Pros & Cons

See for yourself whether the pros of a Cash Balance plan outweigh the cons


  • Predictable and provides your employees a better idea of what they will receive upon retirement
  • Pooled longevity risk means nobody outlives their money with the annuity option
  • Lower risk of increased liabilities from underperformance
  • Much higher contribution limits than traditional 401(k) plans
  • Older employees can put away large amounts of money which is tax-deferred
  • Very portable if you are fully vested


  • Costlier than traditional plans due to annual certification by an actuary
  • Required annual contributions can be an issue if cash flow is uncertain
  • As contribution limits are dependent upon age as well as compensation, it may not work well for younger business owners or those owners/partners who are younger than their employees.
  • Investment risk is borne entirely by the employer
  • Contributions are determined actuarially, rather than left to the employer
  • More modest growth rate than traditional plans