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US · §415(b) · Verified

Defined benefit

Defined Benefit Plan Calculator

Every other plan on this site runs into the same wall: $72,000 a year, whatever you earn. That is the limit on what goes into the account. A defined benefit plan is limited instead by what it promises to pay out — $290,000 a year — and there is no fixed cap on the contribution. That is why an owner over 50 can put away six figures, and why this page gives you the ceiling rather than a contribution it would have to invent.

Prepared for the 2026 tax year.

The limit is on the output, not the input. §415(c) caps a contribution; §415(b) caps a promised benefit at the lesser of $290,000 or 100% of your average compensation for your three highest years.

Schedule C line 31. This sets 100% of your compensation, which is half of the §415(b) test.
The single biggest input. The same promise costs much more a year when there are fewer years left to fund it.
The plan is a deduction, so it comes out of the profit. Leave enough to live on and to cover the payroll tax.

Enter your profit and your age. The page works out the benefit the plan may promise, and tells you plainly why the contribution is the one figure only an actuary can sign.

Benefit the plan may promise $0
Which half of §415(b) binds —
Contribution limit —
Cash the plan must come out of — Profit less the salary you take. A contribution is a deduction, so it can only come from what remains.

Comparing against the plans with a fixed cap? The Retirement Plan Comparison ranks a SEP, a SIMPLE and a solo 401(k) on your profit — all three limited by the $72,000 this plan is not.

Working out what the deduction is worth? The Tax Set-Aside Calculator shows the tax the contribution removes, which is the whole point of a plan this size.

Where these figures come from

Annual benefit limit
The other half of the test
100% of average compensation for the three highest consecutive years · IRC §415(b)(1)(B)
Contribution cap
None. §415(c)'s $72,000 figure governs defined contribution plans; §415(b) governs this one
Funding certification
Schedule SB, signed by an enrolled actuary
Excise tax on underfunding
IRC §4971
Verified
4 October 2026
How this is worked out

The rule is short. What makes the plan unusual is that the limit is on what the plan promises to pay, not on what you put in — so the contribution is a consequence, not a figure the IRS publishes.

The benefit the plan may promise
The lesser of $290,000, or 100% of average compensation for the highest three consecutive years
IRC §415(b)(1)(A) and (B) · IRS Notice 2025-67
Two tests, and the smaller wins. On a high income the dollar figure binds; on a modest one the compensation test does. A sole proprietor's compensation is net earnings after the self-employment tax deduction.
The contribution
Whatever is needed to fund the promised benefit, certified annually
IRC §412 · Schedule SB
This is why no page can state it exactly. The actuary discounts the promised benefit back to today using an assumed rate of return and a mortality table, then spreads the present value over the years remaining. Two actuaries can legitimately differ.
What age does to it
The same benefit, over fewer years
Arithmetic of the discounting, not a rule
The reason owners over 50 use this plan. A $290,000 promise at 40 has twenty-five years of assumed growth behind it; the same promise at 62 has three. The annual contribution is therefore several times larger near retirement.
The obligation
The contribution is required, not optional
IRC §4971
Every other plan here can be skipped in a bad year. A defined benefit plan cannot: an underfunded plan owes an excise tax on the deficiency. That is the trade for the size of the deduction.

The formulas are shown as the authority defines them, in its own terms — the arithmetic is not copyrightable and the rates are public-domain US government material. What these lines cannot tell you is where your figures came from; that is what the table above is for.

Why this plan is not capped at $72,000

The four plans on the rest of this site — SEP, SIMPLE, solo 401(k) and the comparison — are all defined contribution plans, and all four run into §415(c): a ceiling of $72,000 a year on what may be added to the account. Nothing about your age or your income moves that figure.

A defined benefit plan is limited by a different subsection, and it limits a different thing. §415(b) caps the benefit the plan promises to pay you each year — the lesser of $290,000 or 100% of your average compensation for your three highest consecutive years. The contribution is whatever is needed to fund that promise.

A limit on the output rather than the input is why the contribution can be several times larger. It is also why the number depends so heavily on age: the promise is fixed, but the years available to fund it are not.

The three things this page cannot tell you

One: the exact contribution. It is an actuarial calculation, and the estimate above is built from the same factors — age, assumed return, the benefit level — but it is not a certification and it is not allowed to be.

Two: whether the plan is right for you. A defined benefit plan is worth it when the deduction saves more than the plan costs to run, which means a consistently high income and a real appetite for administration. Actuarial fees run into four figures a year.

Three: whether you can afford a bad year. This is the risk that matters. The funding obligation is a legal commitment with an excise tax behind it, and a freelancer's income is the least predictable kind. A plan set up on one good year and funded on the next two is how people get into trouble.

Frequently asked questions

How much can I contribute to a defined benefit plan?

There is no fixed contribution limit, and that is the point. The IRS limits the benefit the plan may promise — the lesser of $290,000 for 2026 or 100% of your average compensation for your three highest consecutive years. The contribution is whatever an actuary calculates is needed to fund that promise, which is why this page gives a range and says plainly that it is an estimate.

Why can I put in more than a 401(k) allows?

Because the two plans are limited by different subsections. A 401(k), a SEP and a SIMPLE are all defined contribution plans, capped by §415(c) at $72,000 of contributions a year. A defined benefit plan is capped by §415(b), which limits the annual benefit instead. Moving the limit from what goes in to what comes out is what makes six-figure contributions possible.

Why does my age matter so much?

Because the promise is the same but the funding period is not. An actuary discounts the promised benefit back to today and spreads the present value over the years remaining until retirement. At 62 that is three years of funding; at 40 it is twenty-five, with investment growth doing much of the work. The same $290,000 promise therefore costs several times more per year near retirement — which is exactly why the plan is popular with owners over 50 and rarely makes sense at 35.

Do I really need an actuary?

Yes, and unlike every other plan on this site that is not a choice. A defined benefit plan must be certified each year on Schedule SB by an enrolled actuary. The actuary sets the funding range, signs the certification and produces the annual report. Budget for the fee: it is a real cost, and it recurs.

Can I skip a contribution in a bad year?

No, and this is the risk people underestimate most. A defined benefit plan must be funded. If it is underfunded the contribution is required whether or not the year went well, and an unpaid minimum funding amount attracts an excise tax under §4971. Every other plan on this site — a SEP, a SIMPLE, a solo 401(k) — can simply not be contributed to in a lean year. This one cannot.

Can I have this alongside a 401(k)?

Yes, and it is common, but the two share a combined deduction limit under §404(a)(7), which is a separate calculation from either plan's own ceiling. Running both is a decision to make with the actuary and the plan provider together rather than by adding two maximums. There is no version of this where the limits simply stack.

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