The Four Pillars of a Modern Retirement Program

Why market return cash balance plans are the future of retirement

Most Americans live with the retirement crisis, fearing they will never achieve financial security in retirement. According to a recent study from the National Institute of Retirement Security (NIRS), an astounding 73% are deeply concerned about the negative effects of increasing inflation on their retirement prospects. The worry is not confined to the working population, as even current retirees are increasingly anxious about outliving their savings. This crisis is not just a personal issue, but a societal one, with potential implications for the economy and workforce stability.

87% of the NIRS survey respondents believe that politicians in Washington, DC, don't fully comprehend the challenges of saving enough for retirement. This situation is an opportunity for the private sector to step in, offering a beacon of hope by helping its workers retire comfortably. Market return cash balance plans can play a significant role in addressing the retirement crisis, providing a more secure and predictable retirement income for employees. By adopting these plans, employers can contribute to the solution and help alleviate the concerns of their workforce.

The shift from defined benefit (DB) plans to defined contribution (DC) arrangements has driven the current crisis. Today, only 11% of 126 million Americans working in the private sector participate in a pension plan, a significant drop from 46% in 1980. As DB plans became associated with high and unpredictable costs, employers shifted the risk onto individual employees by embracing DC savings programs. However, these programs must be more comprehensive as a retirement vehicle and foster employee loyalty like pensions.

That's why it's time for market return cash balance plans - a new generation of sustainable retirement plans that combine the best features of defined contribution (DC) and defined benefit (DB) plans. These innovative programs create guaranteed lifetime income for employees while maintaining a stable and cost-efficient path for employers to invest in employee retirement. By implementing an effective retirement program, companies are incentivizing employee loyalty and helping society. This is the future of American retirement.

In a market return cash balance plan, participants accumulate individual account balances based on employer and sometimes their own participating contributions. These accounts grow based on the investment returns of an underlying pool of assets, much like DC plans. However, unlike DC plans, these assets are invested collectively with professional oversight, like DB plans, which typically produce higher long-term returns.

How does it work?

At the core of a market return cash balance plan are the four pillars of modern retirement program design: increased efficiency, better employee appreciation, improved workforce management and financial risk management. By adhering to these fundamental principles, the program will enhance employees' lives while offering a better outcome for employers.

1. Efficiency

Market return cash balance programs combine the most effective parts of pensions and 401(k)s, offering employees a secure and comfortable retirement. They reduce the financial burden on employers and ensure that employees can retire with peace of mind. The efficiency and affordability of these programs are vital factors that can inspire optimism about the potential for better outcomes for both employers and employees. For employers, these plans can significantly reduce financial risk and improve workforce management by providing a more attractive retirement benefit, which can help attract and retain top talent.

A blend of the best features from DB and DC programs offers a unique and sustainable approach. These plans borrow DB plans' ability to deliver pooled invested returns and efficiently convert assets into a guaranteed lifetime income without costly insurance products. These features are complemented by transparency, fixed costs, portability and flexibility, which are more typical of DC programs. Maintaining these features is crucial, as they are the backbone of plans that are sustainable for employers in the long run and provide employees with the personalization and flexibility they desire in retirement, empowering them to plan their future with confidence.

By offering efficient solutions like market return cash balance plans, employers can demonstrate their unwavering commitment to the financial security of their workforce. For instance, a well-designed plan could provide a guaranteed minimum return on investment, reducing financial risk for employees. This balance of employee income security and reduced financial risk for employers can be achieved without imposing higher costs, making it a win-win situation.

2. Employee engagement

Employees must grasp the long-term benefits of a retirement plan to justify the plan sponsor's investment. Therefore, it's of utmost importance to effectively communicate the perks of this plan to your workforce. When discussing the benefits program, focus on employees' needs and the security it provides for their families. This approach fosters a sense of appreciation and motivates them to participate. By clearly explaining the benefits of the plan, such as the ability to access their account balance in a portal 24/7 and the potential for a guaranteed lifetime income, employees can better understand and appreciate the value of the plan.

What makes the benefits of market return cash balance plans easier to communicate to employees than most other plans? They can access their account balance in a portal 24/7, seeing a real-time, precise number that shows exactly how much money they have saved for retirement. This transparency not only empowers them but also shows that their financial security is a top priority. Employees can see how much the employer contributes to their financial well-being. At the same time, it helps employees understand the lifetime income value of their accumulated savings and how this income will meet their retirement needs. Naturally, employees will feel more valued and engaged in their retirement plans.

It's also important to recognize that not all employees can fully utilize a 401(k) account. However, it's equally important to highlight the potential growth and long-term benefits of participating. When an employee faces a financial challenge and can't contribute to a 401(k) account, they risk missing out on their company's matching pledge. Even a year of missed savings can significantly impact their retirement savings journey, but consistent contributions can lead to substantial growth and a secure future.

When your plan contributes toward guaranteed lifetime income regardless of the individual's circumstances, it's a powerful employee incentive. This feature underscores the plan's flexibility and adaptability, allowing employees to feel empowered and in control of their financial future. When appropriately communicated, employees will appreciate the inclusive benefit they can customize to meet their family's real-world needs. This flexibility is a key advantage of market return cash balance plans, as it allows employees to tailor their retirement benefits to their individual circumstances and goals.

3. Workforce management issues

Securing and maintaining the right talent is an ongoing challenge for businesses. The workforce, particularly millennials and Gen Z, is exhibiting a higher job turnover rate, with traditional pension plans no longer serving as a significant factor in fostering employee loyalty. With most companies offering cookie-cutter 401(k) programs that have stayed the same for decades, an innovative retirement program (such as a market return cash balance plan) can position a company ahead of its competitors. Employers, by offering these modern retirement plans, you are not just attracting talent, but also demonstrating your strategic and forward-thinking approach to workforce management.

With the retirement crisis gaining more attention, individuals increasingly consider their future and how their employer can contribute to a secure retirement. Insufficient benefits packages were a key factor for over 40% of job departures in 2021, as the Pew Research Center reported. Gen Z employees are starting to think about retirement earlier than previous generations. According to the Transamerica Center for Retirement Studies, 30% of Gen Z employees report prioritizing retirement benefits, and 67% of those with access to a retirement plan are utilizing it. Given Americans' widespread struggle with retirement savings, offering robust benefits becomes a strategic approach to attracting and retaining employees.

While many corporations —including Tesla, KPMG and Meta — have enhanced their defined contribution (DC) plans to help retain workers, it's important to note that DC plans alone are typically insufficient to address all workers' retirement concerns. A more comprehensive and modern retirement program that includes components of a market return cash balance plan working alongside a DC plan is a critical tool for tackling retention and advancement issues over the long term.

4. Financial risk management

When considering a new retirement program, managing financial risk is paramount. Unpredictable costs are precisely why many companies have transitioned away from pension plans, seeking a more secure and predictable alternative in 401(k)s.

Traditional pension plans were notoriously expensive and volatile. The problem is that, as a plan sponsor, you can only control a few facets of the plan. External factors like interest rates, inflation and market performance are unpredictable. For the pension programs designed from the 1970s to the 1990s, these economic variables caused employers much pain.

That's why market return cash plans were designed to be robust and affordable for employers. This innovative approach uses the actual rate of return on plan investments, eliminating any asset-liability mismatch and providing a level of control and stability typically lacking in traditional pension plans.

With their unique design, market return cash balance plans offer a more sustainable and cost-efficient alternative to pension plans. It allows plan sponsors to manage more assets longer, ensuring consistent and predictable yearly expenses. The stability helps you meet your financial goals and provides your employees with a more stable retirement savings experience. It's a win-win situation that promises a brighter future for your retirement program.


Is your retirement program designed for future stability and evolving employee priorities—or is it stuck in a bygone era? It's time for the next generation of retirement programs, market return cash balance programs. These modern plans offer an innovative approach that realistically tackles the needs of participants with understanding and flexibility without compromising the needs of employers. With our market return cash balance programs, you can cater to the diverse needs of your employees, offering the best of both traditional DB and DC plans.

By implementing this plan design, you can make investments more efficient, enhance employee engagement, foster employee loyalty and decrease financial risks. You have the power to be a significant part of the solution to the retirement crisis. Consider a market return cash balance program today and take a proactive step towards a more secure retirement for your employees.

About October Three | Our mission is to help employees achieve better retirement outcomes with forward-thinking plans that meet employer needs. As a consulting firm and one-stop-shop, October Three has the administrators, actuaries and consultants to design and administer programs — leading clients through every step of the plan journey.

Are you interested in seeing how a market return cash balance plan could transform your company's benefits offering? Schedule a 30-minute, one-on-one call with a consultant today.