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Kravitz: Cash Balance Boom Continues

Continuing almost a decade of double-digit annual growth, the cash balance plan market was up 19% in 2014, the most recent year for which complete DOL data is available.

The report, published by Kravitz, Inc., draws a contrast with 401(k)s as only rising 2%, though that’s just math applied across a significantly larger number of plans.

Between 2008 and 2014, Kravitz says there was a 189% increase in new plans nationwide. Total cash balance plans now comprise 29% of all defined benefit plans, up from just 2.9% of the total in 2001, according to the report.

According to Kravitz, which positions itself as a leading national provider of cash balance retirement plans, the vast majority – 91% – of cash balance plans are in place at firms with fewer than 100 employees, and more than half – 57% – of all cash balance plans are in place at firms with fewer than 10 employees. There are 12.3 million participants in cash balance plans, according to the report.

Companies contributed $25 billion to cash balance plans and assets reached $1 trillion for the first time in 2014. Kravitz cites four drivers of this growth:


  • Rising federal, state and local tax rates have motivated many business owners to maximize tax-deferred retirement savings and take advantage of tax deductions for contributions to employee retirement accounts.

  • The combination of the high contribution limits of a traditional DB plan with the flexibility and portability of a 401(k) plan – without the common risk factors and runaway costs involved in traditional DB plans.

  • The 2006 Pension Protection Act affirmed the legality of cash balance plans and made the plans easier to administer, while IRS cash balance regulations in 2010 and 2014 expanded investment options, minimizing many funding issues.

  • Media coverage of the Baby Boomer generation’s lack of retirement preparedness is prompting older business owners to accelerate savings and maximize qualified plan contributions.

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