Cash Balance Plan Growth Outpacing Other Plan Designs

July 20, 2012 ( – Kravitz’ 2012 National Cash Balance Research Report indicates a 21% annual increase in new cash balance plans, almost double the previous year's 11% growth rate.

Cash balance plans continue to outpace all other sectors of the retirement plan market, including 401(k) plans, which showed a 1% decline in the same period.   

There were 7,064 cash balance plans active in 2010 (the most recent year for which IRS reporting data is available), up from 1,337 in 2001, representing 810% growth in under a decade. There are now 11.1 million participants in cash balance plans nationally, with $713 billion in total plan assets.   

The stalled economy was no deterrent to adoption of new plans. Between 2008 and 2010, there was a 38% increase in new cash balance plans, despite the lingering recession and stalled recovery.   

Small businesses are driving cash balance growth: 84% of cash balance plans are in place at firms with fewer than 100 employees.   

“Business owners are increasingly choosing cash balance plans as a strategy to accelerate retirement savings, enhance employee benefits, and gain a buffer against market fluctuations,” said Dan Kravitz, President of Kravitz, a cash balance plan service provider. “IRS regulations released in October 2010 added flexibility for plan sponsors, so we expect this growth rate to continue accelerating.”   

The research also found companies more than double contributions to employee retirement savings when adding a cash balance plan. The average employer contribution to staff retirement accounts is 6% of pay in companies with both cash balance and 401(k) plans, compared with 2.3% of pay in firms with 401(k) alone.   

California and New York together account for 23% of all cash balance plans nationally, but the fastest growth in new plans has been in Florida, Texas and Michigan.   

The 2012 National Cash Balance Research Report is here.