Cash balance retirement plans enjoy rapid rise

The number of cash balance retirement plans increased by 15 percent between 2011 and 2012, according to new research.

Kravitz Inc., Los Angeles, released this finding in its “2013 National Cash Balance Research Report.” The annual survey is based on cash balance retirement plan data from the most recent IRS form 5500 form filings.

The report pegs the number of cash balance defined benefits plans in 2012 at 9,115, up from 7,926 in 2011, 7,064 in 2010 and 5,840 in 2009.

“The popularity of cash balance plans has soared since 2001, with double-digit annual growth each year of the decade and a total increase of almost 500 percent in 10 years,” the report states. “These hybrid plans combine the high contribution limits of a traditional defined benefit plan with the flexibility and portability of a 401(k) plan. They also avoid common risk factors and runaway costs involved in traditional defined benefit plans.”

One factor fueling the rise of cash balance plans, the report adds, is the 2006 Pension Protection Act. The legislation affirmed the legality of the plans and eased plan administration. The number of cash balance plans nationwide has more than tripled since the PPA’s enactment. Between 2006 and 2011, the number of plans grew to 5,244, up from 1,684 during the 2000-2005 timeframe.