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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.