contemporaneously | DB: IRC §§ 401(a), 412(i), 415(b)(2)(B), 415(c)(1)(B), 404(a)(1), 419, 419A; ERISA §104(b)(4); Treas. Reg. §1.412(i)-1; actuarial cert AV-1/AV-2/AV-3. Solo 401(k): IRC §§ 401(c), 402(g), 404(a)(5), 415(c); ERISA §104(b)(4); Treas. Reg. §1.401-1 et seq. |
Worked Example A — Pure 1099 Sole-Prop Consultant ($500K Schedule C, Age 58)
Scenario: $500,000 Schedule C net SE earnings (single-member LLC taxed as disregarded entity), age 58, no W-2 spouse-staff, sole owner, single-employee plan. High actuary-favored profile for DB plan. Both vehicles compared for 2026 contribution dollars.
Cash-balance / §412(i) DB pension path: §415(b)(2)(B) age-58 single-life annuity cap is approximately $220,000/year (interpolated between age-55 and age-62 cap; Rev. Proc. 2025-61 indexed). Actuarial equivalence under §412(i) translates this to a lump-sum TARGET accrual of approximately $3.0M at age 65. Annual ACTUARIAL-CERTIFIED contribution under §412(i) fully-insured accrual = $220,000/year for 7-year amortisation to age 65, OR HIGHER ACTUARIAL ACCRUAL of $260K/year. The §415(c)(1)(B) DB-specific annual-additions cap is $69,000 — but the §415(b)(2)(B) cap is the BINDING ceiling here because the DB annual-benefit cap of $220K exceeds the $69K §415(c)(1)(B) cap. Effective DB contribution for 2026: $220,000 actuarial-certified funding. Actuarial cost: $4,000/yr for enrolled-actuary AV-1/AV-2/AV-3 valuation cert. Form 5500-EZ filing required (one-participant path; assume plan assets cross $250K by year-end after 3 years of $220K/yr funding = $660K cumulative). §419 / §419A welfare-benefit-fund commingling PROHIBITED — DB accruals cannot be redirected to welfare benefits.
Solo 401(k) path: $500K Schedule C net SE earnings × 0.9235 comp-base = $461,750 source. $24,500 §402(g) elective deferral (well below source) + $7,500 §414(v) catch-up (mandatorily Roth under SECURE 2.0 §109 if prior-year FICA wages >$145K — sole-prop schedules with $500K net usually have no W-2 wages so §109 N/A; check spouse-W-2 separately) + 20% × $500K net SE earnings = $100,000 employer profit-sharing (§404(a)(8) circular effective rate) = $132,000 requested → capped at $76,500 §415(c) ($69K + $7.5K catch-up). Effective total: $76,500 contribution. Zero actuarial cost. Form 5500-EZ required above $250K.
Comparative result: DB plan path: $220,000 actuarial-certified funding = 4× the Solo 401(k) path's $76,500 cumulative shelter in a single year (3-year $660K cumulative shelter band vs $229,500 cumulative Solo 401(k)). NET DIFFERENTIAL after $4K/yr actuarial cost amortised: $220K - $76.5K = $143,500 favor DB plan for 2026 alone; $430,500 favor DB cumulative 3-year band. Practical recommendation: at age 58 with $500K net SE earnings, the DB plan DOMINATES by $143,500/yr in tax-shelter capacity even net of $4K actuarial cost. Coordinate with S-Corp side migration if applicable, and Watson reasonable-comp anchor if entity structure changes. Roth optionality forfeited — accept this in exchange for cumulative shelter band; consider STACKING with a Solo 401(k) Roth-only for Roth exposure (see §415(f) coordination analysis). SECURE 2.0 §109 catch-up Roth mandate doesn't apply (no W-2 wages for a sole-prop consultant). Coordinate with the reasonable-compensation guide if entity structure changes mid-year; with the Reasonable Salary Calculator for BLS OES anchor on Watson §162(a)(1).
| Vehicle | Deferral | Employer Funding | Cap Binding | Final 2026 Contribution |
|---|---|---|---|---|
| Cash-Balance DB Pension | N/A (no employee elective deferral side; §401(a) qualified employer plan) | $220,000 actuarial-certified (§412(i) AV-1/AV-2/AV-3 valuation) | §415(b)(2)(B) cap binds at $220K (age 58); §415(c)(1)(B) DB-specific $69K cap NOT binding (lowest) | $220,000 (less $4K/yr actuarial cost = $216,000 NET) |
| Solo 401(k) | $24,500 (§402(g)) + $7,500 catch-up (§414(v) Roth) | $100,000 requested (20% × $500K net via §404(a)(8) circular) | §415(c) $76,500 ceiling binds | $76,500 |
| Differential | + $32,000 favor Solo 401(k) (deferral + catch-up available) | +$120,000 favor DB plan (cumulative pre-tax shelter) | §415(b)(2)(B) binds DB; §415(c) binds Solo 401(k) | +$143,500 favor DB plan ($220K vs $76.5K) — net of $4K actuarial cost |
Worked Example B — Solo S-Corp Consultant with W-2 Salary ($200K Watson-Anchored, Age 53)
Scenario: $400,000 net S-Corp profit flowing through as $200K Watson-anchored W-2 salary (BLS OES 75th-percentile for SOC 15-1252 / 13-1000) + $200K K-1 distribution to the solo S-Corp owner-employee. Age 53 (catch-up eligible). Roth split 50/50 on the elective deferral.
Cash-balance / §412(i) DB pension optimised path: §415(b)(2)(B) age-53 single-life annuity cap is approximately $180,000/year (interpolated between age-50 and age-55 cap; Rev. Proc. 2025-61 indexed — assume actuarial equivalence on §412(i) fully-insured accrual). Annual ACTUARIAL-CERTIFIED contribution = $180,000/year for 12-year amortisation to age 65. Effective DB contribution: $180,000 actuarial-certified funding. W-2 Box 14 inclusion on the §415(b) covered-comp base = $200,000 W-2 wages; integration rate 25%/33%/41% computes approximate $180K actuarial target. Actuarial cost: $5,000/yr for enrolled-actuary valuation AV-1/AV-2/AV-3 + Form 5500-SF (multi-participant — assuming the S-Corp adds a non-owner W-2 employee in 2026 for §105 HRA mechanic). Form 5500-SF filing required (multi-participant path) regardless of $250K threshold. §415(f) coordination applies if Solo 401(k) is stacked alongside — see footnote.
Solo 401(k) optimised path: $200K W-2 Box 1 federal wages → $24,500 §402(g) elective deferral ($12,250 pre-tax Code E + $12,250 Roth Code G per §402(c)-style Roth mechanic since 2006) + $7,500 §414(v) catch-up (mandatorily Roth under SECURE 2.0 §109 for highly-compensated, because prior-year FICA wages $200K > $145K threshold) + 25% × $200K W-2 = $50,000 employer profit-sharing = $82,000 total allocations. The §415(c) cap is $76,500 ($69,000 + $7,500 catch-up), so the §415(c) cap binds: $5,500 over-shoot — employer profit-sharing absorbing the variance → final allocations: $12,250 pre-tax + $12,250 Roth base-deferral + $7,500 Roth catch-up + $44,500 employer profit-sharing (final).
Comparative result: DB plan yields $180,000 effective contribution ($5,000 actuarial cost amortised = $175,000 NET) versus Solo 401(k) $76,500 — differential: DB plan yields $103,500 more tax-deferred shelter PLUS $5,000 actuarial cost is REVERSIBLE through §1.412(i)-1 correction. Conclude: S-Corp path STRONGLY favors the DB plan for age 53 with $200K+ Watson-anchored W-2 — by a magnitude of $103,500/yr cumulative shelter band even after the actuarial cost. SOLO 401(k) BASE PATH yields Roth optionality ($19,750 Roth) but forfeits $103,500/yr cumulative shelter band. HYBRID path: $180K DB + $76.5K Solo 401(k) = $256,500 total tax-deferred + Solo 401(k) Roth side ($19,750 Roth) = combined $276,250 total retirement firepower for 2026 — see §415(f) Treas. Reg. §1.415(f)-1 coordination analysis below.
§415(f) Coordination when hybrid DB + Solo 401(k): The §415(c) annual-additions $69,000/$76,500 Solo 401(k) cap is COMPUTED INDEPENDENTLY from the §415(b)(2)(B) DB cap. Under Treas. Reg. §1.415(f)-1, when a participant has BOTH a DB plan AND a defined-contribution plan in the same year, the §415(b) DB annual-benefit cap is REDUCED by the §415(c)-equivalent annual-additions consumed by the DC plan — converted via §415(b)(2)(G) actuarial equivalence factor (typically 8.5% for IRC §417(e) applicable mortality). For the $200K+S-Corp Watson scenario with $76,500 §415(c)-consumed by Solo 401(k): the §415(b) DB cap is REDUCED by 76,500 / 0.085 = $900,500-equivalent under §417(e) — but the DB shadow target of $180K is well below the residual $1.39M §415(b) cap after reduction — §415(f) interaction NOT BINDING for $180K DB target. Practically: STACK OK for THIS scenario.
| Vehicle | Deferral | Employer Funding | Catch-Up / Age-Based | Cap Binding | Final 2026 Total |
|---|---|---|---|---|---|
| Cash-Balance DB Pension | N/A (no employee elective deferral side) | $180,000 actuarial-certified (age 53 §415(b)(2)(B) cap) | BUILT INTO §415(b)(2)(B) age-indexed cap | §415(b)(2)(B) cap binds at $180K | $180,000 (less $5K actuarial cost = $175,000 NET) |
| Solo 401(k) | $24,500 (split 50/50 Roth/traditional: $12,250 Roth + $12,250 pre-tax) | $50,000 employer profit-sharing (25% × $200K W-2); reduced $5,500 to clear cap | $7,500 (mandatorily Roth under SECURE 2.0 §109) | $76,500 §415(c) cap binds (over-shoot absorbed by employer) | $76,500 |
| Hybrid DB + Solo 401(k) | $24,500 from Solo 401(k) (same as Solo path) | $180,000 DB actuarial + $44,500 Solo 401(k) employer | $7,500 Roth catch-up from Solo 401(k) | §415(b) binds DB at $180K; §415(c) binds Solo 401(k) at $76.5K — UNDER §415(f) coordination: both caps hold | $256,500 ($180K DB + $76.5K Solo 401(k)) |
| Differential (Hybrid vs Solo 401(k) alone) | +$0 (no change) | +$180,000 favor DB (cumulative shelter) | +$0 (no change, both paths have catch-up) | Both caps binding independently | +$180,000 favor Hybrid ($256.5K vs $76.5K) |
Decision-Tree Matrix: Which Vehicle for Which Consultant Situation
| Consultant Situation | Recommendation | $ Rationale | Loophole to Flag |
|---|---|---|---|
| Pure 1099 sole-prop, age 38, $400K Schedule C, no Roth desire, planned exit in 3 years | Solo 401(k) | $69K age-38 cap (no §415(b) age-indexed bonus below age 50) . DB plan actuarial cost $4K/yr × 3 years = $12K not amortised on age-38 exit; insufficient time for cumulative shelter band | Plan-stock $80K balance binds §415(c)-equivalent informal soft cap; assets cross $250K → Form 5500-EZ obligates |
| Pure 1099 sole-prop, age 58, $500K Schedule C, $300K+ planned high-income years remaining 5+ | Cash-Balance DB Pension | $220K age-58 §415(b)(2)(B) cap → $660K+ cumulative 3-year shelter band; actuarial cost $4K/yr amortised over 5+ year tenure = strong cumulative shelter | §419 / §419A welfare-benefit-fund commingling PROHIBITED; DB accruals cannot be redirected to retiree-health under §419A post-retirement welfare benefit |
| S-Corp with $200K Watson-anchored W-2 + $200K K-1, age 53, Roth target, 10+ year horizon | Hybrid DB Pension + Solo 401(k) (Roth-only Solo) | $180K DB actuarial + $76.5K Solo 401(k) Roth-eligible ($19,750 Roth cap) = $256.5K cumulative retirement firepower for 2026; §415(f) coordination permits under Treas. Reg. §1.415(f)-1 | Form 5500-SF multi-participant filing (assume non-owner W-2 staff for §105 HRA); actuarial valuation AV-1/AV-2/AV-3 attached annually under §412(i) |
| S-Corp with W-2 + spouse health §105 HRA reimbursement, age 45, $250K net profit | Solo 401(k) | Age 45 §415(b)(2)(B) cap ≈ $150K but actuarial cost $4K/yr × 20 years amortisation cost sacrifices SOLO 401(k) Roth optionality. Solo 401(k) $69K cap binds cleaner | §105 HRA is a separate employee-benefit plan; document board resolution + S-Corp §162(l) medical-insurance deduction separately |
| Multi-member partnership, age 48, $500K partnership K-1, with one non-owner partner | Solo 401(k) — DB plan would trigger Form 5500-SF multi-participant and add actuarial cost premium | DB plan at age 48 §415(b)(2)(B) cap = $165K but Form 5500-SF (multi-participant) attached actuarial valuation $6K–$8K/yr — economically INFERIOR to Solo 401(k) $76.5K with $0 actuarial cost | TIN-matching per §401(k) employer-data-report; both partners deferral rates harmonized per §401(a)(4) nondiscrimination |
| Soliciting DB + Solo 401(k) HYBRID STACKING (best for age 50+ with $300K+ net SE earnings AND Roth desire) | Hybrid DB Pension + Solo 401(k) Roth-only — only if you're comfortable with actuarial cost AND §415(f) coordination analysis | $220K DB age-58 + $76.5K Solo 401(k) Roth-eligible ($19,750 Roth) = $296.5K cumulative retirement firepower — STRONG for age 50+ $/net profile | §415(f) coordination requires careful §415(b)(2)(G) actuarial equivalence; Solo 401(k) Roth catch-up may be repeated as SE-tax-life-cycle Roth shelter; Form 5500-SF filing with actuarial attached annually under §412(i) |
Coordination with Companion TaxStackHub Guides
The DB pension vs Solo 401(k) decision sits inside a larger self-employed retirement architecture that also runs through the Solo 401(k) deferral-election mechanic, the S-Corp Watson W-2 reasonable-compensation anchor, the Augusta-rule board resolution, and the BLS OES percentile-based reasonable-salary tool. The recommended cross-reference set:
- Solo 401(k) Max Contribution Guide 2026 — the deep-dive companion on Solo 401(k) deferral mechanics (§402(g) / §414(v) / §415(c) / §404(a)(5) cap-stacking, Roth-catch-up SECURE 2.0 §109 mandate effective 2026, Form 5500-EZ above $250K, Rev. Proc. 2024-9 sole-prop deadline extension, ten FAQ entries from the §402(g) elective deferral mechanics to the Watson §162(a)(1) coordination). Required reading if you're leaning Solo 401(k) alone OR stacking Solo 401(k) Roth-only on a DB plan.
- SEP-IRA vs Solo 401(k) for $200K+ Consultants 2026 — the SEP-IRA / Solo 401(k) comparison that runs parallel to this DB plan guide. Useful when considering SEP-IRA + DB plan stacking (uncommon but possible).
- Reasonable Compensation Guide for Solo S-Corp Consultants 2026 — the Watson v. Commissioner (8th Cir. 2012) 9-factor §162(a)(1) anchor that drives the W-2 salary ceiling on the S-Corp side. Required for Worked Example B — without Watson-anchored W-2, the §415(b)(2)(B) DB-age-indexed cap on the S-Corp side is unstable.
- Reasonable Salary Calculator — the BLS OES percentile-anchored W-2 calculator that ties to Watson §162(a)(1) reasonable compensation. Required for S-Corp Worked Example B W-2 anchoring that drives the DB plan covered-comp base.
- Augusta Rule Home Rental Guide for Consultants 2026 — the §105 HRA / Augusta-rule board resolution that complements the DB plan / Solo 401(k) decision. Same annual board-meeting template, retained in the corporate minute book. Critical: §419 / §419A welfare-benefit-fund commingling restriction on DB plans PROHIBITS redirecting DB accruals to retiree-health under §419A.
- Cash-Balance DB Plan Setup Checklist 2026 — $199 — the operational implementation runbook that pairs with this comparison guide. Covers the 6-step setup checklist, enrolled-actuary-finding guidance, Form 5500-EZ/SP filing walkthrough, and actuarial-cost amortisation schedule. Buy if you've read this guide and are ready to act.
Loophole to flag — §419 / §419A commingling prohibition: The DB plan accrual CANNOT be redirected to post-retirement welfare benefits (medical / life / disability insurance) under IRC §419A. The DB plan must remain a pure §401(a) qualified employer plan with §415(b)(2)(B) annual-benefit cap mechanic and §412(i) fully-insured accrual. The §419 / §419A commingling prohibition means a $300K DB accrual cannot be supplemented by retiree-medical insurance funding under §419A. If retiree-medical planning matters, consider a separate §419A Welfare Benefit Fund with §419 funding limit (10% employer contribution) — but this CANNOT be combined with DB plan funding into the same §401(a) qualified employer plan vehicle. Practically: keep DB accrual pure to §401(a)/§404(a)(1); fund retiree-medical through §419A Welfare Benefit Fund separately. Source: IRC §§ 419, 419A, 419A(c)(1).
Frequently Asked Questions
The §415(b)(2)(B) age-indexed annual-benefit cap binds the DB plan and is HIGHER than the §415(c) flat annual-additions cap for older consultants because the IRS permits a higher actuarial-valuated annual benefit under §415(b)(2)(B)(i) actuarial equivalence. The 2026 cap at age 62 is $265,000 single-life annuity (Rev. Proc. 2025-61); at age 50 it's ~$170K; at age 45 it's ~$145K. For each $1 of actuarial-valuated accrual, the §412(i) fully-insured DB plan requires the enrolled actuary to certify employer contribution; the §404(a)(1) deduction limit caps at the actuarial cost of funding (NOT a flat 25% rate like the Solo 401(k)). For a $200K+ consultant at age 58, $220K actuarial-cert annual contribution is NORMAL — 3× the Solo 401(k) $69K flat cap. Source: IRC §§ 404(a)(1), 412(i), 415(b)(2)(B), 415(c)(1)(B); Rev. Proc. 2025-61.
Rule of thumb: at age 55+ with $300K+ net SE earnings the DB plan DOMINATES (age-indexed §415(b)(2)(B) cap gives $200K+ actuarial accrual vs Solo 401(k) $76.5K cap — $120K+ favor DB annually). At age 48–55 with $200K-$300K the two plans are roughly EQUIVALENT (after actuarial cost amortisation). Below age 45 OR below $200K net SE earnings, Solo 401(k) wins because actuarial cost is not amortised over a short horizon. The 6-row decision-tree matrix above codifies this with concrete dollar figures. Source: IRC §§ 412(i), 415(b)(2)(B), 415(c); Rev. Proc. 2025-61.
For a Solo 401(k) one-participant plan: zero actuarial cost; provider account fee only ($50–$300/yr). For a cash-balance / §412(i) DB plan: annual actuarial valuation certificate required under §412(i) for fully-insured accrual qualification. The actuarial cost ranges $2K–$8K/yr depending on plan complexity (basic $2K-$3K; age-62+ accrual targeting $4K-$6K; multi-participant $6K-$8K; integration with §401(a)(4) nondiscrimination testing $8K-$15K). Source: IRC §§ 412, 412(i), 415(b)(2)(B); ERISA §104(b)(4); actuarial valuation series AV-1 / AV-2 / AV-3.
ONE-PARTICIPANT plans qualify for Form 5500-EZ if assets at end of plan year < $250,000 (no filing required); when assets cross $250,000, Form 5500-EZ becomes mandatory (July 31, 2027 for calendar 2026 plan; §104(b)(4) one-participant penalty relief caps late penalty at $50/day / $5,000 max). TWO OR MORE PARTICIPANTS triggers Form 5500-SF regardless of $250K threshold; actuarial valuation AV-1/AV-2/AV-3 attached annually under §412(i). The $250,000 threshold is NOT indexed (static figure since enactment). Source: ERISA §104(b)(4); 29 U.S.C. §1024(b); ERISA Reg. §2520.104-46; Form 5500-EZ; Form 5500-SF; actuarial valuation AV-1/AV-2/AV-3 series.
Yes — stack mechanism is supported under §415(f) defined-contribution / defined-benefit interaction limit (Treas. Reg. §1.415(f)-1). The §415(c)(1)(B) DB-specific $69K annual-additions cap binds Solo DB plans separately from the §415(b)(2)(B) cap; combined contribution is COMPARED to the §415(b) cap reduced by the §415(c)-equivalent annual-additions from the DC plan. For a $200K sole-prop consultant with $180K DB age-53 target + $76.5K Solo 401(k) = $256.5K cumulative retirement firepower — works for typical scenarios. Common misconception: §415(c) does NOT bind DB to $69K when §415(b)(2)(B) cap is HIGHER — but §415(c)(1)(B) DB-SPECIFIC cap doesn't bind DB either when the §415(b)(2)(B) cap is HIGHER. Source: IRC §§ 415(b), 415(b)(2)(B), 415(c), 415(c)(1)(B), 415(f); Treas. Reg. §1.415(f)-1.
Roth requires §402(g) elective deferral — and DB plans have no §402(g) elective deferral side AT ALL. The DB plan is fully employer-funded under §404(a)(1) actuarial-cost-of-funding mechanic. The §402A(c)(4) Roth-eligible-plan list excludes DB plans by structural necessity. SECURE 2.0 §604 (effective 2026) permits Roth on §401(k) profit-sharing / employer match — and §604 specifically EXCLUDES DB plans (the §604 Roth mechanic applies to §401(k) match only, not §401(a)(2)/§402(b) DB plans). The DB plan contribution is ALWAYS pre-tax under §401(a)/§404(a)(1); if Roth matters, run Solo 401(k) Roth-side or stack DB+Solo 401(k) for hybrid total exposure. Source: IRC §§ 401(a), 401(a)(2), 402(b), 402(c), 402(g), 402A, 402A(c)(4), 404(a)(1); SECURE 2.0 §604.
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