Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide

In a cash balance plan, benefits are primarily determined based on the career average pay of the employee. This type of retirement plan allows for a defined benefit that grows over time, typically involving annual credits based on a percentage of the employee's salary, along with interest credits.

The structure of cash balance plans combines features of both defined benefit and defined contribution plans. Employees receive a statement each year showing their "cash balance" account, which reflects their accrued benefit. This account is generally calculated using their average salary over their entire career in the organization rather than being directly linked to market performance or specific investment strategies.

Other options consider factors that do not directly influence the defined benefit nature of a cash balance plan. Investment strategies and market performance pertain more to collective investment vehicles rather than to the individual employee's benefit calculation. Additionally, while employee tenure can have an impact on eligibility or vesting, it is not the primary basis for benefit determination in a cash balance plan. Thus, the focus on career average pay solidly aligns with how these benefits are structured.