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BATON ROGUE, La.—Louisiana Gov. Bobby Jindal wants state lawmakers to pass legislation that would require new state employees to enroll in a cash balance pension plan that the state would set up.
“A cash balance plan combines the best features of a defined benefit and defined contribution plans,” Gov. Jindal said during a speech last week before a local Rotary Club.
Like traditional pension plans, cash balance plans protect employees from investment risk, he said. Also like defined contribution plans, benefits are expressed as an account balance and can be rolled into an individual account when an employee terminates employment before retirement, he added.
More than 1,000 employers set up cash balance plans after the first such plan, which was established in 1985 by Bank of America Corp.
Interest, though, cooled more than a decade ago after a spate of lawsuits alleged the basic design of a cash balance plan was age discriminatory.
Employer interest picked up modestly after several federal appeals courts ruled the plans did not discriminate against older employees and after Congress, as part of a broader pension funding reform law in 2006, made clear that the basic plan design was not age discriminatory.
Major employers that have set up cash balance plans since the passage of the 2006 Pension Protection Act include Atlanta-based The Coca-Cola Co.; Midland, Mich.-based Dow Chemical Co;. and Richmond, Va.-based MeadWestvaco Corp.
AUSTIN, Texas—Teacher Retirement System of Texas and three other pension funds in the Lone Star State have been ordered by the state Legislature to conduct separate studies evaluating defined benefit, defined contribution and cash balance and other hybrid plans, among other issues related to the type of plan and plan design the state might offer.