A cash-balance plan is a defined-benefit plan that gives each participant an interest-earning account credited with a percentage of pay on a monthly basis.

Question

Quizplus · Accepted Answer

This is a correct description of a cash-balance plan, which is a hybrid between a defined-benefit plan and a defined-contribution plan. Each participant has an account that is credited with a specified amount of contributions and interest earnings each year, which can be converted into an annuity upon retirement.

A Cash-Balance Plan Is a Defined-Benefit Plan That Gives Each