Using the Cash Balance Accounts Function

A cash balance plan is a benefit plan structured so that an employee's benefit looks like a growing account balance, similar to a 401(k) plan. A hypothetical account grows through an accumulation of credits—typically based on earnings—and the hypothetical interest they accrue. The interest is determined by plan rules, not by actual investment performance, so the benefit is still definitely determinable.

If your organization sponsors a cash balance plan, you use the cash balance accounts function to calculate the credits and interest that make the account grow. The function result is a dollar amount at the event date, though you can also calculate the values as of other dates.

Your benefit formula might consist simply of the account balance, in which case the "normal" form of the benefit is a lump sum. It's also possible that the normal form is an annuity that is actuarially equivalent to the account balance. You can use the factor utility to convert the lump sum to an actuarially equivalent annuity. Regardless of how you express the normal form of the benefit, only forms included in the corresponding optional form set are actually available to the employee.