Cash Balance Plans

  • Post date September 30, 2026

Cash Balance Plans

What is a Cash Balance Plan?

  • Employer Contributions: Only employers contribute, using a formula based on pay or a fixed dollar amount per participant.
  • Interest Credits: Participants receive an annual interest credit, either a fixed rate or one tied to a benchmark (e.g., 30-year Treasury).
  • Vesting Schedule: Standard vesting rules (like 3-year cliff or 6-year graded) apply.
  • Retirement Benefit: Benefits are defined as a hypothetical account balance that can be taken as a lump sum or annuity, with lump sums rollover-eligible.
  • Annual Funding Requirements: Employers must fund annually based on actuarial calculations, meeting IRS minimum funding standards.

A cash balance plan is a defined benefit (DB) plan that looks and feels like a defined contribution (DC) plan while allowing tax-deferred contributions, primarily for a target group, such as professional employees. Cash balance plans offer flexibility, portability, and higher contribution limits than 401(k) plans, for increased retirement savings.

Allow your company to increase tax deductions while helping owners and key employees accelerate your retirement savings with flexible contribution options and predictable costs!

 

How does a Cash Balance Plan work?

Cash Balance Plan One-Pager

*As of 11/13/2025. Source: https://www.irs.gov/newsroom

What makes cash balance plans attractive?

Higher contribution limits

Tax-deferred

Offers replacement income at normal retirement age

Protected under ERISA

Works well with 401(k) Profit Sharing