Direct answer. The scenarios below are hypothetical and illustrative — not representations of actual clients or guarantees of results. Each shows how a Cash Balance Defined Benefit plan paired with a §401(h) sub-account is typically structured for a different owner profile: a solo physician, a multi-partner practice, and a closely held S-corp owner.
How to Read These Cases
Retirement Actuarial Services LLC is an actuarial firm specializing in Defined Benefit and Cash Balance plan design for closely held businesses, professional practices, and high-income owners — and one of the few firms that routinely integrates the IRC §401(h) retiree medical benefit account into those plans.
These case studies are hypothetical and illustrative only. They do not represent specific clients, are not a guarantee of any tax outcome, and use simplified numbers chosen to make the structure visible. Every real plan is sized by actuarial calculation against actual census, compensation, and assumptions.
Case 1 — Solo Physician, Age 52
Profile. Independent physician, S-corp, $600K W-2 compensation, no employees besides spouse, already maxing 401(k).
Design. Add a Cash Balance Defined Benefit plan with a §401(h) sub-account.
| Layer | Illustrative Annual Contribution |
|---|---|
| 401(k) deferral + match | At §415(c) limit |
| Cash Balance DB | ~$180K (age-weighted, illustrative) |
| §401(h) sub-account | Within 25% subordination headroom on aggregate DB contributions |
Outcome framing. Combined deductible employer contributions in the mid-six figures, with the §401(h) building dedicated, tax-favored retiree healthcare assets covering future Medicare premiums and qualified LTC insurance for the household.
Case 2 — Three-Partner Dental Practice
Profile. Three dentists, ages 48 / 55 / 61, partnership entity, $500K average partner compensation, 12 staff.
Design. Cash Balance Defined Benefit plan with §401(h) sub-account, layered on top of existing 401(k) + safe-harbor + profit-sharing for staff.
- Age-weighted Cash Balance contributions favor the older partners.
- Nondiscrimination testing satisfied by adequate staff allocations under the 401(k)/profit-sharing layer.
- §401(h) headroom expands with each year's aggregate pension contributions.
Outcome framing. Each partner accumulates dedicated retiree medical reimbursement assets aligned with their age and retirement horizon, with staff receiving meaningful retirement benefits as part of the overall design.
Case 3 — S-Corp Owner of a Manufacturing Business
Profile. Single owner, age 58, S-corp, $450K W-2, 35 employees, strong multi-year cash flow.
Design. Cash Balance Defined Benefit plan + §401(h), coordinated with existing 401(k) safe-harbor design.
- Cash Balance contribution sized to absorb a large, age-weighted deduction for the owner.
- §401(h) contribution layered on top, sized to the subordination headroom.
- Designed with a clear path to retirement and plan freezing/termination at the owner's planned exit.
Outcome framing. Substantial annual deductible contributions, dedicated retiree healthcare assets, and a defined wind-down path coordinated with the owner's succession plan.
Patterns Common to All Three
- Feasibility study based on actual census and compensation data.
- 401(k) continues to operate; the Cash Balance + §401(h) sit on top.
- §401(h) contribution sized inside the 25% subordination headroom.
- Annual actuarial valuation and Form 5500 filing.
- Post-retirement reimbursement workflow under §213(d).
Next Step
To see what the math looks like for a real business with real numbers, request a feasibility study.
Frequently Asked Questions
Are these real clients?
No. These are hypothetical, anonymized scenarios chosen to illustrate the structure. They are not representations of actual clients and not guarantees of any tax outcome.
Are the numbers in the cases guarantees?
No. They are illustrative. Every real plan is sized by actuarial calculation against actual census, compensation, assumptions, and applicable IRS limits.
Does the design work for any business size?
It is best suited to closely held businesses and professional practices with high-income owners, stable cash flow, and owners typically aged 45+.
Does adding the §401(h) require freezing the 401(k)?
No. The 401(k) continues to operate; the Cash Balance and §401(h) layers sit on top.
How are employees handled in these designs?
Through coordinated 401(k)/profit-sharing benefits and, where applicable, §401(h) participation — all sized to satisfy nondiscrimination rules.
How quickly can a design be implemented?
From feasibility study to adoption typically takes several weeks to a few months.
Can I request a custom case study for my business?
Yes — a feasibility study uses your actual census, compensation, and cash-flow data to model the design specifically for your situation.
Next Step for CPAs, Advisors, and Business Owners
If you would like a qualified actuary to evaluate whether a 401(h) arrangement may be appropriate alongside a Defined Benefit or Cash Balance plan for your business, request an introductory consultation. Retirement Actuarial Services LLC has specialized in advanced Defined Benefit plan design and 401(h) integration for closely held businesses and professional practices for decades.
Important Disclosure
This material is provided for educational and informational purposes only and should not be construed as tax, legal, actuarial, investment, accounting, or fiduciary advice. The availability, suitability, contribution limits, deductibility, tax treatment, and reimbursement treatment of any 401(h) arrangement depend on the specific facts and circumstances of the employer, plan sponsor, participant population, plan design, actuarial assumptions, regulatory limits, and applicable IRS and Department of Labor requirements. No strategy described herein is a guarantee of tax savings, contribution levels, reimbursement amounts, investment results, or plan approval. Business owners and advisors should consult qualified tax, legal, actuarial, TPA, and financial professionals before establishing or modifying any qualified retirement plan or retiree medical benefit arrangement. Results vary.
