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CCH® PENSION — 04/16/10

Cash Balance Pension Plans Surge In Popularity: 359% Increase In Six Years

from Spencer’s Benefits Reports: There were 4,797 cash balance plans active in 2007 (the most recent year for which IRS pension plan data is available), up from 1,337 in 2001. That represents a 359% increase, according to a new national research report from retirement plan consultant Kravitz. “More business owners than ever are seeking to accelerate retirement savings and reduce taxes by adding a cash balance plan,” said firm president Dan Kravitz. “Many employers can double their own pre-tax retirement savings and affordably enhance benefits for their employees at the same time.”

Other highlights from the Kravitz Cash Balance Research Report include these:

• Small and mid-size businesses drive cash balance plan growth: 80% of cash balance plans are in place at firms with less than 100 employees. The majority of cash balance plans (63%) have fewer than 36 participants.

• Plan combinations are a key strategy: 79% of cash balance plans are combined with a profit sharing or 401(k) plan, and more than half of those plans use new comparability rules.

• Medical groups adopt cash balance plans at higher rates: Medical and dental groups account for 34% of cash balance plans, followed closely by other professional, scientific and technical companies at 12%. Legal and financial service firms account for 8% each.

• Regional concentration: California and New York account for 26% of all cash balance plans, with Ohio, New Jersey, and Illinois close behind.

“We believe cash balance plans represent a tremendous growth opportunity for retirement professionals, and we will continue to serve as a resource,” said Mr. Kravitz.

For more information, visit http://www.kravitzinc.com/.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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