Fugue: Cash Balance Plans

A “cash balance plan” is a defined benefit pension plan under which a participant’s retirement benefits are determined on the basis of a hypothetical account that is typically determined in a manner similar to accumulations under a defined contribution plan. A cash balance plan is one category of plan design within a broader class generally spoken of as “hybrid plans,” referring to defined benefit plans that rely on non-traditional methods for determination of a plan participant’s benefits.

Pending Cash Balance Plan Legislation [2006]

Key Source Documents

Litigation

• Berger v. Xerox Corporation Retirement Income Guarantee Plan, CA7, No. 00-584-DRH, 8/1/03.
• Campbell v. BankBoston, N.A., CA1, No. 02-1695, 3/7/03.
• Cooper et al. v. the IBM Personal Pension Plan and IBM Corporation, S.D.Ill., No. 99-829-GPM, 7/31/03.
• Eaton v. Onan, S.D.Ind., IP97-0814-C-H/G, 9/29/00
• Lyons v. Georgia Pacific Corporation Salaried Employees Retirement Plan, CA11, No. 99-10640, 8/11/00.
• Tootle v. ARINC, Md, Civ.No. CCB-03-1086, 6/10/04.

Department of the Treasury

• JS-1132 (2/2/04) - Preserving Cash Balance Plans for Workers: Treasury Proposes Legislation to Protect Defined Benefit Plans and Ensure Fair Treatment of Older Workers in Cash Balance Conversions.
• JS-172 (4/9/03) - Fact Sheet: Cash Balance Plans.
• LS-108 (9/21/99) - Testimony by Benefits Tax Counsel J. Mark Iwry before the Senate Committee on Health, Education, Labor and Pensions: Cash Balance and other Hybrid Pension Plans.

Internal Revenue Service

• Notice 96-8 - Determining amount of single sum distributions from cash balance plans.
• Ann. 2004-80 - Replacement instructions for the 2003 Schedule B relating to special information for cash balance plans
• Ann. 2004-57 - Withdrawal of 2002 proposed regulations; suspension of determination letter review for cash balance conversions.
• Section 401(a)(26) Issue Arising in Cash Balance Plan Determination Letter Applications - Memorandum for Manager, EP Determinations Quality Assurance (6/6/03)
• Relationship between Revenue Ruling 2001-62 and Cash Balance Pension Plans
• Employee Plans Continuing Professional Education (CPE) Technical Instruction Program for Fiscal Year 2004 - Cash Balance Plans

DOL - EBSA

• Cash Balance Plans Questions & Answers (11/99)
• FAQs about Cash Balance Plans
• Fact Sheet: Cash Balance Pension Plans (5/03)

Pension Benefit Guaranty Corporation

• PBGC Seeks Public Comment on How to Value Cash Balance Plans with Variable Indices [No. 00-32 (7/5/00)]

EEOC

• EEOC Creates National Cash-Balance Pension Team (9/20/99)

Bureau of Labor Statistics

• Cash Balance Plans: The New Wave; Elliott, Moore.

General Accountability Office

• GAO - Information on Cash Balance Pension Plans [GAO-06-42 (10/05)]
• Correspondence to American Academy of Actuaries responding to AAA comments on GAO report (12/12/05)
• GAO - Department of the Treasury, Internal Revenue Service: Statement in Preamble to Regulations That Cash Balance Plans Are Not Age-Discriminatory [GAO-01-511R (3/01)]
• GAO - Implications of Conversions to Cash Balance Plans [HEHS-00-185 (9/00)]
• GAO - Cash Balance Plans: Implications for Retirement Income [HEHS-00-207 (9/00)]

Congressional Research Service

• Cash Balance Pension Plans: Selected Legal Issues, RS22214, 7/29/05. (Note - This CRS report is said to have been updated in late 2005 to reflect further litigation developments.)

Financial Accounting Standards Board

• Scope, Effective Date, and Implementation Issues - Relating to accounting guidance for cash balance plans. Minutes of 5/12/04 Board meeting.

Additional References

AARP

• Transition Provisions in Large Converted Cash Balance Pension Plans (10/05)

American Academy of Actuaries

• When Your Retirement Plan Changes: Understanding Your Cash Balance Plan (2000)
• Correspondence regarding GAO report on “Information on Cash Balance Pension Plans” (11/28/05). GAO response listed above with the relevant GAO report.
• Correspondence to FASB suggesting cost attribution methods for cash balance plans (8/20/02)

American Benefits Council

• Retirement: Cash Balance - Index of ABC materials

American Institute of Certified Public Accountants

• Cash Balance Conversions; Arcady, Mellors; Journal of Accountancy, 2/00.

BenefitsLink

• Litigation Issues in Cash Balance Plans - Guest article by Howard Shapiro and Robert Rachal (1999)

Chamber of Commerce

• Retirement Security: Cash Balance and Hybrid Pension Plans

Employee Benefit Research Institute (EBRI)

• Cash Balance Pension Plans and Other Hybrid Retirement Plans - Fundamentals of Employee Benefit Programs; Chapter 10 (1997)

ERISA Industry Committee

• Cash Balance Plans
  • Amici Curiae Brief on appeal of Cooper v. IBM, supporting reversal (11/4/05)
  • Executive Summary: Hybrid Pension Plans Do Not Discriminate Against Older Workers (8/21/03)
  • Correspondence to FASB: EITF Decisions Regarding Issue 03-4, “Determining the Classification and Benefit Attribution Method for a ‘Cash Balance’ Pension Plan” (5/23/03)

Society of Actuaries

• Actuarial Aspects of Cash Balance Plans
• Economic Design of Cash Balance Pension Plans, Gold.
• The Emergence of Hybrid Pensions and Their Implications for Retirement Income Security in the 21st Century, Clark, Scheiber.
• The Cash Balance Funding Method, Murphy.

Other Entities

• CCA Strategies, LLC - Special Topic - Cash Balance Plans
• Gottesdiener Law Firm, PLLC - What Is a Cash Balance Pension Plan?
• Watson Wyatt Worldwide
  • New Legislation, Litigation in Cash Balance Debate (12/05)