Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.


Can my employer convert a traditional pension to a cash-balance plan?

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.