News Archive

"[These] frequently asked questions provide a practical overview of how cash balance plans work, how they compare to other retirement arrangements, and what key design, compliance, funding, and distribution considerations may apply."  MORE >>

"When presented with a proposed plan design, clients and advisors ... may feel an investment strategy to achieve maximum investment returns is appropriate and wish to have the interest crediting rate accordingly tied to a market rate of return. However, in the small plan market setting, tying the interest crediting rate to a market rate of return may have more risks than benefits."  MORE >>

"By doing nothing more than signing termination amendments, JJDD has created several problems. Mr. Icicle is particularly alarmed that they did not amend the cash balance plan to freeze benefits or tell participants about the termination, which means benefits have been accruing to plan participants all this time.... [W]hile the 401(k) plan does not suffer from the benefit accrual problem (and there was no obligation to provide participant notice), it has issues of its own.... And, not incidentally, no Forms 5500 had been filed for the two plans since they were 'terminated.' "  MORE >>

"[The authors] explore the cost and benefit tradeoffs associated with pension unfreezing using a model calibrated to market data within a stochastic framework.... [T]he extent to which restarting DB pensions affects a firm's total pension cost depends on factors such as pension surplus magnitude, employee salaries, firm financial stability, and [PBGC] premiums. In particular, with a high funding surplus and elevated employee salaries, unfreezing a CB plan can yield greater cost efficiency for companies than pension risk transfer, especially in a high interest rate environment."  MORE >>

"Though traditional 401(k) and 403(b) plans can be effective, their contribution limits often make them less attractive to high-income partners and executives, who are often searching for ways to save more and reduce corporate taxes. Cash Balance plans, on the other hand, offer an accelerated savings vehicle that allows for increased contributions and significant tax advantages. [This article explores] how Cash Balance plans can support executive retention and reduce individual and corporate taxes in 2026."  MORE >>

11 pages. "Cash Balance plans currently outnumber traditional DB plans by nearly 2 to 1. Between 2015 and 2024, the number of Cash Balance plans increased by nearly 70%, while the number of traditional DB plans decreased by more than 50%.... The healthcare sector leads businesses in the number of Cash Balance plans ... Out of all new Cash Balance plans implemented with over 100 participants since 2018, the market-based interest crediting rate is the most common plan design structure."  MORE >>

"When you focus on retirement income (rather than how big the account balance is), it turns out that the most stable DB plan design is one where all those risks are (as in a DC plan) held by the same person: a market-based cash balance plan (MBCB).... [I]nflation, interest rates, and asset values are all correlated: more inflation means higher interest rates; higher interest rates mean (generally) lower asset values; and higher interest rates mean lower annuity conversion costs. The MBCB plan, which tracks these market effects in the same way a DC plan does, reflects all of that, providing more 'stability of income.' "  MORE >>

"As a CPA advising high-income business owners, you routinely help clients maximize their 401(k) plans. But many still leave substantial tax savings on the table. Adding a cash balance plan can allow substantial additional tax-deductible contributions for owners, especially those nearing retirement age, dramatically accelerating wealth accumulation while reducing current-year taxable income."  MORE >>

"A Market-Based Cash Balance is a Cash Balance plan that uses a variable-rate interest credit to grow the account. Market-Based features are increasingly popular with sponsors because they align the growth of the plan assets with the interest credit, minimizing risk and volatility for plan sponsors.... Cash balance plans offer employees a more flexible and accelerated path to retirement readiness while plan sponsors benefit from significant tax advantages, predictable costs, and reduced risk."  MORE >>

"[FASB] approved the recommendation of its Emerging Issues Task Force earlier this month that benefits for market-based cash balance plans, which are legally classified as defined benefit plans, be valued by setting the discount rate equal to the assumed interest crediting rate.... [T]he proposed new accounting calculation would make it simpler and more sensible for plan sponsors to estimate their market-based cash balance pension obligations."  MORE >>

"[T]he numerator of the EBAR ... is the benefit projected to retirement age divided by current year compensation. ... [T]he compensation amount in the denominator should logically be projected as well with a salary scale which would make sense mathematically but would also lower the EBARs for younger participants with more years to go to retirement thus requiring them to get larger contributions to raise their EBARs and pass testing, something the law writers and interpreters of 401(a)(4) did not seem to want."  MORE >>

"Projecting the growth of benefits based on one rate and discounting them based on another rate creates a wild fluctuation in the liability for those benefits ... The FASB Emerging Issues Task Force (EITF) recommended that benefits that meet the strict definition of a Market-Based Cash Balance plan should be valued by setting the discount rate to be equal to the assumed interest crediting rate. This simple-sounding fix effectively eliminates the issue and allows benefits to be valued at the account balance with appropriate adjustments for specific, and usually minor, benefit provisions[.]"  MORE >>

"[FASB] will measure the benefit obligation for in-scope plans under the existing defined benefit accounting model by setting the discount rate equal to the assumed interest crediting rate. FASB also decided to clarify that an entity would be required to use the assumed interest crediting rate as the discount rate in all circumstances for in-scope plans.... FASB has decided to [1] direct the staff to draft a proposed accounting standards update for vote by written ballot and [2] grant a 60-day comment period concerning the proposed update."  MORE >>

"The plans impacted by this change are ... DB pension plans where participant benefits are communicated as an account balance, which include pay credits and interest credits based on one of the following investable market returns: [1] The return on plans' assets; [2] The return on a subset of the plans' assets that approximates the associated cash balance liabilities; [3] The return on a regulated investment company."  MORE >>

Jan. 14 meeting. "The Board will consider whether to add a project to its technical agenda to address the discount rate used to measure the projected benefit obligation under Topic 715, Compensation -- Retirement Benefits, for market-return cash balance plans. The Emerging Issues Task Force (EITF) discussed this issue and developed recommendations."  MORE >>

"Retroactive adoption of cash balance plans is a powerful tax planning tool for business owners aiming to reduce taxable income while accelerating retirement savings. CPAs play a crucial role in identifying potential candidates for this type of plan and coordinating with plan administrators."  MORE >>

74 pages. "This paper examines the roles of various designs of decumulation-only CDC plans, referred to as Dynamic Pension (DP) plans, in providing sustainable retirement income for retirees.... [T]he paper explores crucial design elements for DP plans, such as valuation interest rates, benefit- smoothing mechanisms, and pension annuity forms. [The] findings highlight the necessity of a comprehensive design strategy for DP plans, incorporating regular reviews and adjustments to ensure fairness, stability, and participant satisfaction."  MORE >>

"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 >>