基于市场的现金余额计划（MBCBP）常见问题

Market-BasedCashBalancePlan (MBCBP):Frequently asked questions Scott PreppernauWilliam Strange The retirement landscapeis constantly evolving, with the predominant trend being away fromtraditional defined benefit(DB)pension plans toward 401(k)-style defined contribution(DC)plans.However,defined benefit plans aremaking a comeback in ahybridformat known as“cash balance,” whichmimicsthe lookandfeel of a401(k) planbutcomeswithspecial featuresthat can appealtoemployers and employees alike.We have outlinedtenquestionsthat mostfrequently come up whenemployers are deciding whether to sponsora cash balance plan. Read the fullFAQ, or skip to a specific questionvia thelinks below: 1.What is a cash balance plan and how does it fit into the evolving retirement plan landscape?2.What is a Market BasedCash Balance Plan (MBCBP)?3.How are MBCBPs typically invested?4.Do employees need to consider the MBCBP asset allocation when making their 401(k) investment decisions?5.What has led to the growth in cash balance plans? Why would employers add a cashbalance plan if theyalready have a defined contribution plan?6.What options for determining interest credits do plan sponsors have when setting up a cash balance plan?7.What additional considerations apply to the interest credits in a MBCBP? Does everyone have to get the sameinterest credits?8.Why would employers choose an MBCBP?9.Does everyone get the same benefit level in an MBCBP?10.Why have MBCBPs been attracting more attention from employers lately? Q1:What is a cash balance plan and how doesit fit into the evolvingretirement plan landscape? A cash balanceplan is a type of “hybrid” retirement plan,combiningattractivecharacteristicsofboth defined benefit(DB) plansand defined contribution (DC) plans.In acash balanceplan,all assets are held in a pooled accountand aparticipant’s benefitisdetermined by thetermsof the plan document,both features of a DB plan. However,eachparticipant’sbenefitis communicatedin terms of a hypothetical account balance, which mimics thelook and feel ofaDC plan from theparticipant’s perspective. A cash balance account grows through twocomponents: Pay credits:Oftendefined as a percentage ofan employee’sannualsalary—in a 401(k) plan this would beequivalent to the employee or employer contribution.Interest credits:Canbe a fixed rateor a variable rate—in a 401(k) plan this would be equivalent to theinvestment earnings or losses. Plan sponsors can choose among several allowable methods for defining theinterest credits.Theyinclude fixed interest crediting rates up to 6% per year, or a menu of allowable variablerates that link to inflation experience, bond yields, mutual funds,exchange-traded funds (ETFs),collectiveinvestment trusts (CITs), orthe actual trust rate of return. Whilethenumberof open, ongoing traditional DB plans has declinedin recent decades outside ofpublic sector andunion employment,the prevalence ofcash balance planshasgrown significantly.In 1998,about 57%ofFortune 500companiesofferedDB plans tonewly hired employees, with the vast majorityusingtraditional DBdesigns.By2019,only 14%ofsuchcompaniesoffered DB plansto new hires. However, for employersthatdid provide a DB plan,over80% were in theform of a hybrid plan like a cash balanceplan.1 In subsequent questions, we will learn about what is driving the trend toward cash balance, and market-based cashbalance more specifically. 2:What is a Market Based Cash Balance Plan (MBCBP)? A MarketBased Cash Balance Plan (MBCBP) is aspecial typeof cash balanceplan.This type of plan uses theactualreturn onplan assetsas the“interestcredits.”Thus, if the interest creditsare defined as theactual return onplan assets, that makesMBCBPinterest creditsequivalent to investment earnings or losses in a 401(k)and,therefore, an MBCBP planhasrisksimilartoa 401(k) plan(forthe employer). While thatsoundsverysimilar toa401(k) plan, there are some differences: As with any cash balance plan, assets are pooled and investment decisionsaremade at a plan-wide level, ratherthan being participant-directed as in a 401(k).MBCBPsmust adhere to the “preservation of capital” rule, which requires that thecash balance accountdistributed to an employeebegreater thanor equal tothe sum of the pay creditsover an employee’s career.MBCBPs often choose to add a “cap” on the annual interest credit because of nondiscrimination testing rules thatdon’t apply to401(k) plans. In summary, akey feature of MBCBPs is thatthegrowth inemployeeaccount balances (and thus plan liabilities) isaligned withthe actualreturns achieved on the investedplanassets.When combined with an appropriate fundingpolicy, this allows plan sponsors tomaintain a plan that is expected toremainfully funded regardless of actualinvestment performance.In such a design, the plan sponsor bearslittleinvestment risklong-term.Instead,a largeportion ofboth the risk and reward of investment performanceis passed through toemployees,becausereturnsaffect the benefits paid.The ex