Which type of retirement plan typically provides fixed employer contributions each year?

The correct choice, Cash Balance Plans, is characterized by its provision of fixed employer contributions each year, similar to defined contribution plans but with some unique features. In Cash Balance Plans, employers typically contribute a set percentage of an employee's salary to an individual account. Each year, these contributions are combined with an interest credit, making the account balance grow predictably over time.

Cash Balance Plans differ from other types of retirement plans in that they offer employees a clearer understanding of the retirement benefit they can expect. While the "fixed" aspect is in the annual contributions, the plan also guarantees a specific benefit that is expressed in the form of an account balance.

This structure contrasts with Profit-Sharing Plans, where contributions can vary based on the company's profit levels and may not be as predictable or guaranteed. Defined benefit plans focus on guaranteeing a specific retirement benefit instead of fixed contributions and highlight the employer's responsibility to fund the plan based on actuarial assumptions. Money Purchase Pension Plans do provide fixed contributions but lack the flexibility often found in Cash Balance Plans, making them less common in today’s retirement landscape.

The key takeaway is that Cash Balance Plans uniquely combine features of both defined benefit and defined contribution plans, providing a fixed contribution every year while ensuring that employees can see a