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NEW YORK-Telecommunications giant AT&T Corp. will convert its traditional defined benefit pension plan to a cash balance plan, making it one of the largest employers with such a plan.
The conversion, which will go into effect Jan. 1, will apply to the 58,000 active participants in the company's pension plan for management employees, which, as of last Dec. 31, had $10.6 billion in assets.
As many of the roughly 200 employers that have established cash balance plans since BankAmerica Corp. set up the first plan in 1985, AT&T says it is doing so to increase employee appreciation and understanding of their pension plan. An AT&T spokeswoman said cost was not a factor in moving to the cash balance plan.
"We believe these changes will benefit employees and the company alike," said AT&T Senior Vp of Compensation and Benefits Donald Harrington.
Cash balance plans combine elements of defined contribution plans and defined benefit plans. As under defined contribution plans, accrued benefits are expressed as lump sums so employees instantly know the cash value of their benefits. But, like defined benefit plans, the plans are funded on an aggregate basis, and participants' accrued benefits are protected from investment risk.