MORE PENSION PROBLEMS

GAO: Pension plan switch hurts employees
By MARCY GORDON
AP Business Writer
Nov 4, 7:29 PM EST

WASHINGTON (AP) -- Employees whose companies switch from traditional pension plans to an increasingly adopted alternative generally lose benefits, congressional auditors have found. Under the plans, companies set aside money each year for employees with a guarantee that it will grow at a specific rate - unlike traditional pension plans, which promise workers a specific monthly benefit.

The GAO auditors, who examined 31 large company pension plans and 102 smaller ones, found that when employers switch from defined-benefit pension plans to cash balance plans, "most workers, regardless of age, would have received greater benefits under the (defined-benefit) plan."

It estimates the median loss in retirement benefits each month for a 30-year-old employee to be $59, rising to $188 for a 40-year-old worker and $238 for a 50-year-old.

[NOTE: Senior executives get a defined benefit]

Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce, has supported the idea of cash balance plans, saying they are beneficial to workers because they are portable and secure.

"Cash balance plans represent an increasingly vital component of worker retirement security, providing nearly 10 million workers the promise of a sound retirement," Boehner wrote in a letter Thursday to his House colleagues.

"Indeed, cash balance plans provide more generous benefits for the majority of workers than do traditional plans, have proven far better-suited to meet the challenges of an increasingly mobile 21st century workforce, and most importantly, provide a safe and reliable nest egg for an increasing number of American workers," he wrote.