In a cash balance plan, the benefit is usually paid as a single sum equal to your account balance (IRC 411(a)(13)(A)). Most owners take it that way at retirement or when the plan is closed.
The lump sum is capped. The 415(b) limit is written as a yearly income for life, so to test a lump sum the plan converts that income using an interest rate of at least 5.5% and the IRS mortality table. At normal retirement age 62, with ten years of participation, the 2026 limit of $290,000 a year converts to a lump sum in the millions. That lifetime ceiling is what every year's contribution is aimed at.
A lump sum paid directly to you is taxed as ordinary income in the year you receive it. Rolled into an IRA or another qualified plan, it stays tax-deferred until you withdraw it.
An underfunded plan can restrict lump sums. If the actuary certifies a funded percentage under 80%, a lump sum is limited, and under 60% it cannot be paid (IRC 436). An owner who has put in only the minimum each year may need to fund the plan up before taking the full balance. See closing a cash balance plan.