Cash Balance Plan Choice Allays Controversies
Employee Benefit News (01/02) Vol. 16, No. 1 p.32; Gunsauley, Craig

Although old-fashioned defined benefit (DB) plans appear unattractive to today's mobile workforce, some sponsors have turned to cash balance designs to appeal to new workers while maintaining benefits for long-time workers. Telecordia Technologies, a telecommunications firm, was created after the breakup of the AT&T monopoly in the 1980s. As Telecordia grew, and hired more employees in the 1990s, the company has to overhaul its retirement package to accommodate new recruits and active employees, says Bruce Lasko, director of retirement and stock programs at Telecordia. That is when the company decided to give workers a choice between the traditional DB plan and a new cash balance option. Cash balance plans are DB plans that give each participant an interest-earning account credited with a percentage of pay on a monthly basis. Participants can take the benefit as a lump sum whenever they decide to leave the company, eradicating long service eligibility requirements. The cash balance plan is the centerpiece of Telecordia's new retirement package designed to appeal to younger, more mobile workers, and long-service company veterans, as well. Action on converting to the new retirement plan began last April.


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