Tom Harkin: “in the early 1990s, a large number of U.S. companies began a process of switching their defined benefit pension plans to…”

“in the early 1990s, a large number of U.S. companies began a process of switching their defined benefit pension plans to cash balance plans. Many of the employees whose pension plans were to be altered drastically weren't told and didn't notice that they were essentially going to be working for years without earning any more benefits. Their not knowing was viewed as a key benefit by management. And the retirees were furious. As Keith Williams with Watson Wyatt Worldwide and Amy Viener with William Mercer, two firms that put together these plans in 1998 said at an Actuaries conference: Mr. Williams: I've been involved in cash balance plans five or six years down the road and what I have found is that while employees understand it, it is not until they are actually ready to retire that they understand how little they are actually getting. Ms. Viener: Right, but they're happy while they're employed. One of the most abusive practices in cash balance conversions is known as ``wear away.'' Older workers see nothing added to their pensions as the value of the pensions is frozen, often for many years, until it reaches the lower value of the new pension plan. At the same time younger workers are getting their pensions increased. In my view, this is clearly age discrimination and bad pension policy. In 1999, I introduced a bill to make it illegal for corporations wear away the benefits of older workers during conversions to cash balance plans.”