Nearly three decades ago, Bank of America Corp. launched what became a revolution in pension plan design.

In July 1985, the Charlotte, North Carolina-based financial services company replaced its old-style final average pay plan, then the dominant corporate defined benefit plan design, with a hybrid design — so named because the plan combined aspects of both defined benefit and defined contribution plans.

Like all defined benefit plans, Bank of America’s plan promised employees a specific guaranteed benefit. But the plan earned its hybrid moniker because embedded in it were numerous defined contribution plan features. For example, when employees left, they could take the vested portion of their benefit as a lump sum or leave it in the plan until retirement, when they would have the option of a lump sum benefit or a monthly annuity.

Also, like a defined contribution plan, the benefit earned each year was expressed as a percentage of pay. As a result, employees at all times knew the exact value of their benefit.

While Bank of America called its plan BankAmeraccount, it immediately became known as a cash balance plan, an apt description with employees’ benefits expressed as a cash lump sum.

That made the plans strikingly different than final average pay plans, in which employees had to project their retirement benefit based on their guesses about how long they would work for an employer and what their salaries would be in their final years of employment. By contrast, in cash balance plans, employees would instantly know the current value of their benefit.

That easy-to-understand benefit formula and the smooth earning of benefits was a key reason Bank of America adopted a cash balance plan, corporate executives said at the time.

“We wanted a plan that would be easy to understand and that would provide more benefits to more employees. We believe the cash balance plan is it,” said Paul Nordine, a benefit consultant at Bank of America at the time Bank of America launched the plan in 1985.

Hundreds of other employers, including nationally known corporate heavyweights such as AT&T Inc., American Express Co., BP America Inc., Cigna Corp., IBM Corp. and Wells Fargo & Co., had similar thoughts as they, too, adopted cash balance plans, typically converting their old final average play plans to the new design.

But storm clouds in the form of lawsuits were to come. Led by an aggressive plaintiffs bar, the suits charged that the basic plan design discriminated against older employees.

Eventually, the suits came to naught, with five U.S. appeals courts rejecting the age discrimination charge. In addition, Congress, as part of a broader pension measure it passed in 2006, made clear that going forward the basic design of cash balance plans did not violate age discrimination law.

Those twin developments have given a lift to cash balance plan formations. Big-name employers, including The Coca-Cola Co., Dow Chemical Co. and MeadWestvaco Corp., all adopted cash balance plans in the wake of the new law.

On the other hand, many other employers, including cash balance plan pioneer BankAmerica, froze their plans as part of a broader corporate move away from defined benefit plans.

Still, more employers have hung on to their cash balance plans compared with other defined benefit plans.

A 2013 Towers Watson & Co. survey found that 23% of Fortune 100 employers offer hybrid plans, mostly cash balance, to new employees, more than three times compared with those who offer traditional plans.

And that percentage should hold steady. “Many employers who have moved to cash balance plans will keep them,” said Kevin Wagner, a senior retirement consultant with Towers Watson in Atlanta.

One such employer sticking with its cash balance plan is North Shore-LIJ Health System in Lake Success, New York.

“This allows us to offer a benefit to employees that they could better understand than a traditional defined benefit plan,” said Gregg Nevola, the health care system’s vice president of total rewards.

“Employees are used to seeing everything in dollars,” and that is what this plan does, Mr. Nevola said.

And in some business sectors, such as small professional firms, cash balance plan formation is on the rise.

For example, a forthcoming report by retirement plan administrator Kravitz Inc. found that of the 9,648 cash balance plans operating in 2012, 86% of the plans had fewer than 100 participants.

“There has been a lot of activity in the small employer market,” said Jack Abraham, a principal with PricewaterhouseCoopers L.L.P. in Chicago.

“There is no better way to reduce tax liabilities and increase savings than a cash balance plan,” said Dan Kravitz, president of Kravitz in Los Angeles.

The additional benefits that employers can provide to employees through offering a cash balance plan compared with providing just a 401(k) plan are striking.

Employees can contribute up to $17,500 — or $23,000 if they are age 50 and older — annually to a 401(k) plan, and their employers can match those contributions up to a total of $51,000. By contrast, employers can fund an annual benefit of more than $210,000 in a cash balance plan.

The cash balance plan gave Southwest Diagnostic Imaging Ltd., a 650-employee radiology provider, “a vehicle to enable employees to save additional funds for their retirement,” said Mike von Kolen, director of finance at Southwest affiliate Valley Radiologists Ltd., in Phoenix. Southwest set up a cash balance plan late last year.

And more large companies that have frozen their cash balance or other defined benefit plans and moved to a defined contribution plan-only approach could one day embrace cash balance plans.

The drivers of that move are employees who haven’t saved enough through their 401(k) plans for their retirement and are staying on the job longer than their employers would like.

“I can see a scenario where five years from now, if baby boomers don’t retire, some employers might unfreeze their plans to address workforce management issues,” said Art Noonan, a senior partner with Mercer L.L.C. in Pittsburgh.