cash balance plan

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Cash Balance Plan

A pension plan that combines features of a defined-benefit plan and a defined-contribution plan. Like a defined-benefit plan, a cash balance plan guarantees the pensioner a certain benefit upon retirement. That is, the amount one receives from a cash balance plan does not vary according to the performance of some portfolio. Like a defined-contribution plan, the employer agrees to place a certain percentage of one's salary into the plan each year, and accounts are created on an individual basis. A cash balance plan can be rolled over into another account if the employee changes jobs. As a result, it is relatively popular with younger workers.

cash balance plan

A qualified employer pension plan in which the employer guarantees a contribution level and minimum rate of return.

Cash balance plan.

A cash balance retirement plan is a defined benefit plan that has many of the characteristics of a defined contribution plan.

The benefit that you'll be entitled to builds up as credits to a hypothetical account. The hypothetical account is credited with hypothetical earnings, based on a percentage of your current pay.

These plans are portable, which means you can roll them over from one employer to another when you change jobs. That makes them popular with younger and mobile workers.

But they are often unpopular with older workers whose employers switch from a defined benefit to cash balance plan because their pensions may be less than with traditional defined benefit plans.

References in periodicals archive ?
The resolution challenges the fairness of the company's conversion to a cash-balance pension plan, requesting that long-term employees be offered a choice between the current plan and the previous traditional plan.
15 to reconsider a lower court's decision finding Xerox had paid out too little to former employees under its cash-balance pension plan.
Democratic lawmakers, who last year asked the GAO to examine the matter, seized on the report as fresh evidence that the so-called cash-balance pension plans hurt workers.
Despite the growing importance of cash-balance pension plans in the private retirement system in the United States, we have little evidence on the characteristics of firms that are using these hybrid plans.
The Treasury Department has decided to delay issuing contentious regulations on cash-balance pension plans until Congress passes legislation on them.
Controversial bills have been introduced in congress that would limit corporate use of cash-balance pension plans, which many large companies have gone to, especially in the high-technology industry.