DB / DC Combo Plans 

DB / DC Combo Plans

As the name suggests, a DB / DC Combo Plan is when a Defined Benefit Plan is paired with a Defined Contribution Plan, such as a 401(k) Profit Sharing Plan. By combining the two plans, a business owner is able to increase their deductible limit and reduce the cost of providing retirement benefits to employees.

What Is a DB / DC Combo Plan?

A Defined Benefit Plan allows a business owner to make large deductible contributions. What's more, by combining a Defined Benefit Plan with a 401(k) Plan, the deductions are even larger!

Here is a comparison of a standalone Defined Benefit Plan and a DB / DC Combo Plan. By adding the 401(k) Plan, the owner and spouse are able save an additional $75,100 in pre-tax dollars.

Increase Contribution Limits Using a DB / DC Combo Plan

In addition to increasing deductible contributions, DB / DC Combo Plans reduce the employer's cost of providing benefits to employees.

Generally, when a business adopts a Defined Benefit Plan, non-owner employees also must receive a benefit. In fact, nondiscrimination rules describe the requirement for minimum employee benefit amounts. Usually, providing all benefits in a standalone Defined Benefit Plan is significantly more expensive than providing benefits in a DB / DC Combo Plan.

The illustration provides an example of the difference. Significantly, the DB / DC Combo Plan increases owner benefits by $65,000 per year while nearly cutting the cost of employee benefits in half!

Reduce Cost of Staff Benefits with a DB / DC Combo

Plan Participant Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner $150,000 $0 $0 $150,000
Spouse $100,000 $0 $0 $100,000
Total $250,000 $0 $0 $250,000
Plan Participant Defined Benefit EE Deferral ER Contrib Total Amount
Owner $150,000 $0 $0 $150,000
Spouse $100,000 $0 $0 $100,000
Total $250,000 $0 $0 $250,000
Plan Participant Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner $150,000 $26,000 $17,400 $193,400
Spouse $100,000 $26,000 $6,000 $132,000
Total $250,000 $52,000 $23,400 $325,400
Plan Participant Defined Benefit EE Deferral ER Contrib Total Amount
Owner $150,000 $26,000 $17,400 $193,400
Spouse $100,000 $26,000 $6,000 $132,000
Total $250,000 $52,000 $23,400 $325,400

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $290,000 $261,000 $0 $0 $261,000
Spouse - Age 60 $100,000 $111,000 $0 $0 $111,000
EE 1 - Age 25 $25,000 $5,800 $0 $0 $5,800
EE 2 - Age 30 $35,000 $9,000 $0 $0 $9,000
EE 3 - Age 35 $40,000 $3,000 $0 $0 $3,000
Owner Benefits N/A $372,000 $0 $0 $372,000
Employee Benefit Cost N/A $17,800 N/A $0 $17,800

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $290,000 $259,000 $26,000 $14,500 $299,500
Spouse - Age 60 $100,000 $110,000 $26,000 $5,000 $141,000
EE 1 - Age 25 $25,000 $275 $0 $1,800 $2,075
EE 2 - Age 30 $35,000 $500 $0 $2,500 $3,000
EE 3 - Age 35 $40,000 $750 $0 $2,900 $3,650
Owner Benefits N/A $369,000 $52,000 $19,500 $440,500
Employee Benefit Cost N/A $1,525 N/A $7,200 $8,725

Additional Resources

To learn more about how a Defined Benefit Plan can help you, see these resources:

How much can I contribute? Defined Benefit calculator  and Defined Benefit Contribution limits

Setting up a Defined Benefit Plan: How to set up a self-employed Defined Benefit Plan

Case Studies: Defined Benefit case studies 

Illustrator video and FAQs: Defined Benefit video and FAQs

Defined Benefit Plans vs Cash Balance Plans: Defined Benefit Plans vs Cash Balance Plans

Defined Benefit Plans vs SEPs or 401(k) Plans: Defined Benefit Plans vs Defined Contribution Plans

Defined Benefit Plan rules: Defined Benefit Plan rules




Participant (Age) Defined Benefit EE Deferral ER Contrib Total Amount
Owner (62) $261,000 $0 $0 $261,000
Spouse (60) $111,000 $0 $0 $111,000
EE 1 (25) $5,800 $0 $0 $5,800
EE 2 (30) $9,000 $0 $0 $9,000
EE 3 (35) $3,000 $0 $0 $3,000
Owner Bfts $372,000 $0 $0 $372,000
EE Bft Cost $17,800 N/A $0 $17,800
Participant (Age) Defined Benefit EE Deferral ER Contrib Total Amount
Owner (62) $259,000 $26,000 $14,500 $299,500
Spouse (60) $110,000 $26,000 $5,000 $141,000
EE 1 (25) $275 $0 $1,800 $2,075
EE 2 (30) $500 $0 $2,500 $3,000
EE 3 (35) $750 $0 $2,900 $3,650
Owner Bfts $369,000 $52,000 $19,500 $440,500
EE Bft Cost $1,525 N/A $7,200 $8,725