Cash Blanance

A Cash Balance Plan is a defined benefit plan that provides a contribution based on a percentage of salary and credits a rate of return on the contribution.  It is considered a hybrid plan because it combines the contribution limits of a defined benefit plan with account balances that look like a defined contribution plan.


  • Considers salary only
  • Availability to equalize contributions for owners with the same compensation, but different ages
  • Account value builds at a steady pace
  • No employee contributions
  • Defines the benefit in terms of a stated “account balance”
  • Benefits are easier to understand compared to a traditional defined benefit plan
  • Employee’s vested “account balance” is paid at retirement or termination


  • Annual contributions are required
  • Employer bears investment risk
  • Investment experience impacts contribution
  • Three-year cliff vesting required