Looking for brief overview of cash balance plans

[fidu]

Anyone have a brief overview/link/explanation of some of the features of a cash balance plan.

Thanks in advance

[E as in ERISA]

There is a "Cash Balance Plans" topic on the benefitslinks home page. For example, it provides a link to a series of papers by the Society of Actuaries:

http://www.soa.org/library/monographs/reti...ofcontents.html

Are do you just want an explanation like this: A cash balance plan is technically a defined benefit plan -- but the "defined benefit" is that which would be derived from a hypothetical account balance for the participant. Each year the hypothetical account is credited with a contribution equal to a stated percentage of the participant's compensation and earnings at a stated rate. The employer bears the investment risk. There are other variations on the formula.

During the early years of participation, a participant's accrued benefit typically increases faster than it would under a comparable final average pay plan. Therefore it is sometimes considered better for a mobile work force. But for a participant with significant years of service, the cash balance benefit might be leveling off just at the time it would be spiking under a final average pay plan. Hence, the age discrimination issues raised in regard to conversions.

In addition, in a defined benefit plan a lump sum is calculated by determining the present value of the benefit that the participant would be entitled to at retirement. So if you project the cash balance participant's hypothetical account balance out to retirement at the plan's crediting rate and then present value it back at the required rate, the lump sum will not be the same as the participant's current hypothetical account balance. Hence, the "whipsaw" issue.