It is not hard to understand the popularity of the cash balance plan concept. Such plans provide account balance statements on a regular a basis, from which the current accumulated benefits are easily determined. In traditional defined benefit plans, the current value of the accrued portion of the monthly retirement benefit is not easily understood or appreciated by employees, particularly younger ones who are years away from retirement. In a Cash Balance Plan, the benefit is clear. It is the current account balance.
Employees feel like they have received something each year and they understand what it is.
Benefits accrue more evenly over an employee's tenure. This method is more appropriate for today's mobile workforce, where employees change jobs often and rarely stay with just one company their entire career. Cash Balance Plans allow terminating employees to roll over their account to an IRA or a new employer's qualified plan. Traditional defined benefit plans often don't provide distributions before normal retirement date. Cash Balance Plans contain the same level of security as traditional plans.