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CHART CENTRAL

Cash balance plans find a DB/DC middle ground

Cash balance plans have grown in popularity since 2006, after the rollout of the Pension Protection Act and corresponding IRS approval made them a more viable option. Additional clarity from the IRS in 2010 further advanced their popularity, with the number of plans nearly quadrupling between 2009 and 2015.

A cash balance plan offers participants a defined benefit plan that functions more like a defined contribution plan with higher contribution limits and a similar portability. For sponsors, the plans are less expensive and avoid runaway costs as participants near retirement.

Across all cash balance plans, 34% of all DB assets were held in cash balance plans in 2015, up from 29% in 2014 and up from 16% in 2010. While popular among small companies, large companies have also adopted cash balance plans; most have converted most of their defined benefit assets into cash balance plans. IBM and AT&T have $53 billion and $51 billion in cash balance assets, respectively.