Cash balance plan
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Cash balance plan is a type of defined-benefit pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest. The investment performance of the fund does not affect the final benefits to be received by the participant upon retirement. Unlike the regular defined benefit plan, the cash balance plan is maintained on an individual account basis, much like a defined contribution plan.
Definitions
According to Labor Relations and Collective Bargaining by Michael R. Carrell and Christina Heavrin (10th edition),
- Cash balance plan. A type of defined-benefit pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest. The investment performance of the fund does not affect the final benefits to be received by the participant upon retirement. Unlike the regular defined benefit plan, the cash balance plan is maintained on an individual account basis, much like a defined contribution plan.
Related concepts
- Labor relations. The systematic study of attitudes, motivations, and behaviors which two or more job-market actors assume toward each another.
