A cash balance plan is a special form of career average compensation plan. Typically, a cash balance defined benefit pension plan maintains hypothetical accounts for participants. The employer credits participants accounts with a certain number of dollars each plan year, and promises earnings at a specified rate. Interest on the account balance is credited at a stated rate, which may be different from the plans actual rate of investment return.

Please refer to chapter 2 of the AICPA Audit and Accounting Guide Employee Benefit Plan for additional information on cash balance plans.