Contributions to a cash balance plan come from the employee and the employer.

Question

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One way to combine the advantages of defined benefit plans and defined contribution plans is to use a cash balance plan. But in contrast to a 401(k), all the contributions come from the employer. Usually, the employer contributes a percentage of the employee's salary, say, 4% or 5%. The money in the cash balance plan earns interest according to a predetermined rate, such as the rate paid on U.S. Treasury bills.

Contributions to a Cash Balance Plan Come from the Employee