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All cash balance plans deserve green light


With Congress passing comprehensive pension plan funding reform last year, as well as legislation enhancing the appeal of health savings accounts, there may be a temptation to say that federal legislators should take a break this year and put aside employee benefit-related proposals.

We disagree. Indeed, we think high on the congressional benefits agenda this year should be legislation to correct last-minute drafting errors that occurred as a final agreement was being hammered out last year on the pension bill.

We believe that effort should drive another one: legislators taking another look at the provisions agreed to in the pension measure affecting cash balance plans. Simply put, legislators gave a green light to cash balance plans formed as of June 29, 2005.

By contrast, cash balance plans—roughly 1,200 to 1,500—formed before then have no certainty, because of ambiguous wording in federal law as to whether their design discriminates against older employees. The result of that ambiguity has been a slew of lawsuits against employers, alleging age discrimination and a bunch of conflicting court decisions.

Common sense would dictate that all cash balance plans should be covered by the same age discrimination rules. Common sense also should tell legislators that the surest way to encourage more cash balance plan sponsors to phase out their plans is to leave it to the courts to resolve the age discrimination issue.

By contrast, we urge caution on the health care side. We expect some members of the now-in-control Democratic party to use their power push for a single-payer national health insurance system.

While there is a lot wrong with our current system—having 46 million people without health insurance is a disgrace—we don't think a single-payer system is the answer. Frankly, we don't have confidence that the federal government would be a better provider and administrator of health insurance coverage than the private sector.