These plans can be designed to avoid much of the contribution volatility associated with traditional DB plans because accrued benefits
can be reduced if the plan's funding deteriorates.
The court recognized that during this period, "the accrued benefit
payable at normal retirement age is effectively frozen," and older employees were more likely than younger employees to experience long wear-aways.
In 2001, current and former CIGNA employees filed a class action alleging that the cash balance formula was age discriminatory, violated ERISA's back-loading rule, and resulted in a forfeiture of accrued benefits
It has also been held that a company's limitation of a lump sum distribution option, resulting in a decrease in former employees' accrued benefits
violated the ERISA provision and IRC Section 411(d)(6).
The court explained that the plan documents may have allowed surrender charges to be considered in establishing the accrued benefits
under the plan; however, the original plan document did not impose any surrender charges.
outputs, that is, accrued benefits
defined in terms of deferred annuity
The PPA establishes new funding requirements and limits benefit accruals for certain plans deemed "at risk," which means the accrued benefits
under the plan are less than 80 percent funded based on the prior year's assets.
Most importantly, for cash balance or hybrid plans, the accrued benefit
may be expressed as an annuity payable at retirement age, the balance of a hypothetical account, or the current value of the cumulative percentage of the employee's final compensation.
Conversely, employees with many years of service do not get a large percentage increase in their accrued benefits
and are therefore generally better off taking the DROP.
In theory, the natural life of both soft- and hard-frozen DB plans can be equally long; both plans would continue to exist until the accrued benefits
of the youngest employee at the time of the freeze are distributed.
You may also allow employees to view employee-specific information, such as schedules or accrued benefits
, directly on the BioScreen (and print this information, if BioScreen is connected to network printer).
Replacing a traditional defined-benefit pension plan with a cash-balance plan raises a number of complicated and unsettled legal issues under the Internal Revenue Code (IRC), the Employee Retirement Income Security Act of 1974 (ERISA), and the Age Discrimination in Employment Act (ADEA) These legal issues fall into four primary categories: (1) protection of accrued benefits
, (2) rate of benefit accrual, (3) age discrimination, and (4) notice requirements.