The Cash Balance Controversy: Navigating the Issues

Shanney-Saborsky, Regina
September 2000
Journal of Financial Planning;Sep2000, Vol. 13 Issue 9, p44
Academic Journal
This article explores the controversy over the implementation of the cash balance plan, a pension plan for employees in the U.S. Although first implemented over 15 years ago, cash balance plans currently occupy the center of a national storm of controversy as a result of recent popularity. The overriding question in the de[)ate is whether such retirement vehicles, a hybrid of a defined contribution and a defined benefit pension plan, are a legitimate technique to address the evolving retirement needs of corporate America or a budgetary ruse to reduce the cost of private pension programs at the expense of older long-time employees. From the perspective of the employer, the issue is one of design and competitiveness in the marketplace, using a retirement system that is less cumbersome than a defined benefit plan to implement and administer. From the perspective of plan design, the cash balance plan is treated as a defined benefit plan for regulatory purposes, but the benefit is defined in terms of a hypothetical account balance.


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