Cash balance plans are an increasingly common plan design which use an account balance that is then converted to an annuity when defining the single normal form of benefit payment.

When setting up a cash balance plan in DB Precision, there are many components that need to be created in order to properly calculate benefits. Luckily, the New Plan Wizard includes a cash balance check box which, when selected, creates the basic structure of this coding for you.

The one choice you have when selecting this option is whether or not the plan determines benefits using "whipsaw" for benefit payments prior to Normal Retirement Date (NRD). To determine benefits, some plans take the cash balance at payment date and divide by an immediate annuity factor. Other plans using the "whipsaw" method instead project the cash balance to NRD, divide by an immediate annuity factor at NRD, and then reduce that benefit for early retirement. You will need to look at the plan document or prior benefit calculations to determine which to use.

If you are converting a traditional DB plan to a cash balance plan, the easiest method for doing this in DB Precision is to create a sample new plan using the wizard (with cash balance indicated) and then copy the coding created by the wizard into your existing plan.