The test of whether defined benefit plans in some form can be saved likely will be whether any corporations now without defined benefit plans set up cash balance plans, assuming the endorsement given by the Department of the Treasury proceeds without any setbacks.
The Treasury's proposed regulations - that state cash balance plans don't discriminate against older workers - seem certain to clear the way for many watchful large companies to switch their traditional defined benefit plans to cash balance plans. At the same time, the Treasury Department's endorsement could encourage small companies without defined benefit plans to set up cash balance or other hybrid plans.
Even before the Treasury ruling, a few companies this year added or contemplated forming a hybrid defined benefit plan. Baker Hughes Inc., Houston, added a cash balance plan. Callaway Golf Co., the maker of the Big Bertha club, is examining starting such a plan. Executives of both companies expressed a desire to improve retirement benefits beyond their 401(k) plans.
The Treasury decision could enhance that kind of thinking.
As Brian H. Goff, executive director, American Society of Pension Actuaries, Arlington, Va., was quoted as saying, "This is probably the most significant development to revitalizing defined benefit plans since ERISA."