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