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 ?
Yu, 2005, Cash-Balance Plan Conversions: Evidence on Excise Taxes and Implicit Contracts, Journal of Risk and Insurance, 72: 321-352.
Meanwhile, cash-balance plan sponsors only recently have received some guidance by the Treasury Department and IRS with respect to issues under the Pension Protection Act of 2006.
A cash-balance plan is a hybrid pension plan with features of both a defined-benefit plan and a defined-contribution plan.
In each of the specifications, the coefficient on LOGPL is positive, as predicted, and statistically significant, which suggests that firms with larger pension plans are more likely to convert to a cash-balance plan.
CP&L's shareholders overwhelmingly rejected a proposal by the Amalgamated Bank of New York Longview Collective Investment Fund to establish a committee of outside directors to review the company's new cash-balance plan.
And the lump sum in a cash-balance plan builds value faster on the front end, compared with a traditional pension in which the balance grows slowly at first and doesn't really gain steam significantly until retirement nears.
The majority opinion, written by Justice Stephen Breyer, found that CIGNA misrepresented the true effect of switching from a defined-benefit plan to a cash-balance plan.
Under the regulations, a cash-balance plan would satisfy the age discrimination rules that also apply to defined-contribution plans as long as the pay credits to an employee's account are not less than the pay credits that would be made if the employee were younger.
CBF is also monitoring the pension and cash-balance plan accounting frameworks being discussed by the International Accounting Standards Board (IASB).
That was before the company installed a cash-balance plan to help drive home the save-for-retirement message.
s cash-balance plan did not discriminate against older workers.
Under the plan - effective from 30 June 2003 - the airline will switch its non-pilot US employees to a cash-balance plan, which states the retirement benefit as an account balance rather than a monthly payment.