The retirement world is largely focused on 401(k) and traditional defined benefit plans. But investors and financial advisers alike should be paying closer attention to something called a cash balance pension plan.
Cash balance plans are the fastest-growing part of the defined-benefit pension universe and could become as numerous as 401(k) plans within the next few years, according to the trade publication Pension & Investments.
Consider: The number of such plans rose from 1,300 in 2000 to more than 7,600 in 2010, an average annual growth rate of around 20%, according to recent research from Sage Advisory Services. (See Sage Advisory’s recent news release, “Cash balance plans challenge 401(k) supremacy.”)
What’s more, the number of participants nationwide in cash balance plans reached 11 million in 2011.
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