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The General Accounting Office's (GAO) recent reports on cash balance plans support employers' contentions that there is a mismatch between innovative pension plan designs and regulations that are much slower to adapt to them, says the ERISA Industry Committee (ERIC).

According to the Washington, D.C.-based association of large employers, the reports call on federal regulators to do what employers have been asking them to do for several years: develop rules that treat hybrid pension plans as distinct from traditional final average pay plans. However, employers take issue with the reports' failure to apply the fundamental logic of cash balance plans, ERIC says.

The reports erroneously assume that participants will remain with a single employer for their entire careers, the association says. The reports also fail to show how mobile employees, investing their cash balance plan distributions from several employers during their working lives, can build significantly greater pension wealth than their equally mobile counterparts participating in other types of plans.

Most important, the GAO reports recognize the legitimacy of cash balance plans in a changing employment environment, ERIC adds.

Cash balance plans are already playing a vital role in encouraging the creation and maintenance of defined benefit plans in an otherwise oppressive regulatory environment, ERIC says. It notes that during the past 15 years the number of traditional defined benefit plans has plunged by more than half as increasingly arcane and burdensome statutes and regulations have discouraged many employers from offering secured defined benefit plans to their workforce.

The GAO reports, "Cash Balance Plans: Implications of Conversions to Cash Balance Plans;" "Cash Balance Plans: Implications for Retirement Income;" GAO/HES-00-207; are available through the GAO's web site, www.gao.gov.

Edited by Steve Tarnoff
Managing Editor, HRHub.com
Starnoff@vertical.net