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For Immediate ReleaseContact: Nancy Hwa, 202-296-3776
July 12, 2006www.pensionrights.org

Worker/Retiree Rights Groups Urge Inclusion of Senate Provisions on Cash Balance

WASHINGTON – Three national advocacy groups warned the members of the congressional conference committee working on the pension reform legislation that the House provisions on cash balance pensions would encourage discrimination against older employees. In a letter sent to every conferee on Friday, the Pension Rights Center, the National Committee to Preserve Social Security and Medicare, and the National Retirees Legislative Network called on the lawmakers to adopt the Senate provisions, which provide critical safeguards for older workers.

"The House provisions not only fail to make cash balance plans equitable, but actually open up new loopholes for plans to discriminate against long-time employees," said Karen Friedman, policy director of the Pension Rights Center. She reminded the conferees that in April, the House voted overwhelmingly to instruct the conferees to support the Senate's cash balance provisions.

The House bill would:

  • Legalize cash balance plans and conversions without providing bridge benefits for older workers. The Government Accountability Office has shown that older, long-tenured workers lose substantial expected benefits when an employer switches from a traditional defined benefit pension to a cash balance plan. The Senate bill's provisions recognize this loss and provide modest protections.
  • Legitimize the controversial unfair practice of "wearaway," which effectively freezes the benefits of older workers for lengthy periods of time. The Senate bill provisions prohibit the most egregious forms of this practice.
  • Redefine "age discrimination" for a wide range of other plans other than cash balance plans, including contributory and integrated defined benefit plans. This change could undermine existing age discrimination protections resulting in unfair benefit reductions for older employees. The Senate bill redefines age discrimination only with respect to cash balance plans.
  • Allow employers to use an expanded range of "offset" practices, with the result that the benefits of older and lower-wage workers in cash balance plans could be unfairly reduced. The Senate bill does not invite employers to adopt new types of unfair offset practices.
  • Permit employers to deny benefits to employees who work fewer than five years in cash balance plans. This would result in the forfeiture of benefits by most mobile employees, the very workers that cash balance plans were supposedly designed to help. The Senate bill provides for vesting after three years.

Read the group letter to conferees.