Cash Balance Plans: Implications for Retirement Income
HEHS-00-207
Published: Sep 29, 2000. Publicly Released: Sep 29, 2000.
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Highlights
Pursuant to a congressional request, GAO provided information on the implications of using cash balance plans for retirement income, focusing on the: (1) prevalence and features of cash balance plans; (2) factors employers considered in making a decision about whether or not to use a cash balance formula; (3) effects of using cash balance formulas on the adequacy of individual workers' retirement income; and (4) effects of current disclosure practices on plan participants' ability to address issues regarding the adequacy of their retirement funds.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Labor | The Secretary of Labor should direct the Assistant Secretary of the Pension and Welfare Benefits Administration to amend the disclosure requirements under their respective authorities, as provided under the Employee Retirement Income Security Act, for Summary Plan Descriptions, to include a clear statement regarding the difference between the hypothetical account balance and the accrued benefit payable at normal retirement age under the cash balance plan. |
Closed – Not Implemented
In November 2000, the Department of Labor (DOL) sought public comment on whether, and to what extent, changes to the summary plan description requirements would help ensure better communications with participants about cash balance plans. DOL also sought views on whether standardized language should be developed for the disclosure of such information. DOL officials said that the department received no comments in response to these invitations, and that DOL does not anticipate any changes to the summary plan description requirements.
|
| Department of Labor | The Secretary of Labor should direct the Assistant Secretary of the Pension and Welfare Benefits Administration to amend the disclosure requirements under their respective authorities, as provided under the Employee Retirement Income Security Act, for Summary Plan Descriptions, to include specific information about the impact the timing of interest crediting has on deferred pension benefits for terminating workers. |
Closed – Not Implemented
In November 2000, the Department of Labor (DOL) sought public comment on whether, and to what extent, changes to the summary plan description requirements would help ensure better communications with participants about cash balance plans. DOL also sought views on whether standardized language should be developed for the disclosure of such information. DOL officials said that the department received no comments in response to these invitations, and that DOL does not anticipate any changes to the summary plan description requirements at this time.
|
| Department of Labor | The Secretary of Labor should direct the Assistant Secretary of the Pension and Welfare Benefits Administration to amend the disclosure requirements under their respective authorities, as provided under the Employee Retirement Income Security Act, for Summary Plan Descriptions, to include standardized language providing plan participants with their rights to contact Pension and Welfare Benefits Administration or Internal Revenue Service if they are unable to understand the information provided and the relevant addresses and telephone numbers necessary for such contacts. |
Closed – Not Implemented
In November 2000, the Department of Labor (DOL) sought public comment on whether, and to what extent, changes to the summary plan description requirements would help ensure better communications with participants about cash balance plans. DOL also sought views on whether standardized language should be developed for the disclosure of such information. DOL officials said that the department received no comments in response to these invitations, and that DOL does not anticipate any changes to the summary plan description requirements at this time. The Internal Revenue Service, however, issued proposed regulations for the new plan disclosure provisions contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16).
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Topics
Employee retirement plansIncome taxesInformation disclosureRetirement incomePensionsRetirement benefitsStatistical dataTax lawCash balance plansEmployee benefit plans