As individuals and businesses plan for retirement, they often seek out retirement savings options that provide flexibility, stability, and tax advantages. One such option that has gained popularity in recent years is the cash balance plan. A cash balance plan is a type of defined benefit plan that combines features of traditional pension plans with elements of a 401(k) plan. It is an employer-sponsored retirement savings plan that allows business owners and highly compensated employees to save for retirement in a tax-advantaged manner. How Cash Balance Plans Work In a cash balance plan, the employer contributes a set percentage of an employee’s salary, typically based on their age and compensation, to their retirement account. These contributions are invested and grow tax-deferred over time. The account accumulates a “cash balance” which represents the employee’s retirement benefit. The cash balance grows at a predetermined interest rate, or a rate linked to an investment index, providing a guaranteed return. One of the unique features of a cash balance plan is that the employer bears the investment risk, not the employee. This means that regardless of how the investments