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 ?
Kravitz will maintain its focus on cash balance plans, which help more than 125,000 Americans retire with innovative, tax-efficient retirement plans.
Studies are still out on whether they will work in the long run," Huffman said Monday of cash balance plans.
Fully a quarter of large employers have open plans, and nearly all of them are hybrid plans or cash balance plans.
Based near Milwaukee in Wauwatosa, Wisconsin, Evolution Retirement Services helps companies design and administer retirement plans including profit-sharing plans, 401(k) plans, money purchase pensions and cash balance plans.
Merrill Lynch recommends cash balance plans to the professional services retirement plans it advises, Barrett says.
Cash Balance Plans Supersize Small Business Retirement Savings
Her speciality is 401(K) profit sharing, employee stock ownership, and defined benefit cash balance plans.
Clark has conducted research examining retirement decisions, the choice between defined benefit and defined contribution plans, the impact of pension conversions to defined contribution and cash balance plans, and government regulation of pensions.
As the costs and risks of providing traditional defined-benefit pension plans have increased over time, some plan sponsors have looked to alternative forms of benefit provision, with cash balance plans emerging as an increasingly attractive option.
Cash balance plans offer owner-employees in professional practices a vehicle to defer tax on income well in excess of the annual contribution limits of traditional Sec.
An alternative to termination began in the mid 1980s with the introduction of cash balance plans by the Bank of America.
The popularity of cash balance plans has soared since 2001, with double-digit annual growth each year of the decade and a total increase of almost 500 percent in 10 years," the report states.