Can my employer convert a traditional pension to a cash-balance plan?
- What is a cash-balance plan?
- Is a cash-balance plan better than a pension?
- Do I have to do anything to manage my plan?
- Can my employer convert a traditional pension to a cash-balance plan?
- When can I get access to the money?
- Should I take a lump-sum payout or monthly payments?
- I'm required to take a lump sum, but I want monthly income. What can I do?
- If I have a cash-balance plan, do I need to save anything extra?
Yes. And many do just that. About a decade ago, employers looked into the future, saw the massive size of their pension obligations, panicked - and came up with the idea of converting their existing pensions to the cash-balance model. No surprise why: Cash-balance plans typically result in smaller payouts to long-term employees.
That trend spurred a flurry of age-bias lawsuits by employees nearing retirement who were facing lower pension payouts. The 2006 Pension Protection Act calmed the waters a bit by ensuring that if you're caught in a conversion, your employer can't reduce your benefits below what you already were entitled to before the conversion. For more information, check out the Department of Labor Web site.
