The defined benefit pension world got another blow when International Business Machines Corp., White Plains, N.Y., announced in December that it was closing its cash balance plan to employees joining the company after Jan. 1 and would only offer new employees a 401(k) plan.
Will more companies follow IBM's lead this year?
"IBM made a business decision given the regulatory uncertainty," said Stephen Mirante, a consultant with Watson Wyatt Worldwide, New York.
"It (IBM's decision) is indicative of the frustration of many sponsors of defined benefit plans" — frustration by what sponsors view as over-regulation of defined benefit plans in general and frustration by cash balance plan sponsors over the lack of guidance from the federal government.
"If we don't get clarity on the rules (for cash balance plans in 2005) we'll see more plan sponsors moving in that direction," he added.
"Sometimes we lose touch with the fact that the system is voluntary."
Because of the "cash balance limbo" referred to by Howard Fine, a consultant with Mellon's Human Resources and Investor Solutions, New York, the formation of these hybrid plans has been on hold until lawmakers and regulators resolve the issues.
"You won't see any more (cash balance) plans until you get a resolution to the problems," said Mr. Fine, adding that there may be some resolution of the cash balance debate in 2005.
"The debate (over them) is coming to the foreground," Mr. Fine said.