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 $77,000 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 more than $90,000 per year while nearly cutting the cost of employee benefits in half!

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 $31,000 $9,000 $190,000
Spouse $100,000 $31,000 $6,000 $137,000
Total $250,000 $62,000 $15,000 $327,000
Plan Participant Defined Benefit EE Deferral ER Contrib Total Amount
Owner $150,000 $31,000 $9,000 $190,000
Spouse $100,000 $31,000 $6,000 $137,000
Total $250,000 $62,000 $15,000 $327,000

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $350,000 $278,000 $0 $0 $278,000
Spouse - Age 60 $100,000 $97,000 $0 $0 $97,000
EE 1 - Age 25 $25,000 $5,100 $0 $0 $5,100
EE 2 - Age 30 $35,000 $7,900 $0 $0 $7,900
EE 3 - Age 35 $40,000 $2,600 $0 $0 $2,600
Owner Benefits N/A $375,000 $0 $0 $375,000
Employee Benefit Cost N/A $15,600 N/A $0 $15,600

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $350,000 $281,000 $31,000 $19,250 $331,250
Spouse - Age 60 $100,000 $98,000 $31,000 $5,500 $134,500
EE 1 - Age 25 $25,000 $250 $0 $1,800 $2,050
EE 2 - Age 30 $35,000 $450 $0 $2,500 $2,950
EE 3 - Age 35 $40,000 $650 $0 $2,900 $3,550
Owner Benefits N/A $379,000 $62,000 $24,750 $465,750
Employee Benefit Cost N/A $1,350 N/A $7,200 $8,550

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 Plan examples 

• 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) $278,000 $0 $0 $278,000
Spouse (60) $97,000 $0 $0 $97,000
EE 1 (25) $5,100 $0 $0 $5,100
EE 2 (30) $7,900 $0 $0 $7,900
EE 3 (35) $2,600 $0 $0 $2,600
Owner Bfts $375,000 $0 $0 $375,000
EE Bft Cost $15,600 N/A $0 $15,600
Participant (Age) Defined Benefit EE Deferral ER Contrib Total Amount
Owner (62) $281,000 $31,000 $19,250 $331,250
Spouse (60) $98,000 $31,000 $5,500 $134,500
EE 1 (25) $250 $0 $1,800 $2,050
EE 2 (30) $450 $0 $2,500 $2,950
EE 3 (35) $650 $0 $2,900 $3,550
Owner Bfts $379,000 $62,000 $24,750 $465,750
EE Bft Cost $1,350 N/A $7,200 $8,550

Decrease Employee Costs Using a DB / DC Combo Plan

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