Defined Benefit/Cash Balance Plans
Defined Benefit Plan
Defined benefit plans are an effective tool for employers who desire, and are committed to, funding a contribution in excess of what is allowable in a defined contribution plan. The plan works on the premise of providing a defined stream of payments for the duration of one’s retirement.
Cash Balance Plan
A cash balance plan is a defined benefit plan that communicates its benefits in terms characteristic of a defined contribution plan. Cash balance plans often provide a defined benefit solution for an employer in which benefits can be tailored to a customized funding strategy rather than predicated solely on ages and income.
Defined Benefit/Defined Contribution “Carve-Out” Arrangement
A carve-out arrangement is a two plan benefit approach which allows plan sponsors to take advantage of the features of both a defined benefit and defined contribution plan at the same time. The two plans integrate to provide the high deductible limits of a defined benefit plan while often reducing the employee cost via their funding in a defined contribution plan.