| Cash Balance Plans |
| Cash balance plans continue to garner interest from Plan Sponsors, including “term restarts”. Cash balance plans, when structured alongside a 401(k) plan, may allow plan participants the ability to defer significantly more dollars into a qualified plan versus a 401(k) plan alone. A “term restart” involves terminating an original cash balance plan, while concurrently launching a new plan so participants can continue to maximize their tax-deferred savings. Participants’ distributions from the plan which is terminating are commonly rolled over to the participants’ IRA or 401(k) plan accounts, allowing participants to invest in a manner that meets their individual investment objectives. Updates included within the SECURE Act 2.0 have made it easier for cash balance plans to convert the Interest Crediting Rate from a fixed rate to a market rate. Such a switch may help reduce the volatility of the plan’s funded status while also potentially allowing for more attractive investment returns. It’s important for Plan Sponsors to review participant balances regularly to evaluate those that may be nearing the 415 limits or below the capital preservation floor. Read our newsletter… |
