News Archive

"Companies with fewer than 10 employees own more than half of all cash balance plans, a group of retirement plans outpacing 401(k)s in growth."  MORE >>

"In this article, [the authors] break down Cash Balance plan contribution limits for 2025, explore the pros and cons of Cash Balance plans, and explore why businesses may want to combine Cash Balance plans with a traditional 401(k) to enable greater tax-deferred savings."  MORE >>

"[Variable Annuity Pension Plans (VAPPs)] accrue benefits based on a specified accrual rate (e.g., percent of salary, flat dollar amount, percent of contributions) and provide determinable benefits that guarantee monthly payments for the lifetimes of participants. What differentiates a VAPP from a traditional DB plan is the way annual accruals are adjusted each year based on how the plan's assets perform compared to a pre-defined benchmark return (referred to as the hurdle rate)."  MORE >>

"Eastman Kodak Company has terminated its pension plan that covered approximately 35,000 participants, and is offering a new cash balance retirement plan for its roughly 4,000 current employees ... [T]he company said it has been preparing for the pension plan termination for some time and expects to receive 'approximately $500 million of assets -- after meeting our obligations to all pension fund participants -- in December 2025 when the transaction closes.' "  MORE >>

The author provides nine suggestions for TPAs and Financial Advisors who have chosen CB plans as their go-to Defined Benefit (DB) plan of choice in a 401(k) world.  MORE >>

"Perhaps the biggest advantage of a cash balance plan is the ability to allocate significantly more than what's allowed in a traditional 401(k) or profit-sharing plan -- often more than $250,000 per year for older, high-earning participants.... The tax savings typically far outweigh the administrative cost of running the plan.... They're particularly efficient when layered on top of existing retirement programs such as profit-sharing contributions of 3% or more."  MORE >>

"Coming on the heels of contribution rate changes enacted by the legislature in 2024, the move will add another critical guardrail in officials' attempt to put PERS -- only 56% funded with $26.5 billion in unfunded pension liabilities -- on a path to solvency."  MORE >>

"Cash Balance plans designed to maximize benefits for older, higher-paid participants combined with Defined Contribution plans that provide enough in contributions to the staff so that the plans can pass arcane nondiscrimination tests have become popular ... The problem is that IRC 401(a)(26) requires Defined Benefit plans (which Cash Balance plans are) to cover a minimum number of eligible participants so some rank-and-file employees may need to be in the Cash Balance plan AND get a ‘meaningful benefit’.... [W]ho now gets to decide what words like ‘reasonable’, ‘fair’, and ‘meaningful’ written in a law really mean now that the Chevron’s default preference for regulators has been overturned?"  MORE >>

"The hybrid approach to retirement savings blends the options and strengths of the DC model with a CB-defined benefits strategy.... [T]oday's robust risk management tools, higher interest rates, and improved funded status have created ideal conditions for plan sponsors to explore this new, balanced solution."  MORE >>

"[D]efined benefit plans are making a comeback in a hybrid format known as “cash balance,” which mimics the look and feel of a 401(k) plan but comes with special features that can appeal to employers and employees alike. [This article outlines] ten questions that most frequently come up when employers are deciding whether to sponsor a cash balance plan."  MORE >>

"The IRS does not consider a cash balance plan as a successor plan for a terminated 401(k) plan. Therefore, a business owner could establish a cash balance plan immediately following a 401(k) plan's termination. Before terminating a 401(k) plan, however, the sponsor may want to consider the benefits of maintaining both a 401(k) and cash balance plan."  MORE >>

15 pages; rev. Sep. 2024. "Although hybrid plans have been in place in the public sector for decades, they have received increased attention in recent years as more states established hybrid plans on either an optional or mandatory basis. The growing attention to hybrids has occurred amid the many adjustments states have made to public pension benefits and financing arrangements. "  MORE >>

"Cash balance pension plans offer the best of defined benefit and defined contribution plans. They provide the guaranteed retirement benefits that traditional pension plans are known for along with the transparency and flexibility more commonly associated with 401(k) plans. Cash balance plans offer significant tax benefits and predictable costs for employers/owners, as well as the opportunity for participants to accelerate retirement savings."  MORE >>

"[M]arket return cash balance plans ... create guaranteed lifetime income for employees while maintaining a stable and cost-efficient path for employers to invest in employee retirement.... At the core of a market return cash balance plan are the four pillars of modern retirement program design: increased efficiency, better employee appreciation, improved workforce management and financial risk management."  MORE >>

"Employers who have adopted a pre-approved Pension Plan -- either traditional Defined Benefit or Cash Balance -- must restate their plans by March 31, 2025 ... It is the responsibility of the Plan fiduciary to ensure that the Plan is updated and signed by the March 31, 2025 deadline. Because the Restatement process can be time consuming, it is important to begin Planning to ensure the Restatement deadline is met. And as mentioned above, it's now a compliance question on Form 5500."

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"[C]ash balance plans are most popular among smaller, well-established firms that have significant and consistent cash flow ... Generally, they also work well for older small business owners who are no longer making heavy investments in their businesses, and have significant amounts of pass-through income, resulting in high tax bills."

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"Cash balance plans made up 42% of all defined benefit plans in 2018, up from 2.9% in 2001, and this market continues to see double digit annual growth each year, primarily for small to mid-size companies (defined as those with less than 100 employees) compared to relatively flat growth in other qualified plans."  MORE >>

19 pages. "This paper first provides background information and the rationale to seek a market-based approach for determining the obligations and costs under market-return cash balance plans. Then, [the authors] provide alternative approaches that [they] believe would faithfully represent the true economics of these plans."

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"These changes make it easier for plan sponsors to use pay-credit schedules that better reward older, longer-service employees. In addition, the guidance lets sponsors change the plan's interest-crediting basis to one based on the plan's actual investment return, which can better align assets and liabilities. Sponsors can immediately implement these changes, but amendments won't be due until at least Dec. 31, 2026."

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"Despite the hype, benefits experts say the move says less about the merits of a pension and more about single-employer pension plan market funding. Corporate pensions closed 2023 at more than 102% funding, a two-year long surplus, according to a Milliman Inc. analysis. A decade ago, funding percentages averaged around 80%."

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"The industry must shift its mindset. Retirement programs don't need to be purely DB or DC. Plan sponsors can build better programs for themselves and their employees. Start by focusing on your company's goals, then introduce flexibility and control so people can customize based on their needs. Ultimately, a retirement program should provide efficient retirement savings and income while driving engagement,"  MORE >>

"[Notice 2024-02 provides that] [1] [A] CODA is considered established on the date the plan terms providing for the CODA are initially adopted, regardless of the effective date.... [2] [While SECURE 2.0] provides for the exception to the 10% penalty, it does not provide for an exception to the distribution restrictions under 401(k) and 403(b).... [3] [M]atching contribution errors must generally be corrected within six months from when correct deferrals begin, or within the existing three-year correction period for errors occurring before 2024."  MORE >>

"Under Notice 2024-02, plans that either [1] are currently providing increasing pay credits or [2] are being changed to provide for increasing pay credits may do so prospectively, so long as they do not reduce a participant's 'accumulated benefit' (that is, the balance in the participants cash balance account) 'determined as of the end of the interest crediting period that includes the applicable amendment date.' "

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"SECURE 2.0 ... allow[s] sponsors to use a 'reasonable projection' of how plan assets are expected to perform, with that reasonable projection capped at 6%.... This new guidance helps alleviate concerns sponsors had on a variety of compliance-related fronts minimum participation rules, accrual rules, non-discrimination testing, and maximum benefits."  MORE >>

"[W]hile IBM may have been uniquely positioned to revert to its cash balance plan, as the company's [defined benefit] plan, frozen in 2006, is likely now overfunded, many more firms may also be in the position of having an overfunded plan as a result of discount rate changes and high interest rates."  MORE >>