Cash Balance Pension Plan

AAA

DEFINITION of 'Cash Balance Pension Plan'

A pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest charges. A cash balance pension plan is a defined-benefit plan. As such, the plan's funding limits, funding requirements and investment risk are based on defined-benefit requirements: as changes in the portfolio do not affect the final benefits to be received by the participant upon retirement or termination, the company solely bears all ownership of profits and losses in the portfolio.

INVESTOPEDIA EXPLAINS 'Cash Balance Pension Plan'

Although the cash balance pension plan is a defined-benefit plan, unlike the regular defined-benefit plan, the cash balance plan is maintained on an individual account basis, much like a defined-contribution plan. The cash balance plan acts similar to a defined-contribution plan also because changes in the value of the participant's portfolio does not affect the yearly contribution.

RELATED TERMS
  1. Pension Plan Administrator

    An individual responsible for managing the day-to-day affairs ...
  2. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
  3. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  4. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Plan Participant

    A plan participant either contributes into a pension plan or ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
RELATED FAQS
  1. Should I purchase a master limited partnership (MLP) in my retirement account?

    Most investors should not purchase units in a master limited partnership, or MLP, in their retirement accounts. MLPs offer ... Read Full Answer >>
  2. How should I invest the money I keep on my IRA?

    For individuals who are just starting to save, certificates of deposit can be a good place to start, but the interest rates ... Read Full Answer >>
  3. Why choosing the right investment adviser is crucial for your portfolio's health

    Just as finding a good mechanic will help keep your car running smoothly, finding a good broker or financial advisor can ... Read Full Answer >>
  4. What documents I need to transfer an IRA/SEP/SIMPLE to a Traditional IRA?

    Most firms require that you complete their account transfer request form, which they use to request the transfer of assets ... Read Full Answer >>
  5. Is there a limit on how much I can move from my IRA to my Roth IRA?

    There is no limit on the amount that can be converted from your Traditional IRA to your Roth IRA. To learn more, read Retirement ... Read Full Answer >>
  6. How much of the asset management industry has moved from traditional managers to ...

    While the exact numbers are difficult to calculate due to variations in measurement and the overall growth of the asset management ... Read Full Answer >>
Related Articles
  1. Retirement

    Money Can't Buy Retirement Bliss

    Emotional snags can ruin your future happiness. Learn how you can avoid them.
  2. Personal Finance

    Should You Track The Cost Of Retirement Income?

    Today, workers face a challenge when saving for retirement, because retirement income is getting more expensive, and the savings are not keeping up.
  3. Retirement

    How Much Money Do You Need To Retire In Hawaii?

    The Aloha State remains an idyllic place to retire, but at what cost? From rent to cereal to gasoline, we look at the hidden costs of living in paradise.
  4. Personal Finance

    A Guide to Financial Education for Doctors

    Doctors need to choose the educational option which best fits his or her time, schedule and learning preference. Here's a guide.
  5. Retirement

    Find The Top Retirement Cities In Australia

    Australia has some of the world's most livable cities. Did we mention the beaches?
  6. Retirement

    Retire In Vietnam With $200,000 Of Savings?

    An excellent retirement "buy" because English is spoken widely, the cost of living is compellingly low, and Americans are generally welcome.
  7. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.
  8. Retirement

    Top 7 Cities For Retiring In Thailand

    Beautiful Thailand has beaches, cities, affordable health care, plus cultural attractions and great cuisine, No wonder it's popular with expat retirees.
  9. Professionals

    Advisors: Don't Overlook Not-Yet-Rich Millennials

    Financial advisors looking to grow their practices should focus on potential high-net-worth millennials.
  10. Retirement

    Top 10 Stocks for Retirement Portfolios

    Certain stocks are popular retirement portfolio options, but not all are as impressive as they used to be. Time to reevaluate?

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center