Publications

First Circuit: Wear-Away to Cash Balance is Okay
03/18/2003

Understanding the "Wear-Away" Concept

Serious issues can arise when an employer chooses to convert its traditional defined benefit (DB) plan to a cash balance plan. While the facts of each conversion to a cash balance plan vary significantly, a conversion to a cash balance plan vary significantly, a convesion typically entails establishing a hypothetical opening account balance based on a participant's accrued benefit under the traditional DB plan ( ie., his or her protected benefit, usually expressed as a single life annuity payable at age 65) at the time of conversion.