Adopting cash balance pension plans: implications and issues
AbstractOver the past 15 to 20 years, many companies have converted their traditional defined benefit plans to cash balance or pension equity plans. In a cash balance plan, the worker s account is based on an annual contribution rate for each year of employment, plus accumulating interest on annual contributions. A pension equity plan defines the benefit as a percentage of final average earnings for each year of service under the plan. Both types of plans specify the benefit as a lump sum payable at termination. In contrast, traditional defined benefit plans specify benefits in terms of an annuity payable at retirement. From the employees perspective, cash balance and pension equity plans look somewhat like defined contribution plans. However, they are funded, administered, and regulated as defined benefit plans.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 3 (2004)
Issue (Month): 03 (November)
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- Dirk Broeders & An Chen & David Rijsbergen, 2011. "Valuation of Liabilities in Hybrid Pension Plans," DNB Working Papers 326, Netherlands Central Bank, Research Department.
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