Pinnacle Plan Design is a leader in the design and administration of Cash Balance plans. We strongly believe in collaborating with advisors, CPAs and attorneys to help them speak knowledgeably about cash balance plans with their clients.
Cash Balance Guide for 2016
A cash balance plan is a type of employer-sponsored defined benefit retirement plan. Unlike traditional defined benefit plans that provide for a monthly benefit at retirement, which can be confusing and hard to grasp, cash balance plans provide the promised benefit in the form of an “account” balance. The Participant Statement provided to the participant resembles a DC statement. This makes the cash balance benefit much easier to understand and is, thus, more appreciated by employees.
In general terms, the cash balance plan document will define Groups of Participants and their “Pay Credit”. This Pay Credit might be defined as a percentage of compensation or a dollar amount (or some combination of both). For example, the Pay Credit may be the lesser of 3% of compensation or $1,000.
In addition to the Pay Credits, the Hypothetical Accounts are credited with guaranteed interest at the Interest Crediting Rate defined in the plan document. Typical rates include Treasury Rates or a fixed rate (or some combination of both). For example, the Interest Crediting Rate may be the lesser of a fixed rate or an index.
For information on how to identify the right client for a cash balance plan, please contact our Cash Balance Plan Team.