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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

cash balance plan

A qualified employer pension plan in which the employer guarantees a contribution level and minimum rate of return.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
But the research also points to a market that is booming, and proponents say it naturally complements 401(k)s: cash balance pension plans.
* Cash balance pension plans specify a formula for determining annual employer contributions to employee accounts as well as specify an interest rate applied to account balances.
It made major changes in funding of defined contribution and cash balance pension plans, and lots more.
401(k) plans, increased deduction limits, more frequent reporting and disclosure statements, broadened portability, cash balance pension plans and changes to fiduciary rules governing investment advice.
With the evolution of cash balance pension plans, companies that acquire others with more tradition al plans face risks when plans are converted to cash balance or diverted for other corporate uses.
Government Accountability Office contends that cash balance pension plans that became popular 15 years ago have reduced corporate liabilities but have not been beneficial to retirees, particularly older workers.
Cash balance pension plans can present concerns to corporate adopters that should be addressed and properly disclosed in their financial statements.
19, 2000, FEI's Committee on Benefits Finance (CBF), the technical committee that formulates FEI policy on matters pertaining to the design, implementation, financing and administration of employee compensation, pension and healthcare plans, responded to the Internal Revenue Service's request for comments on cash balance pension plans.
In recent years, cash balance pension plans have become increasingly popular among businesses and other organizations with traditional defined benefit pension plans.