CASH BALANCE PLANS FOR CONSTRUCTION OWNERS WHEN THE 401(K) IS NOT ENOUGH.
A cash balance plan fits a construction owner whose company has made a strong profit for several years in a row, who is already putting the maximum into a 401(k) and who is usually in their mid-forties or older. Paired with a 401(k), it can let the owner set aside several times the $72,000 defined contribution limit for 2026, depending on age and pay. It also commits the company to a contribution every year, so it only fits a business whose profits are consistent.
The appeal is simple: money the owner would have taken as a taxable draw goes into a retirement account as a company deduction, and the account is held outside the operating company. The cost is commitment. A cash balance plan has a required contribution each year, set by an actuary, and the company has to cover a share for eligible employees. A contractor with one great year and two thin ones should not start one. A contractor with five consistent years, a strong backlog and a working capital cushion often should look hard at it.
WHAT IT MEANS.
A cash balance plan is a type of defined benefit pension plan that credits each participant with a stated contribution and interest credit each year, letting a business owner contribute far more than a 401(k) allows as a deductible business expense.
This page explains how the plan works for a contractor's business. The plan design, the contribution amounts and the tax effect belong to a pension actuary and your CPA, and the investment choices belong to a licensed advisor.
WHERE CASH BALANCE PLANS GO WRONG FOR CONTRACTORS.
Started after one great year
A big year makes the tax bill painful and a large deduction looks attractive. A cash balance plan needs contributions every year, and construction profit moves with the backlog. An owner who starts a plan on one strong year can face a required contribution in a thin year, right when the company needs the cash for payroll and retainage.
The employee cost was not modeled
The plan has to meet nondiscrimination rules, so eligible employees receive contributions too. For a company with an owner and a few office staff, that cost is usually small. For a company with a large crew on payroll, it can be large. The actuary should model the employee cost before the owner commits.
The contribution was planned without the working capital
The contribution leaves the company as cash. If it pushes working capital below what the surety expects, the deduction costs the owner bonding capacity. The contribution should be planned with the same working capital target the owner uses for distributions.
WHAT IT LOOKS LIKE IN DOLLARS.
$290,000 of annual benefit at retirement, the ceiling the plan funds toward. The yearly contribution allowed depends on the owner's age and pay.
$72,000 per person in a 401(k) and profit sharing plan. A cash balance plan is added on top of it.
Owners in their mid-forties or older with several years of consistent profit, a 401(k) already at the limit and a small number of eligible employees relative to the owner's pay.
THREE CHECKS BEFORE YOU START A CASH BALANCE PLAN.
Pull the last five years of net profit and the backlog for next year. If the lowest of those years could still cover the planned contribution and the working capital the surety expects, the plan is worth modeling. If not, wait and keep building the 401(k).
Ask a pension actuary to model the contribution range for the owner and the cost for every eligible employee. Plans can be designed with a range of allowed contributions, which helps a contractor whose profit varies.
Treat the contribution like any other large cash commitment. Put it in the 13 week forecast in the month it is due, and plan the year-end so the contribution leaves the company without dropping working capital below the target.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $3,300 | $1,000 |
| $1M to $3.5M | $2,600 to $5,300 | $1,500 |
| $3.5M to $6.5M | $3,800 to $8,300 | $3,000 |
| $6.5M to $9.5M | $5,100 to $11,800 | $4,500 |
| $9.5M to $12.5M | $6,100 to $14,900 | $6,000 |
| $12.5M to $15.5M | $7,400 to $17,650 | $7,500 |
| $15.5M to $18.5M | $9,400 to $22,400 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
