Cash Balance Plan Fact Sheet
Type: Pension Plan, defined benefit
Funding: Mandatory funding each year based upon an actuary
Investment risk – born by employer
Max funding: Depends on amount actuary calculates
Max benefit: $225,000 per year
In service withdrawals – not allowed
Allocation of Forfeitures – can only be used to reduce plan costs
PBGC Insurance – Yes required for plans with more than 25 people
Credit for prior service – yes can be given when a new plan starts
Integration with Social Security – Excess and Offset methods are both allowed
Separate investment accounts – no funds are commingled, and payment depends on the company still being in business.
Vesting: 3 year cliff vesting must be used, no other options are allowed.
Top Heavy plans (60% of benefits going to key employees)– must provide at least 2% per year of service.
Eligibility: Standard eligibility rules apply. 1 year of service, 21 years of age, etc.
Insurance: Insurance can be part of the plan benefit. 100x limit, 25% of contribution limit
Employer stock: 10% of contribution can be in employer stock
Who benefits the most: plan favors young people.
Payout upon retirement: Must offer a Joint Survivor Annuity as the default payment plan.
Formula
for calculating the benefit: can be flat amount, flat percentage, and
unit credit. Most use the unit credit which looks like Percentage rate
per year x number of years of service x the average of the three highest
years of salary.
Other: Can be structured to benefit owners and higher compensated employees under certain circumstances.
In
addition to these facts for each type of account I would highlight the
things that are unique. In this case 3 year cliff vesting
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