ElderWeb

The Senate Special Committee on Aging heard testimony about cash balance pension plans. Some large companies are switching from traditional defined benefits pension plans to this new form of pension. The concern many older people have expressed is that traditional plans tend to benefit older workers, with a large part of the benefits earned in the final years before retirement. In cash balance plans, however, benefits are more evenly distributed over the lifetimes of the workers. Companies which are making these changes are doing so in order to create a benefit which will be more attractive to a younger workforce which makes frequent job changes, as opposed to the worker of the past who stayed in one job for most or all of their career. One of the problems which is arising as companies make these changes, is that older workers who are nearing retirement are finding that their benefits under the new plans are significantly lower than they would have been under the old plans. Since they are so near to retirement, they will have little opportunity to make up the difference before they retire.

The committee chairman, Senator Chuck Grassley, urged that the Senate proceed cautiously in legislating any changes in this area because of the complexity of pension law.