Cash Balance Pension Plans

by | February 1, 2014

A cash balance plan is a common type of hybrid pension plan. Like a Defined Benefit plan, contributions from employees and employers are pooled and professionally managed. But the benefits employees actually get is based on the amount accumulated in the account (not on a formula based on salary and years of service). Employers guarantee a minimum rate of return, though the payout is likely to yield lower yearly returns than a traditional pension plan. This model helps reduce and manage future liability for the employer.

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