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Can the Cash Balance Plan experience "runaway" costs?

No. Runaway costs have been associated with standard Defined Benefit Plans because:

  1. They are final average pay plans, so a big increase in compensation during the last few years before retirement can drive up costs since the final average pay is applied to all years of service. This does not happen with Cash Balance Plans.
  2. Lump sums for payouts from standard Defined Benefit Plans are based on a three tier interest rate based on the current interest rate market, which is low. The lower the interest rate the higher the lump sum cost. With Cash Balance Plans the account balance is the lump sum amount, which avoids the fluctuation involved with standard Defined Benefit Plans.

So, while there are costs associated with Cash Balance Pension Plans that can fluctuate, there are no "runaway" costs to be concerned about with Cash Balance Pension Plans.