There’s one area where the traditional pension plan is getting new life -- as a tax dodge for wealthy business owners.

Pensions, also known as defined-benefit plans, can be used by doctors, law partners and wealth managers to stash hundreds of thousands of dollars in income a year. By doing so, they’ll get around the income limits Congress created to bar them from a generous new tax break for owners of pass-through entities, who report the firms’ income on their individual tax returns.

The Treasury Department proposed regulations last week specifying who qualifies for the 20 percent deduction, which effectively slashes the top tax rate to just under 30 percent from 37 percent. The rules also say that planning techniques such as the “crack and pack” -- where business owners split their firms into different entities to lower their tax bills -- are considered abusive.

That’s pushing top-earning service professionals to figure out other ways to get below the income limits of $315,000 if they’re married, or $157,500 if they’re single, so they can take full advantage of one of the tax law’s biggest gifts. One of the workarounds is a retirement plan more associated with union workers.

“Doctors and lawyers got really annoyed when they were excluded from the pass-through deduction,” said Daniel Kravitz, president of retirement plan administrator Kravitz. “After tax reform, these plans become even more beneficial.”

Kravitz said his firm, a specialist in defined-benefit plans for small businesses, is actively marketing pensions as a way for service professionals to get around the new rules. Before the tax overhaul, clients typically used them to defer paying taxes on income.

Defined-benefit plans are generally set up in the last few months of the year, but Kravitz said he’s already having his busiest sales year ever, as clients start new pensions called cash balance plans and boost contributions on existing plans.

With a cash balance plan, participants know each year how much they individually hold. Employers make contributions according to a set formula and manage all participants’ investments collectively, usually guaranteeing a set return.

The contribution limits are based on age: Generally, workers in their 30s and early 40s can pitch in less than $100,000, but limits for older workers rise quickly, to above $200,000 for those in their late 50s and above $300,000 for those in their late 60s.

Many large law firms and medical groups already offer cash balance plans to help their highly paid partners lower their tax bills. While these professionals may boost contributions, if possible, to try to take advantage of the pass-through deduction, the biggest potential opportunity under the new law is for the thousands of smaller businesses that don’t yet have such offerings.

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