Private Pensions: Implications of Conversions to Cash Balance Plans

摘要

The Congress asked us to (1) describe the prevalence and major features of cashbalance plans and reasons why firms adopt them; (2) discuss how the use of cash balance plans can affect the pension benefits for workers of different ages and tenure, particularly after conversion; and (3) determine what information employers converting to cash balance plans typically provide to plan participants and how disclosure might be improved. To address questions, we conducted a random sample survey of 420 firms on the 1999 Fortune 1000 list and reviewed pension plan documents to examine the features of cash balance plans. In addition, we conducted in-depth interviews with officials from 14 firms with cash balance or similar plans to discuss why they adopted such plans and to obtain information about how firms disclosed changes to their pension programs. We modeled pension plan design features to compare pension benefits provided by a 'basic' cash balance plan and a defined benefit plan with a final average pay formula, common to large defined benefit plans. Also, we interviewed various federal agency officials, pension consultants, and actuaries. We conducted our work between September 1999 and August 2000 in accordance with generally accepted government auditing standards.