The IRS has issued final regulations for hybrid retirement plans, such as cash balance plans, that clarify and add flexibility about how an employer credits interest in such plans. The final regulations clarify the definition of "market rate of return" to mean returns with similar volatility to the broad U.S., or similar international, equity market. As such, plan sponsors can choose to credit accounts based on the return of the S&P 500, for example, rather than a fixed rate such as 5% per year. There is, however, capital preservation protection, in case market returns are negative.
Additionally, final regulations allow plans to credit interest based on a subset of plan assets. This way, plan sponsors may choose to have multiple asset pools, probably an aggressive pool for less tenured (i.e.: younger employees) and a more conservative pool for senior employees.
How does this benefit plan sponsors? It allows plan sponsors to share investment risk with participants. This way, plan sponsors have to deal with less volatility.
These regulations go into effect in 2016, and current plans are allowed to be modified.
For more information, please refer to this Plan Sponsor article, as well as the final regulations.