Cash Balance Retirement Plans Continue Their Climb

401k, retirement, cash balance plans, Ascensus

Cash balance plans would be the red line.

They’re taking off. Cash balance plan-provider Kravitz finds the number of new cash balance plans increased by 15 percent, with plan sponsor contributions up 30 percent.

There were 20,452 cash balance plans active in 2016, the most recent year for which complete IRS reporting data is available, according to the Ascensus-owned firm’s “2018 National Cash Balance Research Report.”

Also known as hybrid plans, cash balance plans combine the high contribution limits of traditional defined benefit plans with the flexibility and portability of a 401k.

Growth was expected to be slightly slower in 2016 due to election-year uncertainty and possible changes to tax rates, but these factors did not ultimately impact the market.

In fact, employer contributions to cash balance plans soared 30 percent to $38.2 billion up from $29.3 billion in 2015, for total plan assets of $1.03 trillion.

“Cash Balance plans are particularly appealing to small business owners who need to catch up on delayed retirement savings,” Dan Kravitz, head of Kravitz, said in a statement. “In many cases they can double or even triple their pre-tax retirement savings. Employers also typically increase contributions to employee accounts 50% or more when adding a Cash Balance plan, and that’s a vital competitive edge in a very tight labor market.”

Key findings from the Kravitz report include:

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