Cash Balance

Cash balance plans have become very popular as a retirement planning tool, often found in professional service practices such as doctors, lawyers, engineers, CPA firms, and others, where an older business owner or highly compensated employees who haven’t saved significantly for retirement can receive outsized contributions while providing a smaller retirement benefit for all other eligible employees. A cash balance plan looks like a defined contribution plan in that it maintains an account balance for each participant, but actually operates as a defined benefit pension plan behind the scenes.

Cash balance plans are powerful tools for certain employers with the right demographics and compensation distribution to make retirement savings a major component of the total rewards program.