<nobr>Jan 30, 2003</nobr>

ERIC Submits Comments to Treasury on Cash Balance Rules

WASHINGTON, DC -- The ERISA Industry Committee (ERIC) today submitted initial comments to the Department of Treasury on the proposed cash balance plan regulations. The comments applauded Treasury for acknowledging that cash balance plans are not inherently age discriminatory.

The ERISA Industry Committee contends that the proposed regulations need to be fundamentally revised with respect to both cash balance plans and defined benefit plans in general. If finalized in their current form, ERIC writes that the proposed regulations would create a field day for regulators and lawyers, but a mine field for defined benefit plans.

According to ERIC, the current proposed regulations would --

* outlaw many commonplace pension plans, including plans that cannot reasonably be considered to be age-discriminatory,
* subject plans and employers to the risk of years of costly litigation,
* impose enormous economic costs on the employers that sponsor defined benefit plans, and
* threaten the future of all defined benefit plans.

ERIC proposes that the Treasury replace the intricate approach in the proposed regulation with the following clear and straightforward rule: a pension plan may not provide that an employee stops earning benefits, or starts earning benefits at a lower rate, once the employee attains a particular age.

ERIC pointed out in its comment letter that, "an employee's benefit under a cash balance plan depends on the employee's length of service and compensation, not on the employees age. Under a typical cash balance plan, two employees with the same compensation and the same periods of service will have identical balances in their cash balance accounts when they terminate employment -- regardless of whether one employee is older than the other. Treasury correctly recognized this fundamental point and that cash balance plans are in fact not inherently discriminatory.

Click here for full text of the ERIC comments submitted to Treasury.

The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.
Media Contact: Doug Baj, Director of Communications, ERISA Industry Committee, (202)789-1400, dbaj@eric.org.

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