Cash Balance Pension Plan Conversions

61 Pages Posted: 3 Jan 2001

See all articles by Jonathan Barry Forman

Jonathan Barry Forman

University of Oklahoma College of Law

Amy Nixon

Williams Companies, Inc.

Abstract

One of the hottest issues in the pension world today involves companies replacing their traditional pension plans with cash balance plans. A cash balance plan is a pension plan that looks like a bank account or a 401(k) plan. The problem is that replacing a traditional pension plan with a cash balance plan will reduce the expected pension benefits of older workers. As a result, older workers can see their future pensions cut - in some cases deeply. Not surprisingly, many of these older workers have felt cheated, and they have filed a number of lawsuits to stop these so-called cash balance conversions. This Article considers the various legal issues that are raised by cash balance conversions. In particular, this Article considers whether these conversions violate the Employee Retirement Income Security Act (ERISA) or the Age Discrimination in Employment Act (ADEA). The Article concludes that the typical cash balance conversion will not violate these laws. As long as the conversion protects the already-accrued benefits of older workers, ERISA will be satisfied. And, as long as post-conversion benefit allocations are nondiscriminatory, ADEA should be satisfied.

Suggested Citation

Forman, Jonathan Barry and Nixon, Amy, Cash Balance Pension Plan Conversions. Available at SSRN: https://ssrn.com/abstract=255159 or http://dx.doi.org/10.2139/ssrn.255159

Jonathan Barry Forman (Contact Author)

University of Oklahoma College of Law ( email )

300 Timberdell Road
Norman, OK 73019
United States
405-325-4779 (Phone)
405-325-0389 (Fax)

HOME PAGE: http://www.law.ou.edu/directory/jonathan-forman

Amy Nixon

Williams Companies, Inc. ( email )

One Williams Center
Tulsa, OK 74172
United States

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