Cash Balance Plan
A cash balance plan is a Defined Benefit plan with Defined Contribution characteristics. The plan promises to pay employees a certain amount of income at retirement, thus the risk of investment lies with the Employer. In a Cash Balance plan participant accounts are hypothetically tracked so that it is easier to understand the present value of the benefit.
Advantages:
- Deductibility of a defined benefit plan combined with the portability and predictability of a defined contribution plan