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What is a Cash Balance Plan and How Does it Work for FMC Employees?

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'Cash balance plans can provide FMC employees with a unique opportunity to grow their retirement savings through tax-deferred contributions and higher contribution limits, offering an important strategy for those looking to enhance their financial future.' – Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

'Cash balance plans can offer FMC employees a powerful tool to build substantial retirement savings with the added benefit of employer-managed investments, promoting a more secure financial future for high-income workers.' – Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

What a cash balance plan is and how it works.
The key benefits and limitations of cash balance plans.
How these plans compare to traditional retirement vehicles like 401ks.

Among the various retirement plan options available today, cash balance plans are becoming better known as a useful instrument for high earners, particularly those employed by large corporations like FMC. These plans offer significant advantages to those who want to save more than standard retirement vehicles like 401ks or individual retirement accounts (IRAs) allow because they combine features of defined-benefit and defined-contribution plans.

A Cash Balance Plan: What Is It?

A cash balance plan is a type of defined-benefit pension plan in which benefits are represented as an account balance. The primary distinction between it and a defined-contribution plan, such as a 401k, is how the account is funded and maintained, even though it functions similarly. Employer contributions to each participant's account are made annually under a cash balance plan, which offers two different kinds of credits: interest credits and pay credits. Over time, these contributions build up, providing the worker with a predetermined account amount when they retire.

For example, an employee may decide to convert a $500,000 cash balance account into an annuity upon retirement, which would provide a consistent income stream for the duration of their retirement. To continue tax-deferred growth, they can also take a lump sum payment and roll it over into an IRA or another employer-sponsored retirement plan.

Cash balance plans are subject to annual inflation-adjusted contribution restrictions set by the Internal Revenue Service (IRS). A participant who is 62 years of age or older may accumulate up to $3.6 million in their cash balance plan by 2025. This makes it a desirable choice for individuals looking to signficantly grow their retirement savings due to its high cap.

In this article, we will discuss:

What a cash balance plan is and how it works.
The key benefits and limitations of cash balance plans.
How these plans compare to traditional retirement vehicles like 401ks.

A Cash Balance Plan: What Is It?

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Limits on Contributions and Comparison to Conventional Plans

Contribution caps offered by cash balance plans in 2025 are significantly higher than those of 401k plans. While 401ks will require a catch-up contribution of $11,250 for employees aged 60 to 63, cash balance plans offer more flexibility in terms of contribution limitations, especially for high-income earners. These caps often surpass the contribution limits of conventional retirement plans by many times, but they can change depending on variables like age, income, and work history.

Principal Benefits of Cash Balance Plans

1. Tax-deferred growth: Cash balance plan contributions are tax-deferred, which reduces taxable income and provides immediate tax benefits. Participants can build money for retirement and save more on taxes as a result.
2. High contribution limits: Cash balance plans, which are especially advantageous for high-income individuals or those wishing to increase their retirement savings later in their careers, allow contributions far greater than the 401k plan limits.
3. Rollover flexibility: Participants can transfer their cash balance funds into an IRA or another retirement plan when they retire, giving them greater control over how they manage their retirement assets and allowing for ongoing tax-deferred growth.
4. Employer-managed investments: Cash balance programs shift the investment risk to the employer, as opposed to 401k plans, where the employee bears this responsibility. Employees at FMC, who might not have the time or background to handle their own retirement plans, can feel more at ease knowing the employer manages this process.
5. Federal protection: The Pension Benefit Guaranty Corporation (PBGC) provides federal protection for benefits under cash balance plans, offering an additional layer of assurance.

Possible Drawbacks to Cash Balance Plans

1. Restricted availability: Compared to other retirement plan options, cash balance plans are less accessible. These plans are typically offered by large companies, like FMC, and may not be available at smaller firms or those without similar pension offerings.
2. Taxation on distributions: Employees will pay taxes on distributions even though contributions are tax-deferred. If the account has grown substantially, this could result in a larger tax obligation upon retirement.
3. Best for high-income workers: Cash balance plans are especially beneficial for high-income workers due to their large contribution limits. The advantages of these plans may not be as noticeable for individuals with lower incomes.
4. Complexity: People who are unfamiliar with pension plan arrangements may find it challenging to understand cash balance plans. It is often recommended to consult a financial advisor to navigate the intricacies and confirm the plan aligns with long-term retirement goals.

In Conclusion

Cash balance plans offer a unique and effective means for FMC employees to build up sizable retirement funds. These plans combine elements of defined-benefit and defined-contribution plans, offering significant tax-deferred contributions, excellent federal protection, and a high degree of investment management assurance.

Although typically available at larger companies like FMC, cash balance plans are particularly suitable for high-income earners who are looking to enhance their retirement funds. Despite their complexity, for those who qualify, these plans present an attractive option due to their potential for significant retirement accumulation. They can serve as an effective tool for securing a comfortable retirement, whether used alone or in conjunction with other retirement vehicles.

Before determining whether a cash balance plan is the best option for your financial future, it is essential to comprehend the precise terms, conditions, and tax ramifications, just like with any other retirement plan. You may confirm that your retirement plan aligns with your long-term goals and objectives by speaking with a financial advisor.

Cash balance plans may provide FMC employees with a dependable source of retirement income, especially for those nearing retirement. These plans allow participants to begin collecting benefits as early as age 55, compared to other retirement savings options that require waiting until age 59½ to access funds without penalties. This flexibility, combined with the plan’s high contribution limits and tax benefits, makes cash balance plans a desirable choice for employees looking to improve their retirement strategy.

By combining features of both defined-benefit and defined-contribution plans, a cash balance plan is an effective retirement savings tool. With its larger contribution limits, government guarantees, and tax-deferred growth, it offers a dependable means for employees at FMC to build significant retirement savings. Explore the advantages and challenges of this growing retirement plan today and consider how it can boost your long-term financial wellbeing.

Sources:

1. Tergesen, Anne. 'The Retirement-Savings Weapon Doctors and Lawyers Use to Build Wealth.' Wall Street Journal , 14 Mar. 2025, www.wsj.com/personal-finance/retirement/cash-balance-plans-retirement-high-earners-71bfed2e?utm_source=chatgpt.com .

2. Chubb, Chad. 'Cash Balance Plan Explained: Maximize Tax Savings and Build Wealth.' WealthKeel , 10 Apr. 2025, www.wealthkeel.com/blog/cash-balance-plan-retirement/?utm_source=chatgpt.com .

3. 'Cash Balance Pension Plans: A Complete Guide.' October Three , 10 months ago, www.octoberthree.com/articles/cash-balance-pension-plans-a-complete-guide/?utm_source=chatgpt.com .

4. 'Cash Balance Plan vs. 401(k): A Simple Comparison.' Emparion , 7 months ago, www.emparion.com/cash-balance-plan-vs-401k/?utm_source=chatgpt.com .

5. 'Cash Balance Pension Plans: A Complete Guide.' October Three , 10 months ago, www.octoberthree.com/articles/cash-balance-pension-plans-a-complete-guide/?utm_source=chatgpt.com .

How does FMC Technologies plan to manage the investment strategy of its pension plan to ensure it remains solvent and able to meet the benefit payments as employees retire? Given the shifting dynamics of the market, what specific measures is FMC Technologies employing to enhance the liquidity of its assets and mitigate risks associated with underfunding in the current economic climate?

Investment Strategy for Solvency and Benefit Payments: FMC Technologies' pension plan aims to ensure all benefit payments are met as they fall due. The investment strategy includes maintaining funds above the Statutory Funding Objective and transitioning towards lower-risk assets such as Liability Driven Investments (LDI), gilts, and cash. This strategy, driven by advice from LCP, seeks to reduce underfunding risks and ensure liquidity(FMC_Technologies_Pensio…).

In what ways does FMC Technologies incorporate environmental, social, and governance (ESG) factors into its investment decision-making for the pension plan? How does the commitment to ESG investing align with the broader goals of FMC Technologies, and what impact does it have on the long-term sustainability and performance of the company's pension investments?

ESG Factors in Investment Decisions: ESG factors, including climate change, are considered by FMC Technologies in investment decisions. The company encourages investment managers to integrate ESG considerations into their analysis of future performance and risks. ESG aligns with the long-term sustainability of the pension plan, though there are limited opportunities to apply ESG in the current target investment strategy of LDI, gilts, and cash(FMC_Technologies_Pensio…).

Can you elaborate on the additional voluntary contribution (AVC) arrangements available through FMC Technologies and how they are designed to support employees in building a more robust retirement income? What choices do employees have within these AVC options, and how can they tailor their investment to suit their individual risk profiles?

Additional Voluntary Contributions (AVC): FMC Technologies provides AVC arrangements designed to offer a range of investment options to help employees build a more robust retirement income. These options allow employees to tailor investments based on their risk-return preferences, ensuring flexibility in achieving personal retirement goals(FMC_Technologies_Pensio…).

As employees of FMC Technologies approach retirement, what processes are in place to evaluate their pension benefits and determine eligibility for various retirement options? What role does the pension plan's advisory team play in assisting employees with financial planning in preparation for retirement?

Pension Benefits Evaluation Process: FMC Technologies uses a structured process to evaluate pension benefits, supported by investment advisers and trustees. This process involves regularly reviewing the funding level and the benefit cash flows to ensure the pension plan is on track to meet employee retirement needs. Advisory teams help employees with financial planning during the transition to retirement(FMC_Technologies_Pensio…).

What steps is FMC Technologies taking to transition its investment strategy towards greater exposure to low-risk instruments while still aiming for satisfactory returns? How does this transition align with the companyâ€™s funding objectives, and what are the anticipated benefits for the employees in the context of their retirement planning?

Transition to Low-Risk Investments: FMC Technologies has transitioned much of its pension assets into LDI, gilts, and cash to de-risk the investment portfolio. This shift aligns with the company's funding objectives to secure pension liabilities and provide stable returns for retirees. The plan is expected to fully transition to these low-risk instruments to support long-term pension solvency(FMC_Technologies_Pensio…).

How does FMC Technologies measure the performance of its investment managers, and what criteria are used to evaluate their effectiveness in managing the pension plan's assets? In the event that an investment manager does not perform according to expectations, what procedures are in place for FMC Technologies to reassess and possibly reallocate those funds?

Investment Manager Performance: FMC Technologies evaluates the performance of its investment managers using various criteria, including their ability to meet long-term pension objectives. If an investment manager underperforms, FMC Technologies, with advice from LCP, reassesses and rebalances the portfolio as needed to ensure pension assets are properly managed(FMC_Technologies_Pensio…).

What communication channels does FMC Technologies recommend employees use if they have questions or need clarification regarding their retirement benefits and the pension plan? How can employees easily access additional resources or support to better understand their retirement options as they transition out of active employment?

Communication Channels for Retirement Benefits: Employees of FMC Technologies can access information and support regarding their pension and retirement benefits through direct communication with trustees and the pension advisory team. FMC Technologies recommends utilizing these resources for clarity on retirement options and to understand the transition out of active employment(FMC_Technologies_Pensio…).

Considering the implications of portfolio diversification, how does FMC Technologies determine the appropriate asset allocation for its pension plan's investment strategy? What considerations are taken into account to ensure that all employeesâ€™ retirement savings are managed in a way that balances risk and growth potential?

Asset Allocation and Portfolio Diversification: FMC Technologies’ pension plan employs a diversified asset allocation strategy, ensuring a balance between growth and risk. The investment strategy considers the need to match liabilities with assets while progressively reducing exposure to high-risk assets like equities and increasing exposure to low-risk instruments like LDI and gilts(FMC_Technologies_Pensio…).

How does FMC Technologies plan to maintain compliance with regulatory requirements regarding its pension plan, particularly concerning employer-related investments? What are the limitations or restrictions imposed by legislation that affect how FMC Technologies can manage its pension fund assets?

Compliance with Regulatory Requirements: FMC Technologies remains compliant with regulations regarding employer-related investments. Restrictions under the Pensions Act 1995 and the Occupational Pension Schemes (Investment) Regulations 2005 prevent significant investments in TechnipFMC or associated companies to avoid conflicts of interest(FMC_Technologies_Pensio…).

As risks associated with market fluctuations continue to evolve, how does FMC Technologies plan to adjust its investment strategy to mitigate these risks? What safeguards are put in place to protect retirement benefits during periods of economic uncertainty, and how will these strategies affect the financial well-being of FMC Technologiesâ€™ retirees?

Adjusting Investment Strategy for Market Risks: FMC Technologies employs a liability-driven approach to manage the pension fund, mitigating market risks associated with economic fluctuations. Regular reviews of the investment strategy, alongside professional advice, allow the company to adjust and protect the pension plan's assets during uncertain market conditions(FMC_Technologies_Pensio…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Pension Plan (Defined Benefit Plan): FMC Corporation has a pension plan known as the "FMC Corporation Employees' Retirement Program." This plan is a traditional defined benefit plan, which provides retirement, death, and disability benefits to eligible employees. The plan's benefits are determined based on years of service and final average pay, which is a common formula used to calculate pension payouts. The plan is primarily available to employees who were hired before July 1, 2007. After that date, new hires were no longer eligible for the defined benefit plan but were instead enrolled in the defined contribution plan. 401(k) Plan: The FMC Corporation Savings and Investment Plan is the company’s 401(k) offering. For employees hired after July 1, 2007, this plan serves as their primary retirement vehicle. FMC contributes a percentage of eligible pay to the plan annually. One of the notable features of this plan is the immediate vesting on all contributions, including the company match. This means that employees have full ownership of all contributions from the outset. The plan offers a wide range of investment options managed by Fidelity Investments.

Restructuring Efforts: FMC Corporation has been actively restructuring its operations to improve efficiency and profitability. The company expects to achieve $50 million to $75 million in adjusted EBITDA contributions from restructuring actions in 2024, with a run-rate savings target of approximately $150 million by the end of 2025. This restructuring is critical for FMC as it navigates through the challenges posed by the global economic environment, including supply chain disruptions and inflationary pressures. Pension and 401(k) Plans: FMC's financial outlook includes maintaining strong adjusted EBITDA and adjusted earnings per share growth, which are key metrics that can influence the stability and benefits of its pension and 401(k) plans. As FMC continues its restructuring and cost-saving measures, these benefits could see adjustments to align with the company’s long-term financial goals.

Stock Options: FMC offers Non-Qualified Stock Options (NSOs), which allow employees to purchase company shares at a predetermined strike price after a specific vesting period. These options align employee incentives with the company's financial performance, as they offer the potential for profit if the company's stock price increases. However, employees must be aware of the risks associated with stock options, including potential forfeiture if they leave the company before the options vest. RSUs: FMC also provides RSUs, which grant employees the right to receive company shares once certain vesting conditions are met. RSUs do not require employees to purchase the shares upfront, making them less risky than stock options. Once vested, the shares are delivered to the employees, and they may choose to sell them, subject to capital gains tax.

In 2023 and 2024, FMC Corporation maintained its commitment to employee health and well-being by continuing to enhance its health benefits offerings. This included expanding mental health resources and increasing flexibility in healthcare spending accounts. Despite economic challenges, FMC has focused on providing robust support for its employees, including coverage for telemedicine services and wellness incentives to promote a healthier workforce.

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For more information you can reach the plan administrator for FMC at , ; or by calling them at .

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