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While employees are losing pension credit for years of service, executives are getting pension credit for years not even worked! John W. Snow, CSX CEO, will get credit for 44 years of service, but he only worked 25, according to the New York Times.

His pension credit will also be based on 250,000 shares of free stock.

Does something seem a little crooked somewhere?

Workers are being hoodwinked out of their promised pensions. Executives are drawing pensions for phantom years worked, while employees are being denied credit for actual years worked. That’s exactly what a cash balance pension conversion does for employees. It throws all of one’s years of service right out the window.

Mr. Snow was afraid that he would strain his back carrying all the money out of the office, so he waived $15 million in severance pay. He will still draw a pension of $2.47 million per year until death.

The irony gets even richer: Mr. Snow has been nominated for Treasury secretary. If confirmed he will be in the agency that is now trying to legalize cash balance plans! The Treasury will pay him $161,200 yearly for spending money.

Here’s a question: If the plans were not illegal to start with, why would they need to be legalized now?

The man with more pension money that he can carry may be plotting ways to ensure that you do not draw the pension that you have earned and have been promised for years. We could not make up a story like that if we tried!

To add even more irony: President Bush declared earlier this year, "What's fair on the top floor should be fair on the shop floor." But he has a history of telling the public what they want to hear, and then doing what corporations demand of him.

Mr. Snow’s total compensation climbed 69 percent over the last five years – to $10.1 million. How is the CSX stock doing? It is down 53 percent in five years.

There is even more pension irony: The CSX retirees have had their benefits cut back!

Employees must not allow the Treasury to make the despicable cash balance plans legal after the fact. The companies should have considered if they were legal before taking their workers retirement money.

Do not allow this scam to stand! All employees should protest to the Treasury and send copies to Congress. Just do it, or regret it forever.

Treasury Nominee to Get Big Pension

(12/15/02) - Attention baby boomers: Pay attention to the new pension rules proposed Tuesday by the U.S. Treasury Department. Your retirement security could depend on it. You'll need the help of Congress to ensure you don't lose out big time.

Traditional pension plans are predicated on the notion that employees will spend many years with one employer. The benefits are determined by the years spent with the company, the employee's age and his or her salary. Benefits accrue slowly at first, then accelerate as retirement approaches. By some estimates, the largest share of benefits is earned between ages 55 and 65.

Very good arguments can be made for a new type of pension plan called "cash balance plans." In these plans, an employer contributes a set percentage of an employee's salary into an account (typically 4 or 5 percent) and pays a set level of interest (the rate for Treasury bonds plus 1 percent, for example) on the growing principal each year. Contributions are flat over the employee's time with an employer, so more benefits are earned early. When an employee leaves a company, his accumulated benefit total (principal plus interest) goes with the employee.

Cash balance plans are much less expensive for companies and a better fit for today's work world, where the average time an employee stays with one company has declined to less than five years. Younger workers planning a career that will take them to several companies tend to favor the approach. The problem comes when companies convert their traditional pension plans into cash balance plans. Older employees (sometimes those as young as 40) find that they will get much reduced benefits. Hundreds of lawsuits and Equal Opportunity Employment Commission complaints have been filed alleging that the loss of benefits in conversion amounts to age discrimination.

The new rules seek to shield employers from such complaints by declaring that certain practices in the administration of cash balance plans and conversion from traditional plans do not constitute age discrimination.

One of those rules is pretty unobjectionable. Because benefits paid into cash balance plans late in a career have less time to earn interest before retirement, the total value of benefits earned each year declines the closer someone gets to age 65. If someone has been in a cash balance system for many years, that's just the tradeoff for larger benefits early on.

But the Treasury Department also ruled that an employer would not be guilty of age discrimination if, in converting to cash balance plans, older employees lose a big piece of their promised benefits, which many would. This is wrong; it amounts to changing the rules long after most of the game has been played. In some instances, older employees can go years after conversion without earning any additional benefits. Those years are called a "wear-away" period, and what is being worn away are the benefits promised under the old system.

Most companies converting to cash balance systems have taken pains to ensure that older workers do not suffer. But that's because the rules proposed Tuesday have been in the works for years, and companies didn't know which way the feds would go. Employers were worried that if they didn't take protective steps, they might find themselves open to lawsuits and government sanction. But if the new rules take effect (a 90-day comment period and a public hearing are required), employers will have a free hand to convert without treating older employees in a truly equitable manner.

Congress should step in to rewrite the rules and prevent companies from going back on their pension promises to older workers. Employers and their long-term employees struck a bargain: You work loyally for me and here's what I will provide in salary and benefits. Truth be told, that bargain usually meant that employees were undercompensated in their earliest years with a company and overcompensated in their very last years.

Converting pension systems to cash balance without making older employees whole means they were required to suffer the years of undercompensation but will be denied the balancing years of overcompensation.

Switch to cash-balance plans from traditional defined benefits can mean sharply reduced payments for many older workers.

(12/15/02) - A few years ago, when IBM Corp. was contemplating a major change in its pension program, the threat of losing millions of dollars in promised benefits galvanized workers. They organized, protested and persuaded the company to alter its plans.

Millions of other American workers who are covered by traditional pensions may face a similar battle in 2003. That's because the federal government last week issued a proposal that could end a three-year moratorium on the type of changes IBM had sought -- specifically, the conversion of traditional "defined benefit" pensions to so-called cash-balance plans.

Unlike a traditional pension, which guarantees a monthly payment that's based on the participant's age, years of service and final income at a company, cash-balance plans provide each participant with a personal account, similar to a 401(k).

The amount a cash-balance retirement plan eventually will pay in pension benefits hinges on how much the company contributes to the plan and the rate of return the company guarantees the money will earn over time.

For older workers, that can mean sharply reduced pension payments compared with traditional defined-benefit plans.

That is one of the big reasons many companies are interested in making the shift to cash-balance programs: Firms can save huge sums in pension funding.

Even though the number of traditional pension plans has shrunk over the last two decades, about 42 million Americans still were covered by the plans as of 1998, the last year for which data is available, according to the Employee Benefit Research Institute.

"This is something that mobilized IBM workers," said Jimmy Leas, an IBM employee in South Burlington, Vt., who was involved in the fight when IBM proposed converting to a cash-balance plan. "We picketed. We wrote letters. People stopped working, and they forced the company to make a change" in its proposal, he said. "American workers can put a stop to this."

The government's concern about the fairness of cash-balance plans led to the moratorium on conversions of traditional pensions starting in 1999.

But last week, the Treasury Department issued proposed rules addressing age-discrimination issues that arise with cash-balance plans. The rules, if finalized, could end the moratorium and open the floodgates to a wave of pension-plan conversions, experts said.

Conversion Backlog

"The whole world is not going to turn to cash balance, because different companies have different needs," said Eric Lofgren, global director of the benefits consulting group at Watson Wyatt Worldwide.

Even so, he said, "there is a backup of companies that wanted to go cash balance but didn't want to do it until things were more certain. We will see a big wave of conversions."

Experts note that cash-balance plans have advantages for some workers, particularly younger ones who are likely to switch jobs at least several times in their careers.

Younger workers are at a disadvantage with traditional pensions, because those plans are back-loaded -- that is, those who remain with the company the longest get the biggest pension payments.

Cash-balance plans, by contrast, usually promise all workers identical annual percentage rates of growth in pension-account assets, regardless of age. That can allow younger workers to accrue benefits faster than under traditional plans.

Moreover, cash-balance plans are portable. Though a vested participant eventually will get his or her earned pension benefits no matter whether the pension is traditional or a cash-balance plan, the structure of the latter allows that transfer to occur at the termination of employment rather than at retirement. (The money can be paid out in a lump sum, and rolled over into an IRA, for example.)

But for older workers, any new conversions of traditional plans to cash-balance plans could be costly, despite the government's proposals to address the fairness issue, experts said.

The leveling out of pension accruals under cash-balance plans hurts longtime workers who have relied on the traditional pension system that rewards seniority with richer pensions. When that promise is taken away at 35, the participant probably has time to save enough to make up the difference. But when it's taken away at 50 or 55, it's another story, experts said.

"The people who get caught in the middle are often getting a bad deal," said David Certner, director of federal affairs for the American Assn. of Retired Persons in Washington.

Complex Formula

Moreover, the complexity of the pension-conversion formula can open the door to abuses, and the government's proposed rule change does little to eliminate that possibility, Certner said.

Federal law bars companies from taking away pension benefits that already have been earned by an employee.

However, figuring out the exact amount that each employee is due from an old pension plan requires a complicated calculation whereby the company determines the monthly retirement annuity that the participant already has earned (based on age, service and salary); calculates the lump sum required to generate that monthly annuity at age 65; and then applies a "discount" rate to determine the present value of those future benefits.

The discount rate assumption in the calculation is key. The higher the assumed rate of the money's growth, the smaller the present value of the benefits.

Pension law currently says companies should use the 30-year Treasury bond yield, which is roughly 5% today, as the discount rate, to be conservative.

But the proposed rule allows companies to calculate the present value of future benefits based on any "reasonable" interest rate assumption. Using even a slightly higher rate can have a dramatic effect on the value ascribed to employees' already vested benefits in pension plan conversions.

Consider a 50-year-old woman entitled to a $2,000 monthly benefit at age 65. Using a 5% discount rate, this woman would start the conversion process with $165,033 in already-earned benefits.

But if the assumed discount rate was 7%, the present value of her benefit would be roughly 25% less -- $122,442.

Additionally, the proposed rule allows for something called "wearaway." In a nutshell, this means that an older employee could go several years without earning additional pension benefits.

A quick explanation of how wearaway occurs: When a cash-balance plan is created, each participant would have two separate accounts. One would equal the present value of the vested pension benefits in the old plan; the other would be the participant's opening balance in the new cash-balance plan.

If an employee quits, he or she would be entitled to whichever account had the higher balance. However, for an employee who stays with the company, the present value of the vested pension would stay constant while the cash-balance account would continue to accumulate company contributions.

Assume the company is contributing $5,000 a year to the employee's new cash-balance plan. If the present value of the old pension is $200,000 and the opening sum in the cash-balance account is $100,000, it would take years for the cash-balance account to exceed the old pension's value, even if the credited rate of return is substantial.

The government said it doesn't consider a period of wearaway to be discriminatory, assuming the present value of the old pension plan was figured fairly.

"What happens to a mid-career worker, who has put a number of years into a defined-benefit plan and then has the formula changed?" Certner asked. "We were disappointed that the Treasury didn't do more to protect employees."

Because pension issues can be so complex, workers at companies that are contemplating a shift to cash-balance plans often don't understand what they've lost until long after it's been taken away, said Douglas Sprong, a St. Louis attorney representing employees who are suing over cash-balance conversions.

"IBM had the smartest workforce that the world has ever known, so they figured it out," Sprong said. But in the past, companies have presented cash-balance conversions with documents emphasizing the portability of the plans, without detailed discussion of how much some workers could lose in the end.

Pension advocates had hoped that the Treasury would require companies to use the currently low statutory discount rate when calculating the present value of pension benefits in a conversion.

They also wanted longtime workers to be eligible for some type of grandfathering -- either the ability to stick with the old plan through retirement, or be given another assurance that their benefits wouldn't be drastically slashed when they were on the doorstep of retirement.

Neither was included in the proposal, though it's possible individual companies could choose to grandfather older workers or provide other credit for service already earned.

IBM allowed mid-career workers with a certain level of seniority to choose which pension plan they preferred.

For pension advocates, the battle is just beginning: A group of individuals and organizations that fought cash-balance plans in the past met Friday to plot their next move, said Karen Ferguson, director of the Pension Rights Center in Washington and a longtime critic of cash-balance plans.

They're hoping to fuel a large public response to the possible lifting of the moratorium on plan conversions.

The proposed rules are subject to a 90-day comment period and public hearings before they're made final.

"Employees should raise this issue in their workplace, with their members of Congress and with President Bush," said Rep. George Miller (D-Calif.). "If they do not, the issue will fade and with it the annual value of their pension."

"We are at a time when there is incredible insecurity -- when people are tremendously worried about their income in retirement," Ferguson said. "We think there is going to be a tremendous outpouring of outrage from affected employees."

Individuals can send comments to: Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044.

(12/16/02) - The controversy over cash-balance pension plans has resurfaced in the wake of rules proposed by the Bush administration that would make it easier for companies to offer the plans.

The rules say that if an employer is converting to a cash-balance plan, it must do it in a way that's fair to all workers.

In a traditional pension plan, workers' pensions are determined by a formula in which years of service are multiplied by average pay in the worker's last few years of employment, and then by a percentage, typically 1 percent to 2 percent.

In such an arrangement, workers earn benefits slowly at first, but the curve gets steeper as their tenure grows longer.

Thus, those who work many years at a company can earn substantial pensions, while those who work fewer years earn disproportionately less.

In a cash-balance plan, the employer sets up a hypothetical account for each worker and credits a percentage of pay to it every year.

Under that formula, benefits accrue in a more linear pattern, so short-tenured workers end up with a better pension than they would under a traditional plan.

Cash-balance plans tend to favor younger employees because they have more time over which their money can compound.

More employers have been converting to cash-balance plans because they cost less to administer than traditional pensions and because they want to attract today's mobile workforce.

"It's definitely a significant trend," says Kathleen FitzPatrick, senior consultant and pension actuary at Towers Perrin in Dallas, a management consulting firm.

One of the attractions of cash-balance plans is that workers can take what they have in their accounts when they leave their jobs. That makes the plans ideal for younger workers, who tend to be more mobile during their careers than older workers.

Cash balance plans have been controversial, with many employee groups saying they discriminate against older workers.

The new rules, proposed by the Treasury Department, are expected to end a moratorium on Internal Revenue Service approval of cash-balance plans that began three years ago. The rules say that as long as employers contribute the same percentage of pay to the new plans for older workers as they do for younger workers, they will not be considered discriminatory.

The rules will be out for comment for 90 days, after which there will be a public hearing. Treasury officials say the final rules are expected to become effective sometime next year.

Accelerated changes?

Pension experts say the rules will accelerate the use of cash-balance plans by companies.

"Employers now have better guidance about how they can establish a cash-balance plan or how they can convert an existing defined-benefit plan into a cash-balance plan," says Michelle Hoesly, a pension specialist at the Million Dollar Round Table in Chicago, an international association of insurance and financial services professionals. "Having these guidelines will make it easier for them to establish them."

Experts also say the rules would encourage companies that don't have pensions to consider cash-balance plans.

The number of traditional benefit plans has been falling, declining from 175,000 in 1983 to fewer than 60,000 by 1997, says James A. Klein, president of the American Benefits Council in Washington, D.C., which represents employers.

"For several years, critics have insisted that cash-balance plans are age-discriminatory, despite strong evidence to the contrary," he says. "The administration's affirmation of the legitimacy of these plans should put to rest these unfounded criticisms, while giving employers and employees desired flexibility in their retirement plans."

Employee-advocacy groups say cash-balance plans discriminate against older workers because it can take years for the benefits from cash-balance plans to catch up to the benefits they would have received under a traditional pension plan.

"That's your financial planning down the tubes," says Lynda French, a former IBM employee and now a board member of the IBM Employee Benefits Action Coalition. "You can't regroup at age 45, 50, and make up the difference."

Possible choice

Some companies give workers a choice of remaining in the traditional pension or joining the cash-balance plan.

"If you have a choice to make on the conversion, determine which factors might affect making a good choice," Ms. Hoesly says. "For example, at what age do you plan to retire? When do you plan to begin drawing benefits? How is your health?"

If you don't have a choice of whether to convert to a cash-balance plan, compare your new expected benefit at retirement to what you think you will need.

"If you have an expected shortfall, taking into account all your retirement savings and Social Security, then increase your personal savings through your 401(k) or IRAs," Ms. Hoesly says.

Employee-advocacy groups say they will fight the government's proposed rules.

"This is going to be a big issue," says Karen Friedman, director of policy strategies at the Pension Rights Center in Washington, D.C. "It's an issue of betrayal. It would mean that employers would be free to implement cash-balance plans in a way that continues to hurt older workers."

(12/15/02) - At least 23 million Americans work for companies that offer traditional pension plans — the kind that provide a fixed monthly income based on length of service. For many of them, the pension regulations proposed last week by the Bush administration pose a threat to their future retirement. The new rules would make it easier for cost-conscious companies to switch to another type of pension plan that would shrink their pension liabilities, reducing some employees' benefits.

"The switch to a cash-balance plan is tantamount to a pension pay cut for older workers unless they get adequate transition protection," said J. Mark Iwry, former benefits tax counsel at the Treasury Department during the Clinton administration.

Nothing about pension accounting is easy or straightforward, and the prospect of curling up with a thick pension plan document laden with charts is, well, repellent. But the amounts at stake are so vast that it may be well worth the trouble of parsing the plan, and learning your options, if you are among the people notified in the coming months that your employer is changing its pension.

The proposed regulations do not affect everyone. They do not apply to employees whose companies offer only 401(k) plans, sometimes called defined-contribution plans. In a 401(k), employees contribute from their pay; employers often match a percentage of that contribution.

The regulations refer only to traditional pensions, known as defined-benefit plans, which have a contractual obligation to pay workers a set monthly stipend from retirement until death.

Nor will the proposed regulations affect retirees who are already receiving pension checks; pension benefits cannot be reduced once they have been earned. And younger employees have little to fear from the proposed regulations. Most at risk are middle-aged and older workers who have been at their jobs for many years. In traditional pensions, workers build the biggest part of their benefits near the end of their careers.

But even for employees who are in their 40's or older, the proposed pension rules do not necessarily mean a loss of retirement benefits. In recent years, some companies fearful of age-discrimination suits have changed their pension plans in relatively gentle ways, offering provisions that cushion older workers from the harshest effects.

"These may not have made employees whole, but they helped," said David Certner, director of federal affairs at AARP.

The tricky part for employees will be to cut through the professional jargon and euphemisms that companies often use to describe pension conversions, and to figure out whether their employer's conversion is one of the gentler ones. The new regulations offer little practical help with that.

AT issue are conversions of defined-benefit plans to cash-balance plans. These are hybrids that are funded by the company and insured by the government, the way defined-benefit plans are, but that build a balance that can be rolled over into another tax-deferred account when employees change jobs, in the style of defined-contribution plans like 401(k)'s. In the cash-balance plan, employers contribute to each account based on a set percentage of pay for all participants, and each employee's holdings usually accrue the same rate of interest.

Hundreds of companies made conversions to these plans in relative obscurity in the 1980's and 1990's — until 1999, when older workers at I.B.M. realized midway through a conversion that the company was stripping them of anticipated retirement benefits often worth hundreds of thousands of dollars each. The issue remains tied up in court.

The I.B.M. workers rallied. Congressional hearings and age-discrimination suits followed. Amid the outcry, the Internal Revenue Service, which as part of the Treasury Department regulates corporate pension plans, stopped approving conversions while it studied the legal issues. The moratorium did not stop all companies from converting pensions, but the uncertain legal environment made them move much more cautiously, and to sometimes offer sweeteners.

First, the proposed regulations make clear the position of the Treasury Department that cash-balance pension conversions are not inherently discriminatory by age. And because there are several ways to design a pension conversion, the regulations lay out conditions that employers must meet to make their changes legally bulletproof.

"Many would say that the proposed regulation has set the bar too low," Mr. Iwry said. However, he added, the regulations might reflect, among other things, possible concern within the Treasury Department about whether it has enough authority under current law to provide additional protection for older workers during conversions.

"The regulation can be viewed as a first step," he said. "Congress could do more to give additional protection to older workers without stopping cash-balance plans."

It will still be very difficult for employees to figure out whether their company's plan clears the bar. Some of the most important elements of a pension conversion also pose the most vexing accounting issues.

A good example is the "opening account balance" that a company may assign to each older employee during the conversion, to credit him for the traditional pension benefits he has built up under the old plan. (Some plans, however, may not assign opening balances.) To calculate the opening balance, companies transform a stream of future monthly payments into a single lump-sum present value. Students of finance know that all the future monthly payments cannot just be totaled; they must be telescoped forward in time, using an interest rate.

But which rate? The company, or its consultant, decides. And a company eager to save money will want to choose a higher rate, because doing so will make each employee's opening account balance smaller. (In pension accounting, as in other financial transactions, the higher the interest rate, the lower the present value.)

The proposed regulations offer considerable latitude in selecting an interest rate. "For the purpose of determining your initial cash balance, these regulations just say to use `a reasonable rate,' " said Norman Stein, a pension expert and visiting professor at the University of Maine Law School. "There's going to be a lot of discussion of what's `reasonable,' I can guarantee you."

Mr. Stein noted that the Internal Revenue Code previously imposed a stricter standard, requiring companies to use the 30-year Treasury bond rate in calculations that compare lump sums with streams of payments over time. Unless Treasury officials are persuaded in the coming 90-day comment period to amend this aspect of the regulations, he said, "employees are going to have to be vigilant in looking at their opening account balance and how it was determined."

Unless you are a bond trader or an actuary, you probably cannot do this on your own. Employees who have already traveled this road say it may be worth consulting an actuary or specialized accountant.

"We've had employees who have had to purchase time from an actuary, which is about $500 an hour," said Kathi Cooper, 52, an I.B.M. accountant and the lead plaintiff in a pending suit against that company's pension conversion. She calculated that I.B.M.'s pension changes would cost her $400,000.

"It's easy for people like me to figure this out, because I graduated magna cum laude, University of Texas, in accounting," Ms. Cooper added. "If the Treasury really wants to help American employees today, they've got to make regulations that will force employers to disclose this stuff in eighth-grade language. There are millions and millions of employees out there that don't have a clue what's going to happen to them."

Ms. Cooper also has advice for employees who cannot afford to hire an actuary: go to the Internet and start learning about how pension conversions work, and how your company's conversion measures up against industry norms.

A good starting place for employees is the Web site cashpensions.com, which was created by I.B.M. employees and explains certain technical issues. It also offers sample letters to regulators and elected representatives, asking for more protections for workers, and provides news on pending pension litigation and links to other sites with benefits calculators.

Some employees of other large companies that have converted pensions have started their own Web sites, some of which contain bulletin boards where colleagues and workers from other companies can post pension questions. Ms. Cooper helped start ibmpension@yahoogroups.com.

What if you don't like what you find?

Speak up, Mr. Iwry advised. "Tell the company your concerns about how the conversion would affect you, and ask for information about the potential impact," he said. The company probably will not abandon the conversion, he said, but it may improve the terms for longer-tenure employees. Companies want the savings and flexibility that conversions offer, but do not want to make employees bitter, draw adverse publicity or set a unionization drive in motion.

"There's a lot you can do," Ms. Cooper said, adding that many companies have procedures for employees who want to get the appropriate executive's ear.

"Try the open door, or the executive round table, where you can come forward and talk to the executive," she said. "Don't yell at the executive. Talk to the executive. And say, `If you're going to do this, would you consider grandfathering anyone over 50?' Be proactive."

"When I first filed suit against I.B.M., of course I was afraid," she added. "But I was more afraid of retiring and eating cat food. That was my impetus."

Times Kathi Cooper, who works out of her home in Bethalto, Ill., is the lead plaintiff in a lawsuit challenging I.B.M.'s pension conversion.

(12/15/02) - For many years, Harold Morch, a manager at North Shore University hospital in Manhasset, nursed a dream of retiring at age 62 to a quiet farm in northern Pennsylvania. But in 1999, the hospital and most others in the North Shore-Long Island Jewish Health System shifted from a traditional pension plan to a controversial new type of plan that tends to reduce the monthly benefits that older workers had expected.

Now Morch is 62, and still working. He says he can't afford to leave because the new "cash balance" plan would provide him with nearly 29 percent less than the traditional pension plan, or $947.26 a month compared with $1,330.89 under the old plan. If he waits until 65 to retire, Morch, who began working at the hospital in 1977, will receive nearly 14 percent less than he would have under the earlier plan at the same age, according to documents Morch says he obtained from North Shore's benefits office.

What can you do to protect your promised retirement nest egg if your employer is thinking of converting your traditional pension to a cash balance plan, and you are one of the older workers who stands to lose money? Morch has turned to the courts. He and some co-workers have seen a lawyer, and plan to file a class-action suit charging North Shore with age discrimination.

Worker advocates also urge people who think they will be shortchanged by cash balance plans to organize and make noise to their companies, shareholders and the public. They say such tactics have convinced many employers to give extra help to older workers, or to give them a choice of plans.

But they and a number of financial advisers urge workers to be extremely cautious about adopting another alternative - taking one's built-up pension and leaving a company prior to conversion. "It's a tough decision," said Ron Roge, a Bohemia-based financial adviser. "There often are substantial penalties for leaving early. There are so many variables that situation really has to be analyzed."

Gary Schatzsky, a planner with offices in Albany and Manhattan, said that for workers older than 50, people also "aren't knocking down your door" with lucrative new job offers.

Cash balance plans are expected to become even more widespread under a new set of proposed rules issued by the Bush administration last week that would make it harder for them to be challenged for age discrimination. Of the 945 largest U.S. employers, 22 percent now offer the new plans, up from 3percent in 1990, according to Hewitt Associates.

Such a switch can help employers save money on pension costs, improving their bottom line. But the new plans can cost workers older than 40 up to one-half of their expected pensions when the conversion is made, according to advocates for workers and employers. That's because they use a formula allowing workers to build up retirement benefits evenly throughout their careers, rather than basing benefit amounts heavily on end-of-career earnings.

A spokesman for the North Shore health system, Terry Lynam, said that although he isn't familiar with Morch's situation, the system provided "transition credits" to older employees "with the intention of making them whole at 65" compared to what they would have received under the old retirement plan. North Shore's cash balance plan "costs more than the old one" and is intended to attract and retain younger workers while "trying not to adversely impact" older ones, Lynam said.

At the moment, there's been no definitive, precedent-setting decision in any worker lawsuit against the new plans, according to David Certner, director of federal affairs for the AARP. One age discrimination suit in Indiana was settled. In others, courts have rejected arguments that cash balance plans violate prohibitions against age discrimination in employment. But judges are still considering arguments that they violate anti-discrimination provisions of the federal law governing private pension plans.

So far, workers have been more successful when they've organized to publicly protest the threatened loss of pension benefits. IBM, for instance, allowed 35,000 additional employees - people older than 40 with 10 years of service - to stay in the old plan, along with other older workers whose pensions were grandfathered, after being mightily embarrassed by what amounted to a worker uprising. At one point, when then-chief executive Louis Gerstner was visiting a Houston IBM facility, employees flew a banner over the plant that said, "Hey Lou, thou shall not steal."

Janice Winston, a Philadelphia- based manager for Verizon, helped organize a coalition of workers at that company after it decided to change its traditional pension plan to cash balance a few years ago. She went to Denver twice to speak to annual meetings of Verizon shareholders, and visited Capitol Hill to talk to senators and congressmen. The result: Verizon decided to give people who left the company whichever retirement benefit was greater.

Winston retired early this month with a traditional pension benefit worth $400,000, compared with the $181,000 she would have received under the new cash balance plan. "I made a difference," she said, "especially for myself."

Now that the Bush administration is attempting to legalize cash balance pension monstrosities, you can bet that the corporate shills will be coming out of the woodwork to support it. The distortions, half-truths, and outright lies will be non-stop.

A case in point: The Reuters' December 10, cash balance article by Jonathan Nicholson. He starts off by stating that the proposals may save companies money.

MAY? If Bush is allowed to whitewash the age discrimination problems of cash balance plans, corporations will rake in millions of dollars. They will not save anything. They will take earned pension money from employees!

A Treasury official said the proposal would “clear up confusion.” That is true. If murder is made legal, then all confusion is lifted. There is nothing to debate; all murders are then innocent of committing any crime!

The government knows that they have a hot potato on their hands. That is why the age discrimination charges have been tied up in the Equal Employment Opportunity Commission for over three years. Corporations have been passing out money for years in an attempt to legalize cash balance conversions. The politicians at the trough want to play ball. If they can just somehow cover up the age discrimination aspects of these plans, everyone will be happy - everyone except the employees that is. They may lose 50 percent of their promised pensions that they have earned through years of labor.

The article stated that cash balance plans can save corporations substantial money on pension costs. Again, they are not saving anything. They are taking pension money that has been earned by employees. Cash balance plans were devised to circumvent ERISA laws and wipe out pension funds. They have been doing just that. Now the corporations are afraid that they will be busted in court for age discrimination. That is exactly the reason for the big push to legalize the plans, after the fact.

The cash balance conversions were sold to corporations as a way to take the employee’s money out of the pension plans. Any other reasons given are strictly smoke screens.

There was some whining about underfunded pension plans. There is no mystery why so many plans are underfunded. Many corporation have not contributed a dime to them in years. They depended on the stock market to give them a free ride. That and reducing liabilities through the age discriminatory effects of cash balance plans. Of course, the stock market crash did not help any.

Everyone in Congress is not fooled by the corporate smoke. Rep. George Miller stated "Workers who are playing by the rules and raising families and looking forward to a secure retirement are having the rug pulled out from under them by the Bush administration."

The American Benefits Council was said to have “applauded the move.” Small wonder. The ABC is a lobbying group for big corporations. If they could get their hands on every dime in every pension plan they would indeed be happy!

ABC President James Klein stated that there is strong evidence that cash balance plans are not age discriminatory. Well, just look at the source of that bit of information. This is the guy who is paid by corporations to wipe out your pension!

Mr. Klein went on to state that criticisms of the plans are unfounded and touted their “flexibility.” Cash balance plans are indeed flexible. They allow corporations to twist, turn, distort, and weasel out of making good on their deferred compensation promises. He feels the plans are sound because the Bush administration likes them. G. W. Bush is going to like whatever the corporations tell him to like. He was purchased by the big corporations years ago, just as Mr. Klein was.

The fox has once again affirmed the soundness of the hen house.

You can count on more such propaganda during the coming months.

This is not solely a spectator sport. If you have a pension, you stand to lose money. You have the right to send comments regarding the cash balance proposal to the Treasury Department. All employees of all corporations are encouraged to do just that.

(12/12/02) - Most people assume that when they retire, they'll get a monthly pension that, along with Social Security and other investments, will allow them to live out their golden years in comfort.

More than most don't even try to figure out what they'll have for retirement until they celebrate their 55th or even 60th birthday.

But inattention to something so vitally important is a mistake, especially now that the Bush administration announced this week it is planning to make it easier for companies to alter those old pension plans to "cash-balance" plans.

Typical cash-balance plans set aside 3 to 5 percent of an employee's salary and pay a rate of interest equal to a 30-year Treasury bill or one-year note.

The money in the account grows like a 401(k) plan, and once the worker has been at the company for five years, the money is the employee's.

Most traditional plans, in contrast, are administered by the company and upon retirement pay the worker a fixed amount each month for the rest of his life.

But perhaps the most significant difference between a traditional pension plan and a cash-balance plan is that the value of a traditional plan doesn't really begin to swell until the worker hits 50.

So if you work for a company that's converting from an old pension to this new-style pension and you are about 45, you'll be losing a lot of potential retirement money.

Confused yet? Just keep reminding yourself that it could be the difference between life on a cruise ship or life in a trailer park.

During the last decade, cash-balance plans became hot as companies, eager to cut pension costs as their work forces aged, switched over.

According to an estimate from the Labor Department's inspector general, between 300 and 700 companies covering more than 8 million employees have converted to cash-balance plans.

And many times, employees don't even realize what they'll lose.

Lynda French had to hire an actuary to find out how she'd fare when IBM converted to a cash-balance plan three years ago and discovered she'd lose 45 percent of her pension if she stayed with IBM. French, who was a software analyst, was just shy of 55.

It's too late in life -- especially now with the problems of 401(k) accounts -- to recover financially, said French, who is now the Webmaster of cashpensions.org, based in Austin.

French was only one of many angry IBM employees who protested the conversion.

When U.S. Rep. Bernie Sanders, I-Vt., held a town meeting to discuss employees' concerns about the new plan, nearly 1,000 IBM workers showed up.

A few months after the workers began complaining and Sanders got involved, IBM relaxed its rules and allowed an additional 35,000 workers 40 and older to choose the option to stay on the previous defined-benefit pension plan.

In the midst of the controversy, the Internal Revenue Service stopped certifying cash-balance plans as qualified retirement plans.

But the Bush administration's proposal, which eases the age discrimination issue, has rekindled interest in the plans.

Unfortunately, our eyes glaze over when we hear the words "defined-benefit pension plan."

They're complicated -- benefits are determined by a mathematical formula that aren't laid out in a neat quarterly statement.

And lots of employees don't even realize they're eligible for handsome retirement checks because companies haven't done a good job of explaining the benefit.

My own husband, who qualified for membership in AARP during the last century and should be thinking about retirement issues, was even surprised when I mentioned his pension.

"I have a pension?" he asked.

Luckily, he has a wife whose idea of a good time is calculating how much we need for retirement. But I'm afraid that the spouse's attitude is typical.

In 1983, 175,000 companies had traditional pension plans, according to James Klein, president of American Benefits Council in Washington, D.C., an advocacy group for Fortune 500 companies. In 1997, the most recent data available, fewer than 60,000 companies had them.

Against that backdrop, the one bright light is that cash-balance plans exist at all, Klein said.

Employers are still committing themselves to providing a pension benefit -- and one that better fits today's more mobile work force. Over the years, the money will build up nicely.

It's absolutely true that in some situations, older workers have received less money, he said. But many companies allow their older employees to choose between plans.

One that allows a choice is St. Luke's Episcopal Health System. All the employees who were vested in the old plan at the time of conversion get to choose the plan with the most money when they retire, said Irene Helsinger, senior vice president and chief human resource officer.

The new plan didn't save any money, but employees can now see the real value they're getting when they receive their cash-balance statements, she said.

So check out your pension carefully. And make friends with an actuary -- you never know when you'll need one.