DBK Strategy: Max Contributions to a Solo 401(k) & a Cash Balance Plan (DBP)
Direct Answer: Yes, a self-employed business can run the DBK strategy — a Solo 401(k) combined with a cash balance (defined benefit) plan — in the same year. For tax year 2026, the Solo 401(k) overall limit under IRC §415(c) is $72,000, including a $24,500 employee deferral. The cash balance plan’s maximum annual benefit under IRC §415(b) is $290,000, but the actual deductible contribution is set by a plan actuary. Running both plans caps Solo 401(k) employer profit-sharing contributions at 6% of compensation instead of 20–25%.
Can I Max Out a Solo 401(k) and a Cash Balance Plan in the Same Year?
Yes. As long as the business is self-employed and owner-only, it can sponsor both a Solo 401(k) plan and a cash balance plan — also called a defined benefit plan — at the same time. The industry shorthand for this pairing is DBK: DB for defined benefit, K for 401(k).
“That combination is known as a DBK in the industry. DB for defined benefit and a K for 401(k).”
(webinar recording )
Live Q&A webinar on the DBK strategy, hosted by Mark Nolan, Founder/ Compliance Officer, My Solo 401k Financial.
Key Takeaways
- A self-employed, owner-only business can sponsor both a Solo 401(k) and a cash balance (defined benefit) plan at the same time — a combination known industry-wide as a DBK.
- For tax year 2026, the overall Solo 401(k) contribution limit under IRC §415(c) is $72,000, which already includes the $24,500 employee deferral (not an additional amount).
- Catch-up contributions for 2026 add $8,000 for participants age 50 or older, or up to $11,250 (the “super catch-up”) for participants who turn age 60–63 during 2026 — not both.
- The cash balance plan’s maximum annual benefit is capped at $290,000 for 2026 under IRC §415(b), up from $280,000 in 2025, but the true deductible contribution is calculated by a plan actuary.
- Running a defined benefit plan alongside a Solo 401(k) reduces the Solo 401(k) employer profit-sharing contribution to 6% of compensation, down from 25% for an S corporation or 20% for a sole proprietorship or partnership.
- Employee deferrals and voluntary after-tax Solo 401(k) contributions (used for a Mega Backdoor Roth) are not reduced by defined benefit plan contributions — only the employer profit-sharing portion is affected.
- The Solo 401(k) and the cash balance plan are sponsored by the same business but administered separately: My Solo 401k Financial handles the Solo 401(k), while the cash balance plan is opened with an outside actuarial provider.
What Contribution Types Make Up the DBK Strategy?
The DBK strategy works because a Solo 401(k) and a cash balance plan draw on different contribution sources. Defined benefit plans are funded solely by employer contributions — there is no employee deferral and no voluntary after-tax option inside a cash balance plan. That is where the Solo 401(k) fills the gap, since it allows employee deferrals, employer profit-sharing, and voluntary after-tax contributions.
Employee Deferrals and Catch-Up Contributions
The Solo 401(k) allows a $24,500 employee contribution for tax year 2026, and this amount is unaffected by a defined benefit plan contribution made in the same year. Age-based catch-up contributions stack on top: $8,000 for participants age 50 or older, or a “super catch-up” of $11,250 for participants who turn age 60 through 63 during 2026. A participant cannot use both catch-up amounts in the same year.
“There’s the age-fifty catch-up, which is $8,000 … And then there’s the super catch-up amount of $11,250 for participants who attain age sixty through sixty-three during 2026.”
(webinar recording )
Voluntary After-Tax Contributions and the Mega Backdoor Roth
A participant can also make voluntary after-tax Solo 401(k) contributions up to the overall $72,000 limit, then convert them to a Roth Solo 401(k) or Roth IRA as part of a Mega Backdoor Roth strategy. These contributions must be backed by earned self-employment income — Schedule C income for a sole proprietorship, or Box 1 W-2 wages for an S corporation — not investment income, capital gains, or Social Security benefits.
Employer Profit-Sharing Contributions Drop to 6%
The one contribution type the cash balance plan does interact with is Solo 401(k) employer (profit-sharing) contributions. Without a defined benefit plan, an S corporation can typically contribute 25% of W-2 wages as an employer profit-sharing contribution; a sole proprietorship or partnership can typically contribute 20% of net self-employment income. Once the same business also funds a cash balance plan, deduction rules limit the Solo 401(k) employer profit-sharing contribution to 6% of compensation.
“If you do contribute to a defined benefit plan as well, instead of being able to contribute twenty-five percent… you can only contribute six percent of that one hundred thousand dollars.”
(webinar recording)
What Are the 2026 Contribution Limits for Each Plan?
The Solo 401(k) and the cash balance plan follow two different sections of the tax code, and they are calculated in fundamentally different ways.
“The IRS code confirms that for tax year 2026, the contribution limit to a Solo 401(k) is $72,000… so it’s not an additional $24,500.”
(webinar recording)
Under IRC §415(b), the cash balance plan’s annual benefit is generally capped at the lesser of 100% of the participant’s average compensation over their highest three consecutive years, or $290,000 for 2026 — up from $280,000 in 2025. That $290,000 figure is the maximum annual benefit, not automatically the amount that can be deposited into the plan.
“That $290,000 figure is the maximum annual retirement benefit under… 415(b). It’s not necessarily the maximum amount that can be deposited to that defined benefit plan for tax year 2026.”
(webinar recording)
Solo 401(k) vs. Cash Balance Plan: 2026 Side-by-Side
In short: the Solo 401(k) has a fixed 2026 dollar ceiling of $72,000, while the cash balance plan’s actual contribution is actuary-calculated and only capped indirectly through a $290,000 benefit limit.
Does Maxing Out a Cash Balance Plan Block Solo 401(k) Contributions?
No. This is one of the most common misconceptions about the DBK strategy. A fully-funded cash balance plan does not use up any of the $72,000 Solo 401(k) limit, because the two plans draw on different IRS code sections and different contribution sources.
“This is one of the biggest misconceptions… that if someone maximizes their defined benefit plan, that they cannot also make contributions to a Solo 401(k) plan.”
(webinar recording )
Attendee Questions From the Live Webinar
Does Changing Business Type Affect an Existing Solo 401(k)?
An attendee who currently operates as a sole proprietor and plans to incorporate asked whether that change affects the plan or adds fees.
“If I may change my business type, does that affect how to set up a Solo 401(k)? Are there any additional fees? Currently I’m a sole proprietor. In the near future, I plan to incorporate.”
(webinar recording)
Mark Nolan answered that the sole proprietorship can sponsor the Solo 401(k) now, with an October 15 deadline (following an extension) to open and fund the plan for prior-year employer profit-sharing and voluntary after-tax contributions. If the entity later changes to an S corporation, the plan must be restated to reflect the new sponsoring business, at a cost of $300.
Can I Contribute to Both a SEP IRA and a Solo 401(k) in the Same Year?
A second attendee asked about transferring an existing SEP IRA into a Solo 401(k) for 2026 contributions.
“I previously had a SEP IRA… I now want to establish a Solo 401(k) with you for 2026 contributions. Do we need to do anything to close down or review the prior SEP IRA?”
(webinar recording)
Mark Nolan confirmed the SEP IRA can be transferred into the Solo 401(k). He noted that a business can contribute to both a SEP IRA and a Solo 401(k) plan in the same year, but all contributions across both must be aggregated, and a SEP IRA allows only employer contributions — which is why many clients transfer SEP IRA balances into a Solo 401(k) to also access employee deferrals.
Planning Traps to Avoid With the DBK Strategy
Warning:
- Don’t assume the full $290,000 cash balance benefit figure is automatically allowed — confirm the actual contribution amount with a plan actuary first.
- Don’t subtract the defined benefit plan contribution from the Solo 401(k) limit — they are separate limits under separate code sections.
- Do watch the employer profit-sharing percentage: it drops to 6% of compensation once a defined benefit plan is also in place, from 25% (S corporation) or 20% (sole proprietorship/partnership).
Glossary
- DBK
- Industry shorthand for a self-employed business simultaneously sponsoring a Defined Benefit plan (DB) and a Solo 401(k) plan (K).
- Solo 401(k)
- A 401(k) plan for a self-employed, owner-only business, allowing employee deferrals, employer profit-sharing contributions, and voluntary after-tax contributions up to $72,000 for 2026.
- Cash Balance Plan (Defined Benefit Plan)
- A retirement plan that promises a specified benefit at retirement, funded entirely by employer contributions and calculated by a plan actuary; capped at a $290,000 annual benefit for 2026 under IRC §415(b).
- Employer Profit-Sharing Contribution
- The employer-funded portion of a Solo 401(k), typically up to 20–25% of compensation, but limited to 6% when the same business also maintains a defined benefit plan.
- Mega Backdoor Roth
- A strategy using voluntary after-tax Solo 401(k) contributions, converted to a Roth Solo 401(k) or Roth IRA, to move up to $72,000 into Roth status for 2026.
Frequently Asked Questions
What is a DBK strategy?
A DBK strategy is when a self-employed, owner-only business sponsors both a Solo 401(k) plan and a cash balance (defined benefit) plan in the same year. DB stands for defined benefit and K stands for 401(k). Combining the two allows substantially higher combined retirement contributions than either plan alone, as long as both plans are properly designed.
Can I contribute to both a Solo 401(k) and a cash balance plan in the same year?
Yes. As long as the business is self-employed and owner-only, it can maintain both plans simultaneously. Defined benefit plan contributions do not reduce the Solo 401(k) employee deferral or voluntary after-tax contribution limits — only the Solo 401(k) employer profit-sharing percentage is affected.
What is the Solo 401(k) contribution limit for 2026?
For tax year 2026, the overall Solo 401(k) contribution limit under IRC §415(c) is $72,000. This figure already includes the $24,500 employee deferral, not an additional amount on top of it. Age-based catch-up contributions of $8,000 or, for ages 60–63, up to $11,250 can be added on top of the $72,000 figure.
What is the cash balance plan contribution limit for 2026?
Cash balance (defined benefit) plans don’t have a flat annual dollar limit like a Solo 401(k). Instead, IRC §415(b) caps the maximum annual retirement benefit at $290,000 for 2026, up from $280,000 in 2025. The actual dollar contribution needed to fund that benefit is calculated by a plan actuary based on age, compensation, and other factors.
Does a defined benefit plan reduce my Solo 401(k) employee contribution?
No. Employee deferrals and voluntary after-tax Solo 401(k) contributions are not reduced by defined benefit plan contributions. The only Solo 401(k) contribution type affected is the employer profit-sharing contribution, which drops to 6% of compensation once a defined benefit plan is also funded.
How much can I contribute as a Solo 401(k) employer profit-sharing contribution if I also have a defined benefit plan?
The employer profit-sharing contribution is limited to 6% of compensation when the same business also maintains a defined benefit plan, compared to up to 25% for an S corporation or 20% for a sole proprietorship or partnership without a defined benefit plan. For example, 6% of $100,000 in wages is a $6,000 maximum profit-sharing contribution.
If I change my business type, does that affect my Solo 401(k)?
Yes. If the sponsoring business’s entity type changes — for example, from a sole proprietorship to an S corporation — the Solo 401(k) plan must be restated to reflect the updated business. My Solo 401k Financial charges $300 for this restatement.
Can I contribute to both a SEP IRA and a Solo 401(k) in the same year?
Yes, but all contributions to both plans must be aggregated against the combined limit. A SEP IRA allows only employer contributions, while a Solo 401(k) allows both employee and employer contributions, which is why many self-employed individuals transfer SEP IRA balances into a Solo 401(k).
This article is based on the live webinar hosted by My Solo 401k Financial. Analysis by Mark Nolan, Founder/ Compliance Officer, My Solo 401k Financial.
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