Your Business Can Do More Than Run Itself. It Can Build Your Personal Wealth Too.
Most business owners have some kind of retirement plan in place. They set it up years ago, they contribute, and they move on. It's rarely their fault when it stops fitting the business, it's just that nobody ever went back to ask if it still does.
This episode is about that gap. Not whether you have a plan, but whether it's actually working as hard for you personally as your business is working for its customers.
The Owner Benefit Corner. The fourth and final corner of the Four Corners of Business Owner Planning. New to the framework? Start with Episode 122. The Tax Corner (Episodes 123–124), the Legal Corner (Episode 125), and the Risk Management Corner (Episode 126) cover the rest of the series. Part 2 of this corner picks up the personal and emotional side of taking wealth off the table.
It Always Comes Back to the Pre-Tax Dollar
Brian Hartstein opens with the thesis behind this entire corner. Business owners build a company because they want to create something valuable, and eventually take value out of it, both while it's running and someday when they're ready to move on.
A 401(k) is one pre-tax way to do that. It's not the only way, and where a business owner should focus first depends heavily on what stage the business is in and how those pre-tax resources are being allocated.
Most business owners have some kind of plan already, even if it's as simple as a SEP IRA set up years ago before the business had employees or real complexity. That's a reasonable starting point, but it's rarely revisited once the business matures, sometimes because the advisor in the room is focused elsewhere, and sometimes because nobody asked the follow-up question.
The Retirement Plan Pyramid: From SEP to Defined Benefit
Brian describes pre-tax planning as a pyramid. At the base, you've got a 401(k) or a SEP. The next level up is a profit sharing plan, which opens up some additional flexibility. At the top of the pyramid sits the defined benefit pension plan, sometimes structured as a cash balance plan, which can allow significantly more to be put away in a single year.
Qualified plans like 401(k)s and profit sharing plans are often, in Brian's words, "employee plans." They carry caps on what any one person can contribute, which is good for the broader workforce, but can leave a highly profitable owner wanting more room than the plan allows. That's usually the point where business owners start working their way up the pyramid.
The Cost-Benefit Question Every Business Owner Should Ask
Once a business owner starts looking at profit sharing or defined benefit contributions, the math shifts. It's no longer just "how much can I put away," it becomes "how many cents of every dollar do I actually get to keep," once contributions required for employees are factored in.
Brian shares a general rule of thumb from these conversations: many business owners aim to be in the 80 to 85 cents range or higher. Below that, the numbers may start working against the tax savings, and it's worth stepping back to ask whether the goal is still being met. This isn't a formula that applies the same way to every business, since a lot depends on the owner's age relative to their employees' ages, since these plans are age-banded and that changes what's achievable.
Sometimes a plan looks great from a percentage standpoint but falls apart at the line-item level, for example, a required contribution for one employee that looks disproportionate to their salary. That's exactly why this kind of analysis has to get specific to the business, not just modeled at a high level.
When a Qualified Plan Isn't Enough: Non-Qualified Planning
For business owners who want more flexibility than a qualified plan allows, non-qualified planning is the other lever. The trade-off is straightforward: you give up the immediate tax deduction in exchange for the ability to choose who gets rewarded and how.
A non-qualified plan can grow tax-deferred, similar in spirit to deferred compensation, but the deduction typically doesn't show up until the funds are constructively received by the participant, sometimes years down the road. That flexibility comes without the same nondiscrimination testing that governs qualified plans, which is exactly why it's often used to stack on top of a 401(k) or defined benefit plan rather than replace it.
Is Your Plan Still Working? Design, Structure, and Staying Compliant
Every retirement plan has two separate pieces: design and structure. Design is everything specific to what the plan is trying to accomplish for your business. Structure is who's actually administering and running it. Most business owners get asked about structure. Far fewer ever get asked whether the design itself still fits.
A good third-party administrator should be asking the right questions along the way, helping keep the plan document current as retirement plan language changes, and making sure ERISA requirements like employee education are being met. Plans that have run untouched for years aren't necessarily broken, they may just be due for a review to see if a little fine-tuning could make them work harder for everyone involved.
One area worth double-checking with your TPA: recent legislative changes have adjusted how certain highly compensated employees can make catch-up contributions, including a requirement that those contributions go to a Roth account. For 2026, that threshold is $160,000 in prior-year compensation (based on 2025 earnings). If your plan doesn't currently include a Roth provision, affected employees may not be able to make catch-up contributions at all. This threshold adjusts most years, so it's worth confirming the current figure directly with your plan's TPA and a qualified tax professional.
No matter how well-designed a plan is, most business owners eventually face the same fork in the road: keep reinvesting in the business, or start diversifying some of that value into something that exists outside it. That question, and the more personal side of answering it, is where Part 2 of this corner picks up.
Disclosure: The content on this page is for informational and educational purposes only. Bayntree Wealth Advisors and its representatives do not provide legal or tax advice. Nothing on this page should be construed as legal or tax guidance specific to your situation. Any references to retirement plan design, tax code provisions, or planning strategies are general in nature and may not apply to your circumstances. Please consult a qualified attorney and/or tax professional before making any decisions about your specific situation.
Frequently Asked Questions: Owner Benefit Planning for Business Owners
What does "owner benefit planning" actually mean for a business owner?
Owner benefit planning covers the pre-tax strategies a business owner can use to build personal wealth alongside the business itself, most commonly through retirement plans like a 401(k), profit sharing plan, or defined benefit pension plan, sometimes paired with non-qualified planning. The goal isn't just having a plan, it's making sure that plan still fits the business as it grows and changes. A financial advisor who works with business owners can help evaluate whether your current plan is still doing what it should.
Why do business owner retirement plans need to be revisited as the business grows?
Many plans, especially simple ones like a SEP IRA, get set up early in a business's life and then run unchanged for years. As the business matures, profitability increases, or the workforce changes, the original plan design may no longer be the most effective option available. Revisiting plan design periodically, not just the underlying investments, is one of the most overlooked opportunities for business owners.
What's the difference between a 401(k)/profit sharing plan and a defined benefit pension plan?
401(k) and profit sharing plans sit at the base of what's often described as a pyramid of pre-tax planning options, and they carry contribution caps that apply to everyone, including the owner. Defined benefit pension plans, sometimes structured as cash balance plans, sit at the top of that pyramid and may allow significantly more to be contributed in a given year, depending on the business owner's age, income, and workforce demographics. Which option, or combination of options, makes sense depends on the specific business.
Why are qualified plans sometimes called "employee plans"?
Qualified plans like 401(k)s and profit sharing plans apply the same contribution limits to everyone in the plan, which is designed to benefit the broader workforce rather than concentrate contributions with the owner. For highly profitable business owners who want to put away more than those caps allow, this is often the point where defined benefit plans or non-qualified strategies come into the conversation.
What is a non-qualified plan and why would a business owner use one?
A non-qualified plan is a deferred compensation arrangement that trades an immediate tax deduction for greater flexibility, including the ability to choose which employees participate. Contributions typically grow tax-deferred, and the deduction is usually realized later, when funds are constructively received by the participant. Business owners often use non-qualified planning alongside a qualified plan, rather than instead of one, when the qualified plan alone can't accomplish everything they're trying to do. Whether this makes sense for a specific business depends on individual goals and should be evaluated with a qualified advisor.
How do I know if my retirement plan is being run correctly?
A good third-party administrator should be proactively asking for the right information, keeping your plan document updated as legislative language changes, and helping ensure ERISA requirements, like employee education, are being met. If a plan has run for years without a real design review, that doesn't necessarily mean something is wrong, but it's worth checking with your plan advisor and TPA to confirm the plan still fits your business and remains compliant.
What changed for highly compensated employees under recent retirement plan legislation?
Recent changes affect how certain highly compensated employees can make catch-up contributions to a 401(k), in some cases requiring those contributions to go into a Roth account. For 2026, the compensation threshold that triggers this requirement is $160,000, based on earnings from 2025. If a plan doesn't currently include a Roth provision, affected employees may be unable to make catch-up contributions at all. Because this threshold is adjusted most years, plan sponsors should confirm the current figure with their TPA and a qualified tax professional rather than relying on a prior year's number. Bayntree Wealth Advisors does not provide legal or tax advice.
How should a business owner decide between reinvesting in the business and building personal wealth outside it?
This is often described as the fork in the road every business owner eventually reaches: keep deploying profit back into the business to keep growing it, or start diversifying some of that value into personal wealth that exists independent of the business. There's no universal answer, it depends on the business's stage, its cash flow, and the owner's broader goals. This question, along with the more personal and emotional side of answering it, is explored further in Part 2 of this corner.
Is Your Plan Working as Hard as You Are?
Most business owners have never had someone go back and ask whether their retirement plan design still fits the business they're running today. Schedule a free 15-minute call with Andrew Rafal, host of Your Wealth and Beyond and founder of Bayntree Wealth Advisors. With 20+ years working alongside business owners, Andrew can help you see whether your current plan is still working for you, or just running on autopilot.
This isn't a sales pitch. It's a real conversation about where you are and where you want to go.
Disclaimer:
These materials and links are provided strictly as a courtesy. We make no representations as to the completeness or accuracy of information provided at these websites. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the website to which you are linking. The information is not intended to provide you with any personalized financial, insurance, legal, accounting, tax, or other professional advice.
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