Two types of hybrid defined benefit plan designs have been in the spotlight recently: cash balance pension plans and variable annuity pension plans (VAPPs). Neither plan design is new, but legislation in recent years has made them more viable options for employers. In this article, we explore these two options for plan sponsors contemplating a potential change in retirement plan design. The article is organized as follows:
- Cash balance plans: what they are, why might they be considered, and how participants benefit
- Variable annuity plans: explanation, considerations, and benefits
- Choosing a pension plan design