Lifetime limit

A 401(k) limits how much goes in each year. A Cash Balance plan has no fixed annual contribution limit (but see the contribution range for the description of the annual maximum deductible contribution determined by the actuary.) Instead, IRC section 415(b) limits the benefit the plan can pay out, for each participant. That cap is what ultimately determines how much an owner can put away.

The limit is on the benefit

The law states the 415(b) limit as a yearly pension, a straight life annuity payable for life, starting at normal retirement (62 to 65). A Cash Balance account must never be worth more than that maximum pension converted to a lump sum. The calculator does that conversion year by year.

Four things set the limit

Factor	Rule	Effect
Dollar limit	$290,000 a year for 2026, indexed for inflation	Sets the ceiling for high earners
Pay limit	100% of average pay in the highest 3 consecutive years, with pay capped at $360,000 for 2026	Lower earners hit this first
Participation and service	The dollar limit is reduced 10% for each year of plan participation short of 10. The pay limit is reduced 10% for each year of service (even prior to the start of the business) short of 10	A new plan's limit starts at one-tenth and grows each year
Age	Benefits starting before 62 are reduced. Benefits starting after 65 are increased	The lump-sum cap climbs quickly through the late 50s and early 60s

Converting to a lump sum

Most owners take their benefit as a lump sum and roll it to an IRA. To find the largest allowable lump sum, the annual limit is converted using an interest rate of at least 5.5% and the IRS mortality table for that year. The 5.5% floor means falling interest rates do not raise the cap the way they raise some other lump sums.

Why this matters more than the annual contribution

The annual contribution in a Cash Balance plan is what it takes to fund a benefit that stays within this limit by a target date. That leads to a few practical points:

Older owners can contribute more each year, because they have fewer years to reach a larger limit.
There is a finish line. Once an account reaches the cap, contributions for that owner have to stop or significantly slow down.
Strong investment returns near the cap can backfire. Assets above the maximum can't be paid to the owner. See Investments and risk for how excess assets are dealt with.
All defined benefit plans of the same employer count together. A prior plan's benefits use up part of the limit.

Try it!

The lifetime limit calculator projects the cap for the next 10 to 15 years from a birth date, hire date, plan start date, and pay.