NU Online News Service, Sept. 11, 2003, 3:53 p.m. EDT – Towers Perrin Inc., Valhalla, N.Y., has put out a statement expressing concern about a recent House vote supporting opponents of cash-balance pension plans.
The vote approved a measure that would prohibit the Treasury Department from using federal funds to overturn a recent U.S. District Court decision that found that one large cash-balance plan conversion discriminated against older workers.
Towers Perrin says the measure, which was introduced by Rep. Bernard Sanders, a Democratic Socialist from Vermont, as an amendment to the appropriations bill H.R. 2989, would prohibit the IRS from issuing final regulations that would explicitly approve the use of cash-balance pension plans.
An employer with a traditional defined benefit pension plan uses a formula for calculating contributions that assumes employees will be with employer for many years. Employers with traditional plans usually contribute less for newer employees than for more senior employees, on the assumption that the early contributions for newer employees will have many years to accumulate investment earnings.