Like a defined-contribution plan, a cash-balance plan removes the backloading of the pension formula; older workers (accurately) perceive that they are worse off under a cash-balance approach than under a traditional years-of-service-times-final-salary plan. But removing a feature that gave extra benefits to the old differs from discriminating against them. Replacing a plan that discriminates against the young with one that is age-neutral does not discriminate against the old.
While the named plaintiff in the class-action suit pledged to continue the case, the president of the American Benefits Council praised the decision [ABC press release], coupled with legislation passed by Congress [JURIST report] last week, as clarifying the legality of cash-balance plans. AP has more.
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