[Congressional Record Volume 145, Number 94 (Tuesday, June 29, 1999)]
[Senate]
[Pages S7820-S7824]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN:
  S. 1300. A bill to amend the Internal Revenue Code of 1986 and the 
Employee Retirement Income Security Act of 1974 to prevent the wearing 
away of an employee's accrued benefit under a defined plan by the 
adoption of a plan amendment reducing future accruals under the plan; 
to the Committee on Finance.


              older workers pension protection act of 1999

  Mr. HARKIN. Mr. President, older workers across America have been 
paying into pension plans throughout their working years, anticipating 
the secure retirement which is their due. And now, as more Americans 
than ever before in history approach retirement, we are seeing a 
disturbing trend by employers to cut their pension benefits.
  Many companies are changing to so-called ``cash balance'' plans which 
often saves them millions of dollars in pension costs each year by 
taking a substantial cut out of employee pensions. This practice allows 
employers to unfairly profit at the expense of retirees.
  Employees generally receive three types of benefits for working: 
direct wages, health benefits and pensions.

[[Page S7822]]

Two of those are long-term benefits which usually grow in value as 
workers become older. Pensions are paid entirely after a worker leaves. 
Reducing an employee's pension years after it is earned should be no 
more legal than denying a worker wages after work has been done.
  In fact, our laws do prohibit employers from directly reducing an 
employee's pension accrued benefit. Unfortunately, however, these 
protections are being sidestepped and workers' pensions are being 
indirectly reduced through the creation of cash balance pension plans.
  Under traditional defined benefit plans, a worker's pension is based 
on their length of employment and their average pay during their last 
years of service. Their pension is based on a preset formula using 
those key factors rather than the amount in their pension account. 
Under the typical cash balance plan, a worker's pension is based on the 
sum placed in the employee's account. That sum is based on their wages 
or salary year to year.
  When a worker shifts from a traditional to a cash balance plan, the 
employer calculates the value of the benefits they have accrued under 
the old plan. The result for many older workers who have accrued 
significant sums in their pension that are higher than it would have 
been under the new cash balance plan. In that case, under many of these 
cash balance plans the employer simply stops contributing to the value 
of their pension till the value reaches the level provided for under 
the new plan. And this can go on for significant periods--five years 
and sometimes more. Pension experts call this ``wear away'' others call 
it a ``plateau.''
  This is not right. It is not fair. In fact, I believe it is a type of 
age discrimination. After all, a new employee, usually younger, would 
effectively be receiving greater pay for the same work: money put into 
their pension plan. And, there are some who believe this practice 
violates the spirit and perhaps the letter of existing law in that 
regard.
  What does this mean to real people?
  Two Chase Manhattan banking executives hired an actuary to calculate 
their future pensions after Chase Manhattan's predecessor, Chemical 
Bank, converted to a cash balance plan. The actuary estimated their 
future pensions had fallen 45 percent. John Healy, one of the 
executives, says ``I would have had to work about ten more years before 
I broke even.''

  Ispat Inland, Inc, an East Chicago steel company, converted to a cash 
balance plan January 1. Paul Schroeder, a 44-year-old engineer who has 
worked for Ispat for 19 years, calculated it could take him as long as 
13 years to acquire additional benefits.
  Why are companies changing to these cash balance plans? They have 
lots of stated reasons: ease of administration, certainty in how much 
is needed to pay for the pension plan and that the plan is beneficial 
to those workers who move from company to company (with similar pension 
plans). But, the big reason is the companies save millions of dollars. 
They save it because the pensions provided for with almost all cash 
balance plans are, on average far less generous, and they immediately 
reduce their need to pay anything into a pension plan at all for a 
while, sometimes for years, because of this wear away or plateau 
feature.
  At one conference of consulting actuaries, Joseph M. Edmonds told 
companies:

     . . . it is easy to install a cash balance plan in place of a 
     traditional defined benefit plan and cover up cutbacks in 
     future benefit accruals. For example, you might change from a 
     final average pay formula to a career average pay formula. 
     The employee is very excited about this because he now has an 
     annual account balance instead of an obscure future monthly 
     benefit. The employee does not realize the implications of 
     the loss of future benefits in the final pay plan. Another 
     example of a reduction in future accruals could be in the 
     elimination of early retirement subsidies.

  Because traditional pension plans become significantly more valuable 
in the last years before retirement, the switch to cash balance plans 
also can reduce older workers' incentive to stay until they reach their 
normal retirement age.
  I support Senator Moynihan's legislation that requires that 
individuals receive clear individualized notice of what a conversion to 
a cash balance plan would do to their specific pension. There is no 
question that shining the light on this dark practice can reduce the 
chance that it will occur. I certainly agree with his view that those 
notices should not be generalized where obfuscation is easier and 
employees will pay less attention to the result.
  I also believe that more must be done. For that reason, I am 
introducing the Older Workers Pension Protection Act of 1999 which 
prohibits the practice of ``wear away.'' It provides that a company 
cannot discriminate against longtime workers by not putting aside money 
into their pension account without any consideration for the long term 
payments made to the employee's pension for earlier work performed. 
Under my bill, there would be no wear away, no plateau in which a 
worker would be receiving no increases in pension benefits while 
working when other employees received benefits. The new payments would 
have to at least equal the payments made under the revised pension plan 
without any regard to how much a worker had accrued in pension benefits 
under the old plan.
  Some suggest that if such a requirement were put in place, companies 
could and would opt out of providing any pension at all. I do not 
believe that would happen. Companies with defined benefit plans do not 
have them because they are required to do so. They do it because of 
negotiated contracts or because the company has decided that it is an 
important part of the benefits for employees to acquire and maintain a 
productive workforce. Many suggest that the simple disclosure alone 
might prevent a reduction in payment benefits.
  Much is made about the gains of younger workers when companies switch 
to cash benefit plans. There is greater portability. But, none of the 
experts I've consulted believes that is a dominant motivation of the 
companies for proposing these changes in pension law. And, the changes 
I am proposing would not reduce the benefits for younger workers.
  I urge my colleagues to take a fresh look at the spirit of the 
current law that prevents a reduction in accrued pension benefits. I 
believe it is only fair to extend that law with its current spirit by 
simply requiring that any company which changes to a cash balance or 
similar pension plan treats all workers fairly and not penalize older 
employees whose hard work has earned them benefits under the earlier 
pension plan.
  Mr. President, Ellen Schultz at the Wall Street Journal has done an 
excellent series of articles on this issue. I ask unanimous consent 
that a copy of those articles appear in the Record at this point. I am 
also including the text of a piece of this same subject done by NPR. If 
my colleagues have not seen these articles I commend them to their 
attention. I believe that once you've read them, you'll agree with me 
that we must take action to protect the pensions of older workers.

              [From the Wall Street Journal, Dec. 4, 1998]

      Employers Win Big With a Pension Shift; Employees Often Lose

             (By Ellen E. Schultz and Elizabeth MacDonald)

       Largely out of sight, an ingenious change in the way big 
     companies structure their pension plans is saving them 
     millions of dollars, with barely a peep of resistance. Unless 
     they happen to have a Jim Bruggeman on their staff.
       Sifting through his bills and junk mail one day last year, 
     Mr. Bruggeman found the sort of notice most people look at 
     but don't spend a lot of time on: His company was making some 
     pension-plan changes.
       The company, Central & South West Corp., was replacing its 
     traditional plan with a new variety it said was easier to 
     understand and better for today's more-mobile work force. A 
     brochure sent to workers stressed that ``the changes being 
     made are good for both you and the company.''
       Alone among Central & South West's 7,000 employees, Mr. 
     Bruggeman, a 49-year-old engineer in the Dallas utility's 
     Tulsa, Okla., office, set out to discover exactly how the new 
     system, known as a cash-balance plan, worked. During a year-
     long quest to master the assumptions, formulas and 
     calculations behind it, Mr. Bruggeman found himself at odds 
     with his superiors, and labeled a troublemaker. In the end, 
     though, he figured out something about the new pension system 
     that few other employees have noticed: For many of them, it 
     is far from a good deal.
       But it clearly was, as the brochure noted, good for the 
     company. A peek at a CSW regulatory filing in March 1998, 
     after the new plan took effect, shows that the company saved 
     $20 million in pension costs last year

[[Page S7823]]

     alone. Other government filings revealed that whereas the 
     year before, CSW had to set aside $30 million to fund its 
     pension obligations, after it made the mid-1997 switch it 
     didn't have to pay a dime to fund the pension plan.


                             pension light

       The switch to cash-balance pension plans--details later--is 
     the biggest development in the pension world in years, so big 
     that some consultants call it revolutionary. Certainly, many 
     call it lucrative; one says such a pension plan ought to be 
     thought of as a profit center. Not since companies dipped 
     into pension funds in the 1980s to finance leveraged buyouts, 
     have corporate treasurers been so abuzz over a pension 
     technique.
       But its little-noticed dark side--one that many companies 
     don't make very clear to employees, to say the least--is that 
     a lot of older workers will find their pensions cut, in some 
     cases deeply.
       So far, only the most financially sophisticated employees 
     have figured this out, because the formulas are so complex. 
     Even the Labor Department and the Internal Revenue Service 
     have trouble with them. So thousands of employees, while 
     acutely aware of how the stock market affects their 
     retirement next eggs, are oblivious to the effect of this 
     change. (See related article on page C1.)
       One might get the impression, from the rise of 401(k) 
     retirement plans funded jointly by employer and employee, 
     that pensions are a dead species. In fact, nearly all large 
     employers still have pension plans, because pulling the plug 
     would be too costly; the company would have to pay out all 
     accrued benefits at once. Meanwhile, companies face growing 
     obligations as the millions of baby boomers move into their 
     peak pension-earning years.
       Now, however, employers have discovered a substitute for 
     terminating the pension plan; a restructuring that often 
     makes it unnecessary ever to feed the plan again.


                         pitfalls for employers

       But this financially appealing move has its risks. The IRS 
     has never given its blessing to some of the maneuvers 
     involved. If employers don't win a lobbying battle currently 
     being waged for exemptions from certain pension rules, some 
     of these plans could be in for a costly fix.
       In addition, the way employers are handling the transition 
     could result in employee-relations backlashes as more and 
     more older workers eventually figure out they are paying the 
     price for the transformation of traditional pension plans.
       In those traditional plans, most of the benefits build up 
     in an employee's later years. Typical formulas multiply years 
     of service by the average salary in the final years, when pay 
     usually is highest. As a result, as much as half of a 
     person's pension is earned in the last five years on the job.
       With the new plans, everyone gets the same steady annual 
     credit toward an eventual pension, adding to his or her 
     pension-account ``cash balance.'' Employers contribute a 
     percentage of an employee's pay, typically 4%. The balance 
     earns an interest credit, usually around 5%. And it is 
     portable when the employee leaves.
       For the young, 4% of pay each year is more than what they 
     were accruing under the old plan. But for those nearing 
     retirement, the amount is far less. So an older employee who 
     is switched in to a cash-balance system can find his or her 
     eventual pension reduced by 20% or 50% or, in rare cases, 
     even more.
       This is one way companies save money with the switch. The 
     other is a bit more complicated. Companies can also benefit 
     from the way they invest the assets in the cash-balance 
     accounts.
       If the employer promised to credit 5% interest to 
     employees' account balances, it can keep whatever it earned 
     above that amount. The company can use these earnings to 
     finance other benefits, to pay for a work-force reduction, 
     or--crucially--to cover future years' contributions. This is 
     why the switch makes pension plans self-funding for many 
     companies.
       Although employers can do this with regular pensions, the 
     savings are grater and easier to measure in cash-balance 
     plans. The savings often transform an underfunded pension 
     plan into one that is fully funded. ``Cash-balance plans have 
     a positive effect on a company's profitability,'' says Joseph 
     Davi, a benefits consultant at Towers Perrin in Stamford, 
     Conn. They ``could be considered a profit center.''


                          motive for the move

       Employers, however, are almost universally reticent about 
     how they benefit. ``Cost savings were not the reason the 
     company switched to a cash-balance plan,'' says Paul Douty, 
     the compensation director at Mr. Bruggeman's employer, CSW. 
     Sure, the move resulted in substantial cost savings, he says, 
     but the company's goal was to become more competitive and 
     adapt to changing times. Besides, he notes, the $20 
     million in pension-plan savings last year were partly 
     offset by a $3 million rise in costs in the 401(k); the 
     company let employees contribute more and increased its 
     matching contributions.
       There is another reason some employers like cash-balances 
     plans: By redistributing pension assets from older to younger 
     workers, they turn pension rights--which many young employees 
     ignore since their pension is so far in the future--into 
     appealing benefits today. At the same time, older workers 
     lose a financial incentive to stay on the job, since their 
     later years no longer can balloon the pension.
       Some pension professionals think companies should be more 
     candid. ``If what you want to do is get rid of older workers, 
     don't mask it as an improvement to the pension plan,'' says 
     Michael Pikelny, an employee-benefits specialist at Hartmarx 
     Corp., an apparel maker in Chicago that decided not to 
     install a cash-balance plan.


                           under a microscope

       Most employees aren't equipped to question what employers 
     tell them. But Mr. Bruggeman was. He had a background in 
     finance, his hobby was actuarial science, he had taken 
     graduate-level courses in statistics and probability, and he 
     knew CSW's old pension plan inside and out. So when the 
     company announce it was converting to a cash-balance plan 
     last year, he began asking it for the documents and 
     assumptions he needed to compare the old pension to the new 
     one.
       With each new bit of data, he gained another insight. 
     First, he figured out that future pension accruals had been 
     reduced by at least 30% for most employees. CSW got rid of 
     early-retirement and other subsidies and reduced the rates at 
     which employees would accrue pensions in the future.
       Employees wouldn't necessarily conclude this from the 
     brochures the human resources department handed out. Like 
     most employers that switch to cash-balances plans, CSW 
     assured employees that the overall level of retirement 
     benefits would remain unchanged. But a close reading of the 
     brochure revealed that this result depended on employees' 
     putting more into their 401(k) plans, gradually making up for 
     the reduction in pensions.
       At a question-and-answer session on the new plan before it 
     was adopted, Mr. Bruggeman spoke up and told co-workers how 
     their pensions were being reduced. The next day, he says, his 
     supervisors in Tulsa came to his office and told him that CSW 
     management in Dallas was concerned that his remarks would 
     ``cause a class-action suit'' or ``uprising,'' and said he 
     shouldn't talk to any other employees. He says the 
     supervisor, Peter Kissman, informed him that if he continued 
     to challenge the new pension plan, CSW officials would think 
     he wasn't a team player, and his job could be in jeopardy.
       Asked about this, Mr. Kissman says: ``In my department I 
     would not tolerate employee harassment. I believe the company 
     feels the same way. Past that, I really can't speak to this 
     issue. It's being investigated by the company.''


                            a few sweeteners

       Employers, aware that switching to cash-balance plans can 
     slam older workers, often offer features to soften the blow. 
     They may agree to contribute somewhat more than the standard 
     4% of pay for older employees, or they may provide a 
     ``grandfather clause.'' CSW offered both options, saying 
     employees 50 or older with 10 years of service could stay in 
     the old plan if they wished. Mr. Bruggeman, a 25-year 
     veteran, was just shy of 49. He calculated that people in his 
     situation would see their pensions fall 50% under the new 
     plan, depending on when they retired.
       Mr. Bruggeman told company officials that the plan wasn't 
     fair to some long-term employees. Subsequently, he says, in 
     his November 1997 performance evaluation, his supervisor's 
     only criticism was that he ``spends too much time thinking 
     about the pension plan.'' A CSW official says the company 
     can't discuss personnel matters.
       What bothered Mr. Bruggeman even more was his discovery of 
     one of the least-known features of cash-balance plans: Once 
     enrolled in them, some employees don't earn any more toward 
     their pension for several years.
       The reasons are convoluted, but in a nutshell: Most 
     employees believe that opening balance in their new pension 
     account equals the credits they've earned so far under the 
     old plan. But in fact, the balance often is lower.
       When employers convert to a cash-balance plan, they 
     calculate a present-day, lump-sum value for the benefit each 
     employee has already earned. In Mr. Bruggeman's case, this 
     was $352,000--something he discovered only after obtaining 
     information from the company and making the calculations 
     himself. Yet Mr. Bruggeman's opening account in the cash-
     balance plan was just $296,000, because the company figured 
     it using different actuarial and other assumptions.
       This is generally legal, despite a federal law that bars 
     companies from cutting already-earned pensions. If Mr. 
     Bruggeman quit, he would get the full $352,000, so the law 
     isn't violated. But if he stays, it will take several years 
     of pay credits and interest before his balance gets back up 
     to $352,000.


                              ``Wearaway''

       Mr. Douty says this happened to fewer than 2% of workers at 
     CSW. But at some companies that switch to cash-balance plans, 
     far more are affected. At AT&T Corp., which adopted a cash-
     balance plan this year, many older workers will have to work 
     three to eight years before their balance catches up and they 
     start building up their pension pot again. ``Wearaway,'' this 
     is called. Only if an employee knows what figures to ask for 
     can he or she make a precise comparison of old and new 
     benefits.
       Indeed, the difficulty of making comparisons has sometimes 
     been portrayed as an advantage of switching to cash-balance 
     plans. A partner at the consulting firm that invented the 
     plans in the 1980s told a client in

[[Page S7824]]

     a 1989 letter: ``One feature which might come in handy is 
     that it is difficult for employees to compare prior pension 
     benefit formulas to the account balance approach.''
       Asked to comment, the author of that line, Robert S. Byrne 
     of Kwasha Lipton (now a unit of PricewaterhouseCoopers), 
     says, ``Dwelling on old vs. new benefits is probably not 
     something that's a good way to go forward.''
       At one company, employees did know how to make comparisons. 
     When Deloitte & Touche started putting a cash-balance plan in 
     place last year, some older actuaries rebelled. The firm 
     eventually allowed all who had already been on the staff when 
     the cash-balance plan was adopted to stick with the old 
     benefit if they wished.


                           Struggle at Chase

       At Chase Manhattan Corp., two executives in the private-
     banking division hired an actuary and calculated that their 
     future pensions had fallen 45% as a result of a conversion to 
     a cash-balance plan by Chase predecessor Chemical Bank. ``I 
     would have had to work about 10 more years before I broke 
     even and got a payout equal to my old pension,'' says one of 
     the executives, John Healy, now 61.
       He and colleague Nathan Davi say that after seven years of 
     their complaints, Chase agreed to give each a pension lump 
     sum of about $487,000, which was roughly $72,000 more than 
     what they would have received under the new cash-balance 
     plan. Although a Chase official initially said the bank had 
     ``never given any settlement to any employee over the bank's 
     pension plans,'' when told about correspondence about the 
     Healy-Davi case, Chase said that a review had determined that 
     about 1,000 employees could be eligible for additional 
     benefits. ``We amended the plan so that it would cover all 
     similarly situated employees,'' a spokesman said.
       How many quiet arrangements have been reached is unknown. 
     But employees are currently pressing class-action suits 
     against Georgia-Pacific Corp. and Cummins Engine Co.'s Onan 
     Corp. subsidiary, alleging that cash-balance plans illegally 
     reduce pensions. (Both defendants are fighting the suits.) 
     Judges have recently dismissed similar suits against Bell 
     Atlantic Corp. and BankBoston N.A.


                           Concern at the IRS

       Not aware of any of this ferment, Mr. Bruggeman in August 
     1998 filed his multiple-spreadsheet analysis of the CSW cash-
     balance plan with the IRS and the Labor Department, asking 
     them for a review. Soon after, he says, a manager in CSW's 
     benefits department called him in and ``wanted to know what 
     it would take for me to drop all this.'' The answer wasn't to 
     be ``grandfathered'' and exempted from the new plan. ``I told 
     him all I want is for the company to . . . be fair to 
     employees,'' he says, ``It's the principle of the thing.''
       The manager couldn't be reached for comment, but a CSW 
     official says the company takes complaints ``very seriously 
     and they're thoroughly investigated. In every part of this 
     type of investigation an employee is interviewed by a company 
     representative, and in every initial interview the employee 
     is asked for suggestions on what might be a preferred 
     solution.''
       Even without Mr. Bruggeman's input, the IRS has a lot of 
     cash-balance data on its plate. The agency is swamped with 
     paper-work from hundreds of new plans seeking its approval, 
     and applications are piling up. The delay is due in part to 
     concern at the IRS that such plans may violate various 
     pension laws, according to a person familiar with the 
     situation. Meanwhile, the consulting firms that create the 
     plans for companies are lobbying for exemptions from certain 
     pension rules.
       They say they aren't worried. That's because ``companies 
     who now have these plans are sufficiently powerful, 
     sufficiently big and have enough clout that they could get 
     Congress to bend the law . . . to protect their plans,'' says 
     Judith Mazo, a Washington-based senior vice president for 
     consulting firm Segal Co. Regulators, meanwhile, are playing 
     catch-up. Bottom line, Ms. Mazo says: ``The plans are too big 
     to fail.''
                                  ____


                [From ``Morning Edition,'' Feb. 1, 1999]

       Pros and Cons of Cash Balance Plans for Retirement Savings

       Bob Edwards, host. This is NPR's ``Morning Edition.'' I'm 
     Bob Edwards.
       A new type of pension program is becoming popular with the 
     nation's top employers. The program is called the cash 
     balance plan. It's an innovative and complicated type of 
     retirement account suitable for today's modern work force, 
     especially many young mobile employees. And that's the 
     problem. Critics warn cash balance plans benefit the young at 
     the expense of older, longtime workers. NPR's Elaine Korry 
     reports.
       Elaine Korry reporting. The traditional pension plan so 
     widespread a generation ago essentially promised long-term 
     employees a secure monthly income when they reached 
     retirement age. Eric Lofgren (ph), head of the benefits 
     consulting group (ph) at Watson Wyatt (ph), says that type of 
     pension made sense when people worked at the same job for 
     decades. But, he says, great changes in the workplace have 
     made those plans obsolete.
       Mr. Eric Lofgren (Benefits Consulting Group, Watson Wyatt). 
     The traditional plan does a very good job for about one 
     person out of 20. But for the rest of us who have changed 
     jobs a couple times in our career, the traditional plan 
     really doesn't deliver, because it rewards long career with 
     one employer and that just isn't the situation for most 
     people.
       Korry. The response of many large employers--so far about 
     300 of them--has been to quietly switch to a new plan that 
     turns the traditional pension on its head. Lofgren, who helps 
     companies formulate these new cash balance plans, says they 
     spread the wealth around so more employees prosper, perhaps 
     19 out of 20. But that's not the only reason companies are 
     lining up to make the switch. Edgar Pouk (ph), a New York 
     pension law attorney, says that the real winners in these 
     plan conversions are the employers.
       Mr. Edgar Pouk (Pension Law Attorney). They stand to gain 
     by the change, and so they're trying to sell it, and they 
     sell it by emphasizing the advantages of the conversion for 
     younger workers, but not explaining the drawbacks, and 
     serious drawbacks, for older workers.
       Korry. In fact, says Pouk, switching to a cash balance plan 
     can cost older employees tens of thousands of dollars, a loss 
     they may never figure out. This stuff is so technical, many 
     pension experts don't understand it, let alone the average 
     employee. In simple terms, here's what happens: Pension 
     regulations permit companies to use two different interest 
     rates when calculating the value of the old pension vs. the 
     opening balance of the new one. Employers usually choose the 
     formula that favors them, even though it leaves older workers 
     worse off. A pension balance of, say, $100,000 under the old 
     plan might be worth only $70,000 when converted to a cash 
     balance plan. Right there, the older worker is down 30 grand.
       It gets worse. For some accounting purposes, the employer 
     can treat the $70,000 as if it were 100 grand. Then the 
     employer can freeze the account until the employee works the 
     five to 10 years it can take to make up the difference. Edgar 
     Pouk says the contributions the company doesn't have to make 
     during that time add up quickly.
       Mr. Pouk. You're talking about tens of thousands of dollars 
     for each worker. You multiply that by thousands of workers 
     and the employer saves millions of dollars.
       Korry. Often older workers don't know what happened. Some 
     employers, however, are careful to point out the differences. 
     Then older workers have a choice. They can recoup their 
     losses, but only by quitting, in which case they would 
     receive a lump-sum payment equal to their old balance. So 
     cash balance plans may be an inducement for older workers to 
     leave. Olivia Mitchell (ph), head of the Pension Research 
     Council at the Wharton School, says recent changes in labor 
     and law have given older workers many more job protections 
     than before, so employers are resorting to creative ways to 
     ease their older worker force out.
       Ms. Olivia Mitchell (Pension Research Council, Wharton 
     School). They may be downsizing, they may be looking for a 
     different type of employee, perhaps with different skills, 
     and so they're taking the cash balance plan as one of many 
     human resource policies to essentially restructure the work 
     force. So it's seen as a tool toward that end.
       Korry. Companies that convert to cash balance plans can 
     level the playing field so that all employees benefit. Some 
     companies will guarantee their older workers a higher rate of 
     return or allow them to keep the old plan until they retire. 
     But those are voluntary measures that eat up the cost 
     savings. For now, regulators have not caught up with the 
     growing momentum toward the new plans. But according to 
     attorney Edgar Pouk, employers who don't protect their older 
     workers are running the risk of landing in court.
       Mr. Pouk. When you have a number of years where the older 
     worker receives no additional benefits that a plan is illegal 
     per se, because federal law prohibits zero accruals for any 
     year of participation.
       Korry. So far, the Internal Revenue Service has not given 
     its blessing to cash balance plans. Employers have mounted an 
     intense lobbying effort to win a safe harbor within pension 
     law. On the other side, employees at a few large companies 
     have lawsuits pending against the conversions, and some 
     congressional leaders have expressed concern. Staffers on the 
     Senate Finance Committee are considering legislation that 
     would at least require employers to spell out what a pension 
     conversion would mean for older workers. Elaine Korry, NPR 
     News, San Francisco.
                                 ______