They are increasingly combining a 401(k) plan with a profit-sharing and a cash-balance plan
Yu, 2005, Cash-Balance Plan
Conversions: Evidence on Excise Taxes and Implicit Contracts, Journal of Risk and Insurance, 72: 321-352.
Two major differences between a traditional defined-benefit plan and a cash-balance plan
Meanwhile, cash-balance plan
sponsors only recently have received some guidance by the Treasury Department and IRS with respect to issues under the Pension Protection Act of 2006.
Rather than leave that cash 'just sitting there,' Hiller said, Zell is making use of it to fund the buyouts and -- in a program he announced Tuesday -- to make a one-time, cash contribution of 2% of employees' salaries to a new cash-balance plan
early this year.
Courts have disagreed over whether or not the cash-balance plan
discriminates against older workers and Congress has not moved to eliminate this uncertainty.
had discriminated against its older employees when it converted to a cash-balance plan
Although cash-balance plans
have been around since 1985, they went virtually unnoticed until IBM wanted to establish a cash-balance plan
in 1999 and some employees sued.
Under the plan - effective from 30 June 2003 - the airline will switch its non-pilot US employees to a cash-balance plan
, which states the retirement benefit as an account balance rather than a monthly payment.
In the mid-1980s, a newly designed pension plan, the cash-balance plan
, was introduced to businesses in the United States.
The issue is whether a company that converts to a cash-balance plan
discriminates against older workers who are close to retirement.
No Pension Guaranty cost and insurance cost and insurance Vesting Plan can require certain Employee contributions Schedule number of years service are immediately before vesting occurs vested; vesting in employer contributions Cash-Balance Plan
Beneficiary Significant accruals at younger ages Structure of No employee contributions; Plan employer makes regular contributions to a fund of assets for benefits accrued by individual employees Risk Level Employer bears investment risk Benefits Benefits are defined in terms of current lump-sum equal to "account" balance Accounts credited with interest tied to 30-year Treasury Form of benefit payment is a lump sum or annuity Portability Portable Insurance Pension Guaranty Corp.