July 20, 2012
2012 National Cash Balance Research Report indicates a 21% annual increase in
new cash balance plans, almost double the previous year's 11% growth rate. ---
Cash balance plans continue to outpace all other sectors of
the retirement plan market, including 401(k) plans, which showed a 1% decline
in the same period.
There were 7,064 cash balance plans active in 2010 (the most
recent year for which IRS reporting data is available), up from 1,337 in 2001,
representing 810% growth in under a decade. There are now 11.1 million
participants in cash balance plans nationally, with $713 billion in total plan
The stalled economy was no deterrent to adoption of new
plans. Between 2008 and 2010, there was a 38% increase in new cash balance
plans, despite the lingering recession and stalled recovery.
Small businesses are driving cash balance growth: 84% of
cash balance plans are in place at firms with fewer than 100
“Business owners are increasingly choosing cash balance
plans as a strategy to accelerate retirement savings, enhance employee
benefits, and gain a buffer against market fluctuations,” said Dan Kravitz, president
of Kravitz, a cash balance plan service provider. “IRS regulations released in
October 2010 added flexibility for plan sponsors, so we expect this growth rate
to continue accelerating.”
The research also found 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% of pay in
companies with both cash balance and 401(k) plans, compared with 2.3% of pay in
firms with 401(k) alone.
California and New York together account for 23% of all cash
balance plans nationally, but the fastest growth in new plans has been in
Florida, Texas and Michigan.
The 2012 National Cash Balance Research Report is here.