Cash balance plans are a type of defined benefit plan in which the company makes contributions on behalf of all participants. What sets these plans apart is they offer much higher contribution limits than a 401(k), especially for older participants. Those participants can contribute more after age 55 and provide a guaranteed retirement benefit.
In this plan, a participant’s contributions also grow tax-deferred at a set interest rate, rather than based on investment performance. This can benefit those starting late or those that want to boost heading into retirement.