Definition

Cash Balance Plan

A defined benefit plan expressed as a hypothetical account balance for each participant.

Full definition

A cash balance plan is a defined benefit plan that describes the promised benefit in terms of a hypothetical individual account. It is legally a DB plan and can host a 401(h) sub-account when properly drafted.

Related terms

Defined Benefit Plan

A qualified employer plan that promises a specified retirement benefit, typically based on pay and service.

401(h) Account

A separate sub-account inside a qualified pension or annuity plan used to pay certain retiree medical benefits.

Availability, tax treatment, and plan design depend on the facts and circumstances of the employer, plan document, participant group, and applicable law. 401h.com provides general educational information only — not tax, legal, actuarial, investment, or ERISA advice. Consult qualified tax, legal, actuarial, and plan professionals.