When a cash balance plan is already in place, adding a §401(h) sub-account is mechanically a plan amendment plus a sub-account on the TPA's recordkeeping system. Costs are modest relative to the deduction created.
One-time setup
Typical setup ranges from $1,500 to $4,000, covering the plan amendment, actuarial sizing of the §401(h) contribution, and recordkeeping system setup. ERISA counsel involvement may add another $1,000–$3,000 depending on plan complexity.
Annual maintenance
Annual fees are typically $750 to $2,500 in addition to existing cash balance plan fees. This covers the subordination test, the §401(h) line items on Form 5500, and reimbursement administration.
Net economics
On a $75,000 annual §401(h) contribution at a 37% marginal rate, the deduction value is roughly $27,750. Even at the high end of administrative cost, the cost-to-benefit ratio is in the low single-digit percent range.