Professional Pension Plans
The pension built around one high-earning owner.
A professional pension is a defined-benefit plan — traditional or cash balance — designed around the owner of a successful practice rather than a large workforce. Where a 401(k) caps employee deferrals in the tens of thousands, a properly designed professional pension can shelter six figures a year on a deductible basis. A fully-insured 412(e)(3) is the most aggressive version of this idea; cash balance is its more flexible cousin. The right answer depends entirely on your age, income, and who else is on payroll.
Model my pension options →Defined contribution caps the employee. Defined benefit funds the owner.
The shift from a 401(k) to a defined-benefit pension is a shift in who the plan is designed to reward.
A 401(k) or SEP is a defined-contribution plan: the law caps what goes in each year, and that cap is the same whether you are 35 or 62. For a high earner with a short runway to retirement, that ceiling is the problem — there is simply no way to catch up fast enough.
A professional pension flips the logic. It is a defined-benefit plan: you define the retirement benefit you are targeting, and the law lets you fund whatever annual contribution is actuarially required to get there. Because an older owner has fewer years to fund a large benefit, the required — and deductible — contribution rises sharply with age. That is why these plans favor practitioners in their fifties and sixties.
For a solo or small practice, that frequently means a deductible contribution several times larger than any defined-contribution plan allows — often the single largest tax deduction available to a profitable owner.
Three structures, one deduction-first goal.
A professional pension is not a single product. It is a family of defined-benefit structures, each trading flexibility against contribution size. We model all three before recommending one.
Traditional defined benefit plan
Market-funded.
Largest if young.
A classic defined-benefit plan funded with invested assets. The actuary projects returns to set the contribution; strong markets can lower required funding, weak markets raise it. Maximum flexibility in investment choice, with funding volatility as the trade-off.
Cash balance plan
Hybrid.
Predictable and portable.
The most popular professional pension today. Each participant has a notional account credited with a stated interest rate (typically 4–5%). Contributions are predictable, the benefit is easy to communicate, and it pairs cleanly on top of a 401(k). Risk is shared between plan and employer.
412(e)(3)
Fully insured.
Maximum deduction.
Funded entirely with guaranteed insurance and annuity contracts. No market assumptions, no funding volatility — and the highest deductible contribution of the three. It is also the most rigid, and demands conservative, well-disclosed design.
Which structure fits your practice?
There is no universally “best” pension — only the one your numbers support. These are the questions a feasibility analysis answers.
- i.How old are you, and how many years do you realistically want to fund before drawing the benefit? Shorter runways push toward cash balance and 412(e)(3).
- ii.How many full-time employees do you have, and what are their ages and salaries? Staff economics decide how much of the contribution lands on you versus the plan as a whole.
- iii.How stable and high is your taxable income? Defined-benefit plans expect funding even in a soft year, so consistency matters.
- iv.Do you want market upside, or is a contractually guaranteed, volatility-free plan worth a more rigid design? That single preference often decides cash balance versus 412(e)(3).
The fully-insured route
When the answer is 412(e)(3).
For an older solo practitioner with a short runway and a preference for guarantees over market exposure, the fully-insured 412(e)(3) is usually the structure that produces the largest deductible contribution. It is the specialty this practice was built around.
One feasibility analysis. All three structures.
Remain Life Insurance Services, LLC models traditional defined-benefit, cash balance, and 412(e)(3) side by side from your age, income, and employee census — in coordination with a third-party administrator — so you choose from real numbers.
Reach a Remain advisor by phone, text, or email — whichever works for you.