cash balance plan

(redirected from Cash-Balance Plan)

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 ?
They are increasingly combining a 401(k) plan with a profit-sharing and a cash-balance plan.
Yu, 2005, Cash-Balance Plan Conversions: Evidence on Excise Taxes and Implicit Contracts, Journal of Risk and Insurance, 72: 321-352.
Two major differences between a traditional defined-benefit plan and a cash-balance plan exist.
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.
Rather than leave that cash 'just sitting there,' Hiller said, Zell is making use of it to fund the buyouts and -- in a program he announced Tuesday -- to make a one-time, cash contribution of 2% of employees' salaries to a new cash-balance plan early this year.
Courts have disagreed over whether or not the cash-balance plan discriminates against older workers and Congress has not moved to eliminate this uncertainty.
had discriminated against its older employees when it converted to a cash-balance plan.
Although cash-balance plans have been around since 1985, they went virtually unnoticed until IBM wanted to establish a cash-balance plan in 1999 and some employees sued.
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.
In the mid-1980s, a newly designed pension plan, the cash-balance plan, was introduced to businesses in the United States.
The issue is whether a company that converts to a cash-balance plan discriminates against older workers who are close to retirement.
No Pension Guaranty cost and insurance cost and insurance Vesting Plan can require certain Employee contributions Schedule number of years service are immediately before vesting occurs vested; vesting in employer contributions Cash-Balance Plan Beneficiary Significant accruals at younger ages Structure of No employee contributions; Plan employer makes regular contributions to a fund of assets for benefits accrued by individual employees Risk Level Employer bears investment risk Benefits Benefits are defined in terms of current lump-sum equal to "account" balance Accounts credited with interest tied to 30-year Treasury Form of benefit payment is a lump sum or annuity Portability Portable Insurance Pension Guaranty Corp.