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Cash Balance / Defined Benefits Plans

Below is a list of common Cash Balance / Defined Benefit plans with brief descriptions of each:

Traditional Cash Balance Plan

This is the most common type of Cash Balance Defined Benefit plan. It provides employees with a retirement benefit based on a predetermined formula, usually expressed as a percentage of their average salary over a specified period. Contributions are made by the employer and credited with interest. Employees have the option to receive the accumulated balance as a lump sum or convert it into an annuity at retirement.

Age-Weighted Cash Balance Plan

In this plan, contributions and benefits consider both an employee's salary and age. Older employees receive larger contributions and potentially higher benefits as they approach retirement, making it attractive for businesses with an aging workforce.

Floor-Offset Cash Balance Plan

This plan combines a Cash Balance plan with a traditional defined benefit plan. The Cash Balance account serves as a "floor" benefit, ensuring that employees receive a minimum retirement benefit. Any additional benefit earned under the defined benefit plan is then added to the Cash Balance account.

Pension Equity Plan

This type of plan resembles a Cash Balance plan but operates as a hybrid between a defined benefit and a defined contribution plan. It provides a hypothetical account balance, and contributions and benefits are determined based on a set formula linked to years of service and salary.

Variable Annuity Plan

In this plan, employees receive a fixed contribution to their hypothetical account, but the investment earnings are tied to the performance of a variable annuity investment. The retirement benefit is determined by the accumulated value of the account at retirement.

Cash Balance/401(K) Combo Plan

This hybrid plan combines a Cash Balance plan with a 401(k) plan. Employees receive both a Cash Balance benefit and can contribute to a 401(k) plan. The employer may provide matching contributions to the 401(k) plan, offering additional retirement savings opportunities.

Cash Balance/Profit Sharing Combo Plan

Like the Cash Balance/401(k) combo plan, this type of plan combines a Cash Balance plan with a profit-sharing plan. Employees receive a Cash Balance benefit and may also receive a share of the company's profits based on a predetermined formula.

These plans offer different ways for employers to provide retirement benefits to their employees, and the choice of plan type often depends on factors such as the company's objectives, demographics of the workforce, and regulatory considerations. We will use our unique process to Design, Implement, Monitor and Evolve, also known as the “DIME Method” to build a plan that is right for you.