PLANSPONSOR - December/January 2020 - 40
DB FOCUS
Steady as It Goes
Cash balance plans have benefits but require monitoring and foresight
C
ash balance plans may be defined
benefit (DB) plans, funded by the
employer, but they have many
characteristics that make them look like
defined contribution (DC) plans. A subset
of DB plans, cash balance plans are
offered by companies of all sizes, yet they
are especially popular with professional
service firms. They are complex, though,
and require special handling on both contributions
and investments.
Cash balance plans date back to
the 1980s, with the earliest adoption by
companies wishing to mitigate the cost
of maintaining a traditional DB plan. A
minority of large companies still provide
them, but the plans' popularity has seen a
second leg of growth thanks to new regulations
contained in the Pension Protection
Act of 2006 (PPA) and favorable rule
changes since. From a base of about 1,000
plans in the U.S. in 2006, the number of
cash balance plans soared to about 17,000
in 2016, according to the latest tally by the
Department of Labor (DOL). Reflecting
the growth in small plans, today 90% of
cash balance plans have fewer than 100
participants, and 50% fewer than 10.
The plans somewhat resemble
defined contribution plans, in that each
employee has an account that is credited
with each year's contributions and an
assumed return on investment (ROI),
via an interest crediting rate (ICR). And,
as in DC plans, benefits are based on the
account balance, rather than a formula
tied to earnings.
For larger organizations, cash
balance plans can cost less than matching
participants' 401(k) contributions, says
John Delaney, senior director of investments
at consultancy Willis Towers
Watson, in Philadelphia. " Because of the
funding rules, if you estimate the benefits
correctly, and the financial markets
cooperate, you could go for years without
40 PLANSPONSOR.COM December 2019 - January 2020
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PLANSPONSOR - December/January 2020
Table of Contents for the Digital Edition of PLANSPONSOR - December/January 2020
The Savings Hierarchy
2019 PLANSPONSOR Best in Class DC Providers
On Their Own Terms
HSA Investment Options
Steady as It Goes
The Employer Component
PLANSPONSOR - December/January 2020 - Cover1
PLANSPONSOR - December/January 2020 - Cover2
PLANSPONSOR - December/January 2020 - 1
PLANSPONSOR - December/January 2020 - 2
PLANSPONSOR - December/January 2020 - 3
PLANSPONSOR - December/January 2020 - 4
PLANSPONSOR - December/January 2020 - 5
PLANSPONSOR - December/January 2020 - 6
PLANSPONSOR - December/January 2020 - 7
PLANSPONSOR - December/January 2020 - 8
PLANSPONSOR - December/January 2020 - 9
PLANSPONSOR - December/January 2020 - 10
PLANSPONSOR - December/January 2020 - 11
PLANSPONSOR - December/January 2020 - 12
PLANSPONSOR - December/January 2020 - 13
PLANSPONSOR - December/January 2020 - The Savings Hierarchy
PLANSPONSOR - December/January 2020 - 15
PLANSPONSOR - December/January 2020 - 16
PLANSPONSOR - December/January 2020 - 17
PLANSPONSOR - December/January 2020 - 2019 PLANSPONSOR Best in Class DC Providers
PLANSPONSOR - December/January 2020 - 19
PLANSPONSOR - December/January 2020 - 20
PLANSPONSOR - December/January 2020 - 21
PLANSPONSOR - December/January 2020 - 22
PLANSPONSOR - December/January 2020 - 23
PLANSPONSOR - December/January 2020 - 24
PLANSPONSOR - December/January 2020 - 25
PLANSPONSOR - December/January 2020 - 26
PLANSPONSOR - December/January 2020 - 27
PLANSPONSOR - December/January 2020 - 28
PLANSPONSOR - December/January 2020 - 29
PLANSPONSOR - December/January 2020 - 30
PLANSPONSOR - December/January 2020 - 31
PLANSPONSOR - December/January 2020 - On Their Own Terms
PLANSPONSOR - December/January 2020 - 33
PLANSPONSOR - December/January 2020 - 34
PLANSPONSOR - December/January 2020 - 35
PLANSPONSOR - December/January 2020 - 36
PLANSPONSOR - December/January 2020 - 37
PLANSPONSOR - December/January 2020 - HSA Investment Options
PLANSPONSOR - December/January 2020 - 39
PLANSPONSOR - December/January 2020 - Steady as It Goes
PLANSPONSOR - December/January 2020 - 41
PLANSPONSOR - December/January 2020 - The Employer Component
PLANSPONSOR - December/January 2020 - 43
PLANSPONSOR - December/January 2020 - 44
PLANSPONSOR - December/January 2020 - 45
PLANSPONSOR - December/January 2020 - 46
PLANSPONSOR - December/January 2020 - 47
PLANSPONSOR - December/January 2020 - 48
PLANSPONSOR - December/January 2020 - Cover3
PLANSPONSOR - December/January 2020 - Cover4
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