The Government Accountability Office found that workers of all ages see cuts in their pension benefits when their employers switch to a cash balance plan from a defined benefit plan, according to a study of 31 large and 102 small pension plans. Unless a company converting to a cash balance plan provides specific transition protections for workers, more than 85% of 30-year-olds, 90% of 40-year-olds and 50% of 50-year-olds experience a reduction in benefits, the study found. With cash balance plans that have a five-year vesting requirement, more than one-third of plan participants never become vested.
The GAO study is based on 1999 data. The agency conducted interviews with 409 companies in 1999's Fortune 1000 and found that 19% offered cash balance plans. The study was conducted at the request of the U.S. House of Representatives.