Why does my cash balance plan limit the amount I can contribute to my 401(k)?

As a general rule, 401(k) profit-sharing plans will limit the profit sharing contribution to 25%. The employee deferral is only limited by earned compensation.

When a 401(k) profit sharing plan is combined with a cash balance plan or other defined benefit plan, the rules state that the company is restricted to making a 6% maximum contributions under the profit sharing plan. There is no such restriction on the employee deferral because it is contributed by the employee and not the employer. So the final retirement contribution would be as follows:

1) Employee deferral (elective)

2) Profit sharing match up to 6% (elective)

3) Cash balance plan contribution (mandatory)