A cash balance plan is an employer-sponsored retirement plan that has some characteristics of both defined benefit and defined contribution (DC) plans The employer credits each employee with a specific percentage of pay each year and applies interest to these amounts at a rate of interest that the employer chooses The benefit is therefore defined as an "account balance," as in a DC plan A cash balance plan differs from a DC plan, however, in that the employer retains control of the funds held by the plan and chooses how to invest these funds The account balance in a cash balance plan is merely an accounting of the employee's accrued benefit under the plan It is not an individual account owned by the employee Because the employee is required to receive a benefit that is no less than the amount of pay credits and interest credits that have been applied to his or her "account," cash balance plans are legally defined benefit plans and are insured by the Pension Benefit Guaranty Corporation