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 $72,800 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 $66,000 per year while nearly cutting the cost of employee benefits in half!

Reduce Cost of Employee 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 $25,000 $16,800 $191,800
Spouse $100,000 $25,000 $6,000 $131,000
Total $250,000 $50,000 $22,800 $322,800
Plan Participant Defined Benefit EE Deferral ER Contrib Total Amount
Owner $150,000 $25,000 $16,800 $191,800
Spouse $100,000 $25,000 $6,000 $131,000
Total $250,000 $50,000 $22,800 $322,800

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $280,000 $247,000 $0 $0 $247,000
Spouse - Age 60 $100,000 $107,000 $0 $0 $107,000
EE 1 - Age 25 $25,000 $5,600 $0 $0 $5,600
EE 2 - Age 30 $35,000 $9,000 $0 $0 $9,000
EE 3 - Age 35 $40,000 $1,500 $0 $0 $1,500
Owner Benefits N/A $354,000 $0 $0 $354,000
Employee Benefit Cost N/A $16,100 N/A $0 $16,100

Defined Benefit Plan Only

DB / DC Combo Plan

Plan Participant Eligible Compensation Defined Benefit Employee Deferral Employer Contribution Total Amount
Owner - Age 62 $280,000 $245,000 $25,000 $14,000 $284,000
Spouse - Age 60 $100,000 $106,000 $25,000 $5,000 $136,000
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 $700 $0 $2,900 $3,600
Owner Benefits N/A $351,000 $50,000 $19,000 $420,000
Employee Benefit Cost N/A $1,475 N/A $7,200 $8,675

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: IRS Summary




Participant (Age) Defined Benefit EE Deferral ER Contrib Total Amount
Owner (62) $247,000 $0 $0 $247,000
Spouse (60) $107,000 $0 $0 $107,000
EE 1 (25) $5,600 $0 $0 $5,600
EE 2 (30) $9,000 $0 $0 $9,000
EE 3 (35) $1,500 $0 $0 $1,500
Owner Bfts $354,000 $0 $0 $354,000
EE Bft Cost $16,100 N/A $0 $16,100
Participant (Age) Defined Benefit EE Deferral ER Contrib Total Amount
Owner (62) $245,000 $25,000 $14,000 $284,000
Spouse (60) $106,000 $25,000 $5,000 $136,000
EE 1 (25) $275 $0 $1,800 $2,075
EE 2 (30) $500 $0 $2,500 $3,000
EE 3 (35) $700 $0 $2,900 $3,600
Owner Bfts $351,000 $50,000 $19,000 $420,000
EE Bft Cost $1,475 N/A $7,200 $8,675