Defined Benefit and Cash Balance Plans

HomeDefined Benefit and Cash Balance Plans

A Defined Benefit plan is a qualified pension plan which allows for certain tax benefits under the law, like tax-deferred investment growth and tax deductions based upon targeted annual contributions.

Since all contributions into this type of plan are made by the sponsoring company, the tax deductions are taken by the entity sponsoring the plan.

Defined Benefit Plan

Defined benefit plans provide a fixed, pre-established benefit for employees and owners at retirement. Employees often value the fixed benefit provided by this type of plan.

Cash Balance Plan

A Cash Balance plan is a type of Defined Benefit Plan often called by the IRS a ‘Hybrid Plan’ because it has some characteristics of a defined contribution plan (like a Profit-Sharing Plan).