Cash Balance Plans Surge While 401k Growth ‘Flat’

401k, savings, cash balance, retirement

They increasingly make sense for the participant portfolio.

They were popular, then not, then popular again, and it’s reflected in the numbers.

The number of new cash balance plans increased 17 percent compared with just 3 percent growth in new 401(k) plans, according to cash balance plan provider Kravitz, surpassing industry projections of 12 percent to 15 percent growth.

Citing available Form 5500 filing data, Kravitz added that small businesses continue to drive cash balance growth: 92 percent of plans are in place at firms with fewer than 100 employees.

In an apparent sign of confidence in cash balance growth in the wake of the Pension Protection Act’s passage a decade ago, as well as its future performance potential, mega-recordkeeper and retirement plan provider Ascensus announced that it had acquired Kravitz in June as part of a broader foray into the space.

Cash balance plans are experiencing over 20 percent growth per year, while the 401ks are a mature market, growing at about 2 percent per year,” Kravitz president Dan Kravitz said at the time (and just a bit off). “It’s a good complement with the 401k for professional services firms looking for tax and retirement savings. Cash balance plans are a great way to do it.”

Other findings from Kravitz include:

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