Cash Balance Retirement Plans Surge 17%, Plan Assets Rise to $1.1T

Tax advantages and the need to catch up on delayed retirement savings make Cash Balance the fastest growing sector of the retirement plan market 

Los Angeles, CA – Kravitz, Inc., an Ascensus company, today released the 2017 National Cash Balance Research Report, showing a 17% net increase in the number of new Cash Balance retirement plans compared with a 3% increase in new 401(k) plans. This marks more than a decade of double-digit annual growth in the Cash Balance plan market, concurrent with the decline of traditional defined benefit plans. Cash Balance plans now make up 34% of all defined benefit plans, up from just 2.9% in 2001.

There were 17,812 Cash Balance plans active in 2015, the most recent year for which complete IRS reporting data is available. This 17% year-over-year increase surpassed industry projections and significantly outpaced the 401(k) market. Plan sponsors made a record-setting $29.3 billion in Cash Balance contributions in 2015, with total plan assets rising to $1.1 trillion.

“Cash Balance plans offer considerable advantages for employers, including the opportunity to double or triple tax-deferred retirement savings,” said Dan Kravitz, head of Kravitz. “Cash Balance plans are also very appealing to employees, and can help companies attract top talent in a tight labor market.”

Also known as “hybrid” plans, Cash Balance plans combine the high contribution limits of traditional defined benefit plans with the flexibility and portability of a 401(k).

Key findings from the 2017 National Cash Balance Research Report:

  • Increasing diversity of companies adopting Cash Balance plans: while medical/dental groups and law firms still make up close to half the market, Cash Balance plans are becoming increasingly popular across the business world, from the technology sector to retail and manufacturing.
  • Small business continues driving Cash Balance growth: 92% of Cash Balance Plans are in place at firms with fewer than 100 employees.
  • Companies more than double contributions to employee retirement savings when adding a Cash Balance plan:the average employer contribution to staff retirement accounts is 6.6% of pay in companies with both Cash Balance and 401(k) plans, versus 3.7% of pay in firms with 401(k) alone.
  • IRS regulations allowing broader Cash Balance investment options have accelerated plan growth: the ‘Actual Rate of Return’ option and other new investment choices approved in the 2010 and 2014 Cash Balance regulations made plans more flexible for employers and removed certain funding issues. The number of large plans using Actual Rate of Return has increased almost 20%.

These and other highlights of the 2017 National Cash Balance Research Report will be discussed in an upcoming Cash Balance Outlook 2017 webcast led by Dan Kravitz on Tuesday, September 12 at 10 a.m. Pacific. Registration is free and open to anyone interested in learning more about Cash Balance Plans.

Download the 2017 National Cash Balance Research Report here.

Register for the Cash Balance Outlook 2017 webinar here.

For more information, call Dan Kravitz at 818-379-6162 and visit www.CashBalanceDesign.com.

 

About Kravitz
Since 1977, Kravitz, an Ascensus company, has delivered the latest in design, administration, and management of corporate retirement plans. The company designed its first Cash Balance plan in 1989. Today Kravitz, Inc. administers over 1,300 plans, including more than 800 Cash Balance plans, helping over 150,000 people retire successfully. Headquartered in Los Angeles, the company has offices in New York, Chicago and Atlanta, with satellite offices in 11 other states. Kravitz was acquired by Ascensus, Inc. in 2017. Visit CashBalanceDesign.com

 

About Ascensus
Ascensus helps more than 7 million Americans save for the future—retirement, college, and healthcare—through technology-enabled solutions. With more than 35 years of experience, the firm offers tailored solutions that meet the needs of asset managers, banks, credit unions, state governments, financial professionals, employers, and individuals. Ascensus supports approximately 50,000 retirement plans, more than 4 million 529 college savings accounts, and a growing number of ABLE savings accounts. It also administers more than 1.5 million IRAs and health savings accounts. As of June 30, 2017, Ascensus had over $155 billion in total assets under administration. For more information about Ascensus, visit ascensus.com.