Cash Balance Plans

A Cash Balance plan is a type of Defined Benefit retirement plan. Using age and salary differences, a Cash Balance plan can be used to give a significantly larger allocation to a chosen employee or group of employees. A Cash Balance plan uses a "hypothetical" account balance for the participants which accrues interest at a pre-defined government rate, which differs from a regular Defined Benefit plan that typically targets the benefit. There is greater flexibility with a Cash Balance vs. a Defined Benefit plan and usually a Cash Balance represents fewer risks. Often Cash Balance plans are used in combination with a 401(k) / Profit Sharing plan.

Cash Balance Plans may be useful for:

Employers who are older than some of the staff employees or have significantly higher income
Employers desiring larger contributions for certain classes of employees
Employers with substantial resources
Employers with stable income

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Cash Balance Plans