• No corporation has started a cash balance pension plan from scratch and for good reason. Only through a cash balance conversion can pension theft occur. New cash balance plans defined as a hybrid between defined benefit plans and defined compensation plans might be simple and easy to implement -- the complicated rules in the Treasury regulations that attempt to make them fit under the umbrella of defined benefit plans just don't cut it!
• Cash balance conversion plans exploit the pension benefits of older workers, an undeniable fact.
• Cash balance plans don't necessarily allow young, mobile employees to walk away with better benefits than the traditional plans -- minimum vesting is still 5 years!
• "Going to cash balance" is often no different than saying "we're going to cut 30% off your pension accruals."
• A pension fund could be qualified under the defined benefit rules as "fully funded" and still not contain enough cash to pay out all the cash balances if a corporation goes bankrupt -- the adequacy of funding is determined through complex actuarial calculations that are not easily verified or understood.
• Even cash balance pensions are not secure -- companies can continue to adjust the formulas downward with additional amendments in place of making fund contributions.
• Most corporations that convert to Cash Balance were NOT underfunded at the time of conversion. It's all about greed! Corporations say CB is easy to administer and understand. NOT TRUE.
• If you mangle the ERISA Law enough to make the Cash Balance shoe fit, we guarantee a language that NO ONE will understand or be able to implement -- even the dozens of complex examples in the proposed regulations don't clarify what the new rules are.
• A Cash Balance Plan is nothing more than a simple savings plan except the employee would receive greater protections at their local bank or credit union.
• The cash balances in cash balance plans are hypothetical amounts that are not guaranteed by the PBGC -- only the calculated age 65 annuities, that fluctuate based on prevailing interest rates, are protected.
• A Cash Balance Plan does NOT qualify as a Defined Benefit Plan in ERISA because it does NOT provide a defined benefit.
• The Federal Courts are examining Cash Balance Plans. It is an American right to have our day in court. Allow the Judicial Branch to do their due diligence and do NOT deny us justice!
• Under the proposed regulations, plans can qualify as cash balance plans without even offering lump sum distributions -- they simply have to change how benefits are 'expressed' in the plan documentation.

Cash Balance Plans, under defined benefit ERISA law, are wrong!

• Define a new ERISA category for Cash balance plans, rather than modifying defined benefit or defined contribution rules to accommodate them.
• Create a plan type that doesn't require annual services from an actuary; the level of funding can easily be tested by adding together the virtual cash balances.
• Require Federal Insurance against the virtual cash balances, not against calculated annuities.
• Shorten the vesting schedule.
• Allow employees to convert the balances to an IRA or defined contribution plan whenever the balance exceeds a critical amount, to avoid making the plan an "employee-mobility" incentive.
• ERISA Defined Balance Plans would be simple to understand and easy to administer.
• Few, if any, corporations have started a cash balance pension plan from scratch and for good reason -- they aren't any simpler to set up than traditional pensions -- currently, the consulting companies only focus on cash balance plans as conversion, money-saving vehicles.
• Because a cash balance plan is expressed as growing cash balance, rather than as an annuity, the protections and plan information need to be designed around that balance.
• A defined balance plan would be "fully funded" as long as the fund contains the sum of the hypothetical employee balances -- this would ensure the capability of paying out all the balances in the event of a plan termination or company bankruptcy.
• Additional research would need to be done to determine what non-discrimination rules would make sense for cash balances -- these do not need to become another executive compensation vehicle!
• The initial legislation for Defined Balance plans should be focused on designing a vehicle for companies who do not currently have defined benefit plans in place -- conversions from existing defined benefit plans would only be supported through a plan termination. A follow-on study should determine whether/how conversions should be supported without going through plan determinations.
• The Pension Protection Act of 2003 should be passed and used to regulate conversions from one defined benefit type to another, as long as both defined benefit plans fully comply with the defined benefits age discrimination rules.

If a Defined Contribution plan calls for an employer to contribute 5% of salary, they actually have to put that much into the plan. For a 30 year old employee with a Defined Contribution account balance of $10,000, the plan actually has $10,000 in it.

Because the CB has been crammed into the Defined Benefit plan, they get to follow the Defined Benefit rules for determining how much money the plan needs to be fully funded. They get to project the account balance forward to the 'normal retirement age' using one interest rate (say 4%) and then discount it back to today using a different rate (say 7%). The net is that for a 30 year old employee with a Cash Balance of $10,000 the plan would actually need only $3696 to say that it is fully funded. (For a 40 year old, $4912 is needed.)

So a 401K or a Defined Contribution plan is far superior to a Cash Balance plan because the cash is actually there. Cash Balance members are just company creditors.