What feature of a cash balance plan is unique compared to traditional defined benefit plans?

The unique feature of a cash balance plan compared to traditional defined benefit plans is that changes in participants' portfolio balance do not affect yearly contributions. In a cash balance plan, benefits are expressed as a hypothetical account balance, which grows annually based on a predetermined interest crediting rate. This means that contributions to the plan are determined separately and do not fluctuate with actual investment performance, thus providing a more predictable benefit for participants.

In traditional defined benefit plans, benefits are based on final average salary, years of service, and other factors, and the financial condition of the pension fund can impact the stability of the benefits promised to participants. The cash balance plan structure alleviates concerns about market volatility affecting contributions in a manner that can change the benefits participants eventually receive, which is a fundamental principle distinguishing it from traditional plans.