Market Overview

New Cash Balance Retirement Plans Increase 15%, Plan Sponsor Contributions Up 30%

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New Cash Balance Retirement Plans Increase 15%, Plan Sponsor Contributions Up 30%

Cash Balance plans continue rising as the fastest growing sector of the retirement plan market, driven by small business demand and retirement savings shortfalls

PR Newswire

LOS ANGELES, Aug. 23, 2018 /PRNewswire/ -- Kravitz, Inc., an Ascensus company, today released the 2018 National Cash Balance Research Report, showing a 15% net increase in the number of new Cash Balance plans and a 30% rise in employer contributions. The 2018 report is the firm's 10th annual review of the Cash Balance market, tracking a decade of double-digit annual growth as favorable legislation and wider public awareness continually increased the popularity of these IRS-qualified plans.

(PRNewsfoto/Kravitz, Inc.)

There were 20,452 Cash Balance plans active in 2016, the most recent year for which complete IRS reporting data is available. 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). Growth was expected to be slightly slower in 2016 due to election year uncertainty and possible changes to tax rates, but these factors did not ultimately impact the market. In fact, employer contributions to Cash Balance plans soared 30% to $38.2B up from $29.3B in 2015, for total plan assets of $1.03T.

"Cash Balance plans are particularly appealing to small business owners who need to catch up on delayed retirement savings," said Dan Kravitz, head of Kravitz. "In many cases they can double or even triple their pre-tax retirement savings. Employers also typically increase contributions to employee accounts 50% or more when adding a Cash Balance plan, and that's a vital competitive edge in a very tight labor market."

Key findings from the 2018 National Cash Balance Research Report:

  • Small businesses are driving Cash Balance growth: 92% of Cash Balance plans are in place at firms with fewer than 100 employees; 57% have 10 or fewer employees.
  • Companies with Cash Balance plans increase their contributions to employee retirement savings 50% or more: The average employer contribution to staff retirement accounts is 6.9% of pay in companies with both Cash Balance and 401(k) plans, versus 4.7% of pay in firms with a 401(k) plan alone.
  • California and New York have the most plans overall while the fastest growth has been in Georgia and Michigan: California and New York account for 25% of all new Cash Balance plans followed closely by Texas, Ohio, and Florida. Georgia is a regional powerhouse with close to 29% year-over-year growth in new plans.
  • IRS regulations allowing broader Cash Balance investment options have accelerated growth in new plans: The "Actual Rate of Return" option and other new investment choices approved in the 2010 and 2014 Cash Balance regulations made these plans more flexible for employers and removed certain funding issues. The number of large plans using Actual Rate of Return is now 39%, up from just 10% five years ago.

These and other highlights for the 10th annual National Cash Balance Research Report will be discussed during the Cash Balance Outlook 2018 webcast led by Dan Kravitz on Tuesday, September 18 at 11 a.m. Pacific/2 p.m. Eastern. Registration is free and open to anyone interested in learning more about Cash Balance plans.

Download the 2018 National Cash Balance Research Report here.

Register for the Cash Balance Outlook 2018 webinar here.

For more information, call Dan Kravitz at 818-379-6162 and visit 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 1,400 plans, including more than 950 Cash Balance plans, helping over 160,000 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 is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit ascensus.com. View career opportunities at careers.ascensus.com.

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SOURCE Kravitz, Inc., an Ascensus company

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