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A cash balance plan is a defined benefit retirement plan that maintains hypothetical individual employee accounts like a defined contribution plan.The hypothetical nature of the individual accounts was crucial in the early adoption of such plans because it enabled conversion of traditional plans without declaring a plan termination.
The average total employee retirement account contribution rate is 11% of their salary for those in plans with auto-enrollment, nearly 40% higher than the rate of 8% for those hired under ...
Contribution limit: The plans combine a "pay credit" based on an employee's salary and an "interest credit" that's a certain percentage rate; the employee then gets an account balance worth of ...
401(k) plans are a vital tool for workers to save for their retirement. But they've also received a lot of criticism from financial-protection advocates, who argue that 401(k)s haven't delivered ...
Pension administration in the United States is the act of performing various types of yearly service on an organizational retirement plan, such as a 401(k), profit sharing plan, defined benefit plan, or cash balance plan. Increasingly, employers are also implementing these plan types in combination arrangements for greater contribution ...
Under a cash balance type of plan, benefits are computed as a percentage of each employee's account balance. Employers specify a contribution—usually based on a percentage of the employee's earnings—and a rate of interest on that contribution that will provide a predetermined amount at retirement, usually in the form of a lump sum.
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The cash balance plan typically offers a lump sum at and often before normal retirement age. However, as is the case with all defined benefit plans, a cash balance plan must also provide the option of receiving the benefit as a life annuity. The amount of the annuity benefit must be definitely determinable as per IRS regulation 1.412-1.
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