cash-balance pension plan

A benefit plan that gives an employee a specific amount of money based on salary and years of service. The employer bears the investment risk. Cash-balance pension plans have come under criticism because often they pay more to a younger person leaving the company than to an older person nearing retirement age. In early 2003, regulations were proposed to require pension plans converting to a cash-balance plan to make it age-neutral. A cash-balance plan establishes a hypothetical account for each employee and credits the account with hypothetical pay and interest credits.