The attraction of a cash balance plan is driven by the notion of an account balance.   People simply relate better to a bucket of cash than to what the cash can provide in terms of retirement income.  The cash balance plan uses a formula to set aside a given percentage ( the “rate credit”) of each participant’s salary each year and to enhance that balance with an established rate of interest (“interest credit”).  The participant sees each year how much his hypothetical balance is growing. While the cash balance method can count past service, in the initial year, the participant will see a hypothetical balance in his account which is not matched by real assets in the Trust.  As in the traditional defined benefit plan, the difference, the “unfunded actuarial accrued liability,” is amortized over time and ultimately funded.  In the cash balance context, this disconnect between the sum of everyone’s account balances and the actual amount of assets underlying those accounts can be disconcerting at best.