What is a Minimum Balance Pension?

A Minimum Balance Pension refers to a type of retirement plan that integrates aspects of both cash balance plans and traditional defined benefit plans. This hybrid structure often includes the guaranteed income characteristics of a traditional pension while also allowing for the cash balance aspect, where participants have individual accounts reflecting hypothetical account balances that grow over time.

With this combination, participants can benefit from the stability of a defined benefit structure, alongside the more flexible and portable nature of a cash balance plan. Such plans typically set a floor on the account balance, ensuring that employees have a minimum level of benefits—even if the investment performance does not achieve expected returns. This hybrid approach aims to provide security to employees while adapting to the changing workplace trends that favor flexibility.