Dental Practice Retirement Plans: Defined Benefit, Cash Balance, Solo 401(k), and How to Stack Them

A 401(k) with profit sharing tops out at $72,000 for 2026 ($70,000 for 2025) before catch-up contributions, and that’s the ceiling most dentists think they’re stuck with. A cash balance plan on top of it isn’t capped by that number at all; it’s funded toward a lifetime benefit that can reach $290,000 a year, and the older you are when you start, the more you can put in each year to get there. For a dentist over about 45 with consistent profit above $300,000, the two plans together commonly reach $200,000 to $300,000 of contributions a year in the actuarial illustrations we see. The price is mandatory funding and an actuary, and the staff get a contribution too.

Which plan should a solo dentist with no staff use?

A solo 401(k), almost every time. With no employees other than a spouse, there’s no testing, no staff cost and nothing to design around, so the only question is how much room the limits give you. For 2026 that’s a $24,500 employee deferral under IRC 402(g), plus an employer contribution of up to 25% of W-2 pay, together capped at $72,000 by IRC 415(c). Catch-ups sit on top of the cap.

Limit	2025	2026	Source
Employee deferral, 402(g)	$23,500	$24,500	Notice 2024-80; Notice 2025-67
Catch-up, age 50 and over	$7,500	$8,000	same
Catch-up, ages 60 to 63	$11,250	$11,250	same
Total annual additions, 415(c)	$70,000	$72,000	same
Total with age-50 catch-up	$77,500	$80,000	arithmetic
Total with 60-to-63 catch-up	$81,250	$83,250	arithmetic
Compensation counted, 401(a)(17)	$350,000	$360,000	same notices
Defined benefit annual benefit, 415(b)	$280,000	$290,000	same notices
SIMPLE IRA deferral, employer with 25 or fewer employees	$17,600	$18,100	same notices

• The employer side is 25% of W-2 pay for an S-corp owner under IRC 404(a)(3). For a sole proprietor the same rule works out to 20% of net self-employment earnings, because the contribution and the half-SE-tax deduction both reduce the base; Publication 560 states it as “25% of the employee’s compensation (or, for you, 20% of your net earnings from self-employment).”
• A new plan can be adopted after year end. IRC 401(b)(2) lets an employer that adopts a plan “after the close of a taxable year but before the time prescribed by law for filing the return … (including extensions thereof)” treat it as adopted on the last day of the year, which covers the employer contribution. Employee deferrals still need an election in place before the pay they come out of, so for an S-corp owner the plan has to exist before the December payroll. The same section gives a sole proprietor with no employees one exception: first-year deferrals can go in up to the unextended return due date.
• A SEP does the same job with less paperwork and can be “set up for any year as late as the due date (including extensions) of your income tax return” per Publication 560, but it has no deferral layer, so it tops out at the 25% employer piece.
• Form 5500-EZ is due once plan assets pass $250,000.

What changes once the practice has employees?

The plan has to pass nondiscrimination testing, and the cheapest way to pass it is to pay for it. Once a hygienist or assistant meets the plan’s eligibility rules, a solo 401(k) is over; the practice needs a full 401(k) that either passes the annual deferral tests on actual participation or buys its way out through a safe harbor contribution. Most dental practices take the safe harbor, because a failed test usually ends with part of the owner’s own deferrals refunded.

• The safe harbor options are in IRC 401(k)(12): a nonelective contribution of 3% of pay to every eligible employee, or a match of “100 percent of the elective contributions of the employee to the extent such elective contributions do not exceed 3 percent of the employee’s compensation, and 50 percent of the elective contributions of the employee to the extent that such elective contributions exceed 3 percent but do not exceed 5 percent,” a 4% maximum match.
• Profit sharing on top is where the owner’s money goes, and cross-testing under Reg. 1.401(a)(4)-8 lets the plan give the owner a much higher rate than staff, provided “each NHCE has an allocation rate that is at least one third of the allocation rate of the HCE with the highest allocation rate” or, the deemed route, “each NHCE receives an allocation of at least 5% of the NHCE’s compensation.” An owner who’s older than the team gets the most out of this, because the test projects contributions to retirement age.
• Nearly every dental plan is top-heavy, since the owner holds most of the assets. IRC 416(c)(2) then requires an employer contribution for each non-key employee of “not less than 3 percent of such participant’s compensation,” which the 3% safe harbor nonelective satisfies by itself.
• A SIMPLE IRA under IRC 408(p) is cheaper to run and needs only a 3% match or a “2 percent of compensation” nonelective contribution, but the owner’s deferral stops at $18,100 for 2026 ($17,600 for 2025) at a practice with 25 or fewer employees, the size where a SIMPLE is even in the conversation, with a $3,850 catch-up; the $16,500 and $3,500 figures you’ll see quoted are for bigger employers. It fits a young practice with uncertain profit; an established one leaves too much on the table.
• A SEP with staff must contribute the same percentage for everyone. IRC 408(k)(3)(C) treats SEP contributions as discriminatory “unless contributions thereto bear a uniform relationship to the compensation” of each participant, so 25% for the owner means 25% for the hygienists.

How does a cash balance or defined benefit plan work?

Backwards from the 401(k). A defined benefit plan promises a benefit at retirement, up to the IRC 415(b) ceiling of $290,000 a year for 2026, and an actuary works out what has to go in each year to fund it. The fewer years left, the bigger the annual contribution, which is why a 55-year-old can put in several times what a 35-year-old can. A cash balance plan is the same animal expressed as a hypothetical account that grows by a pay credit and a stated interest credit each year, and it’s the form most dental practices choose.

• The contribution is mandatory. IRC 412 requires contributions “not less than the minimum required contribution determined under section 430,” every year, whether or not the practice had a good one. A practice with volatile profit is a poor fit.
• The cost of running it is an enrolled actuary plus a third-party administrator; our read is $3,000 to $6,000 a year for a small plan, against a few hundred dollars for a solo 401(k).
• Most dental plans are outside the PBGC. 29 U.S.C. 1321(b)(13) exempts a plan “established and maintained by a professional service employer which does not at any time … have more than 25 active participants,” and the definition of professional individuals names “physicians, dentists” first. No PBGC premiums, but also no PBGC backstop.
• The benefit limit is also 100% of the participant’s average pay over the highest three years, so a low S-corp salary caps the cash balance plan as surely as it caps the 401(k).

How much can a dentist shelter by stacking the two plans?

For an owner in their 50s, our read is $200,000 to $300,000 a year, and two rules set the number. The 401(k) and the cash balance plan have separate IRC 415 limits, so one doesn’t use up the other. The deduction is capped by IRC 404(a)(7) at the greater of 25% of pay across both plans or the cash balance minimum funding, unless the employer’s 401(k) contributions “do not exceed 6 percent of the compensation,” in which case the cap falls away. Deferrals don’t count toward the 6%.

How do the entity structure and your salary set the contribution base?

For an S-corp, every percentage above runs on the owner’s W-2 salary, and distributions don’t count. That’s the direct link to the entity structure and reasonable compensation decision. A salary set low to save Medicare tax shrinks the retirement plan base by the same amount, and at 25% the lost contribution room usually dwarfs the payroll tax saved.

• A $250,000 salary supports a $62,500 profit-sharing contribution (25%); a $180,000 salary supports $45,000. The $70,000 of lower salary saves 2.9% of Medicare tax, about $2,030, and costs $17,500 of deductible contribution, which at a 37% rate is about $6,475 of tax, deferred rather than saved, but deferred for a decade or more and compounding untaxed in the meantime. The lower salary loses on that comparison before the cash balance plan even enters it.
• Compensation above $360,000 for 2026 ($350,000 for 2025) doesn’t count under IRC 401(a)(17), so past that point a higher salary buys nothing on the plan side.
• A sole proprietor or partner uses net self-employment earnings instead, and the effective employer rate is 20% rather than 25% for the reason above. The plans available are the same; the base is smaller for the same profit.
• The retirement plan contribution also competes with equipment for the same cash in a given year, and both hit the surety-style question a bank asks at a practice purchase: what did the balance sheet look like after the deduction.

Which SECURE 2.0 changes matter for a dental practice?

Four of them, and the catch-up rules change what a dentist actually does this year. The super catch-up for ages 60 to 63 is $11,250 in both 2025 and 2026, against the standard $7,500 and $8,000, and it ends at 64. From 2026 the catch-up must be Roth for anyone whose prior-year FICA wages from the practice topped the threshold, $150,000 of 2025 wages for 2026 catch-ups (Notice 2025-67), after the two-year transition in Notice 2023-62.

• Mandatory Roth catch-up: an owner-dentist on a $280,000 salary will make the $8,000 or $11,250 catch-up as Roth from 2026. It costs the deduction on that slice and buys tax-free growth on it; the plan document has to allow Roth or the catch-up is lost.
• Employer Roth: IRC 402A now lets a plan offer “designated Roth contributions in lieu of … matching contributions or nonelective contributions,” so the profit-sharing layer can be Roth for an owner who expects the same or higher bracket in retirement. It’s taxable in the year it’s made.
• Student loan match: under IRC 401(m)(13) a plan can treat an associate’s student loan payments like deferrals and match them, “at the same rate as contributions on account of qualified student loan payments.” For an associate carrying dental school debt who can’t defer, it’s the only way a match reaches them.
• Auto-enrollment: under IRC 414A a new 401(k) must enroll employees automatically, with the deferral rate stepped up each year “by 1 percentage point (to at least 10 percent, but not more than 15 percent)” unless the employee opts out. The section doesn’t apply to SIMPLE plans, to any arrangement “established before the date of the enactment of this section,” to an employer “in existence for less than 3 years,” or until a year after the employer first “normally employed more than 10 employees.” A four-chair practice with six staff that opened in 2024 is exempt on two counts; the plan document still has to say what it does.

What should I do next?

Confirm whether you have an eligible employee, because that one fact decides whether a solo 401(k) is even on the table. If you do, price the safe harbor 401(k) against a SIMPLE on your real payroll. If you’re past 45 with three good years behind you, order the cash balance feasibility study before the fourth quarter; the plan can be adopted as late as the extended return due date under 401(b)(2), but the design, the document and the first-year funding all have to be done by then, and the funding is real money you need to have on hand. And revisit the S-corp salary in the same meeting; the two decisions are one decision.

• The salary side of the base: dental practice entity structure and reasonable compensation.
• How an associate’s buy-in compensation sets their own plan room: dental associate compensation and buy-in.
• What the plan costs are worth against the rest of the overhead: dental practice bookkeeping and overhead benchmarks.
• The same stacking analysis for law firm partners and the SEP-versus-solo-401(k) version for trucking owner-operators.
• Selling in the next few years: what a final year of funding does to the deal in dental practice valuation and sale.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.