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All the details of just how the "sentence" found its way into the IRS document are unclear. It is obvious that some one or some group really wanted the statement to be added. It could have been slipped in by an "inside man."

As it seems, a treasury employee quit his job and went to work for a law firm that promoted pension plan one month after the sentence was added. This law firm promoted cash-balance plans for "companies seeking to reduce or modify" their pension costs and "companies considering termination of a pension plan in order to recapture overfunded assets."

Evidently the group that perpetrated the addition of the sentence knew full well that cash balance plans, designed to bilk the wage earners, would violate age bias laws! Why else would they go through such gymnastics to get the sentence added? If you were going to rob a bank, wouldn't it be nice if you could slip a sentence into the statutes stating "robbing banks is not a violation of the law." Is that not what we basically have here?

That one sentence has been used as a shield to rob millions of working Americans out of their promised, earned pensions. Too much pension money has been taken from too many Americans for this issue to be swept under the rug. It is not inconceivable that some people will serve prison time before this issue is settled (you heard it here first).

More and more Americans are waking up each day to what has happened to them. When these people learn the facts, they will not be happy campers. Duke and other corporations have done everything possible to show this baby in the best possible light. But, it is an ugly baby. And, it is Duke's baby!

The sentence may as well have said "it is now legal to rob employees of their pension-funds." That is exactly how the sentence has been used! The corporations are now throwing money at their lobbyist like there is no tomorrow. This is no time for employees to be silent. Now is the time to scream BLOODY MURDER!

Our old plan was a "high five" plan. We were paid a percentage multiplied times the highest five years annual salary. The new plan cheated most of us out of that. The kicker was that we had to work until a certain age to reap this reward. The people who left the company early lost out on the reward. Now, we find that the people who played by the rules, also lost out.

“Hugh Forcier, a lawyer at the firm of Faegre & Benson, warned in an October 1990 memo to practitioners at consulting firms that he didn't think the IRS would agree -- nor that they could achieve ‘a legislative fix.’ He feared that cash-balance plans would be found to violate the law and that the subsequent costs to employers could be ‘truly staggering.’" We certainly hope the cost to employers is truly staggering. Thievery has its price.

“…Some key IRS personnel publicly stated that they believed the plans violated age-discrimination law.” The sentence only made it to the preamble of the proposed regulations, so it never carried a lot of weight. The whole scheme has been shaky from the beginning. Here is an important note: “…the IRS never took the next step and converted into a final regulation the sentiment expressed in the sentence about cash-balance plans and age bias.”

As we have been saying for some time, the IRS only grants TENTATIVE approval to cash balance plans. They are all subject to review. The tax exempt status is subject to revocation. This is exactly what happened to Onan Corporation. This was the results of a civil suit in federal court alleging age bias in its cash-balance plan.

“The IRS said it agreed that Onan's pension plan should be disqualified.” Onan’s attorneys then had the nerve to ask the court to disregard the IRS's opinion! “IRS officials, in urging the Tax Court to move forward with the suit, said that ‘the issues involved in this case are ripe for decision.’"

We might add that the time is ripe for us to send the IRS our cash-balance plan comments! “Should the IRS come down hard on cash-balance plans, employers hold out hope that Congress will take action to change the law to ensure that cash-balance plans are legal.” Read the last sentence again. Now do you see why so much money is being thrown at the lobbyist?

This is an election year. If you have never written your Washington representatives before, the year 2000 is a great time to start writing. It all boils down to: will corporate lobbyist dollars outweigh our votes? This is no time to suffer in silence. If this issue is important to you, your Washington representatives need to know about it in no uncertain terms.

This issue could end up in the Supreme Court, as a matter with insurance companies did. They used one sentence in a Department of Labor bulletin to exempt themselves from fiduciary requirements under pension law. The Supreme Court shot the insurance companies down. The insurance companies lobbied congress to save them, which it did.

This will not happen again if all working Americans let their representatives know that they will not tolerate a congressional bail out of illegal cash-balance plans. Write the IRS first. The deadline is January 18, 2000. Then write your senators and congressman. The stakes have never been higher.

The Wall Street Journal article, “How a Single Sentence By IRS Paved the Way To Cash-Balance Plans,” by Ellen E. Schultz, makes it clear that pension foul play is afoot. Ms. Schultz is doing some excellent investigative work in ferreting out the cash-balance plan skullduggery. These plans did not come about by accident or overnight. They came only after years of scheming by unscrupulous people. The plans would have been worthless without another party with larceny in their heart. And, along came the greedy, gullible corporations.

Some believe that Duke-Energy schemed for ten years before implementing their pension abortion. Someone had the bright idea that the cash-balance plans would not be illegal if they could quietly slip a sentence into an IRS document that stated that they were legal! And, someone did just that.

"Specifically, the sentence stated that a pension plan's accrual features 'will not cause a cash balance plan to fail to satisfy the requirement of section 411(b)(1)(H).' In other words, even though the rate at which benefits build up in cash-balance plans declines with age, employers don't have to worry that they are violating age-discrimination law."

It seems that this sentence was not in the proposed pension regulations draft just eleven days before.

"Employers are sleeping less soundly these days. In 1999, as millions of older workers realized exactly how cash balance pensions work, they complained loudly enough that four federal agencies and Congress began looking into whether the plans do, in fact, illegally discriminate. Besides the IRS, the agencies are the Equal Employment Opportunity Commission, the Labor Department and the General Accounting Office."

Grab a ringside seat as more bodies are uncovered!

Click the link below to read the full article:

How a Single Sentence By IRS Paved the Way To Cash-Balance Plans

Pension Skullduggery, Part Two

BOSTON (AP) - In a landmark move that could affect labor fights across the country, residents and interns at a private Boston hospital have voted overwhelmingly to be represented by a federally protected union.

The 177-to-1 vote on Tuesday could set a precedent for doctors-in-training in the United States. It marked the first time residents and interns at a private hospital have cast ballots for federally protected union representation.

Duke Power may be considering buying Millstone Nuclear Plant, according to The Charlotte Observer article, “A newly aggressive Duke Power eyes nuclear plant in Connecticut.”

Newly aggressive? Duke Power has been extremely aggressive in taking employee benefits away for some time! Some think that Duke is interested in buying the Millstone Nuclear Plant, which was shut down due to "paperwork problems and employee morale."

Let's get this straight. Duke, who has gutted the pension-fund and is suffering from the biggest morale slump in its history, is thinking of straightening out a nuclear plant, which was shut down because of low employee morale? That IS rich!

Duke Energy will take a fourth-quarter charge of more than 750 million dollars to cover claims from workers exposed to asbestos, according to The Charlotte Observer. Have you ever wondered if Duke took away benefits to pay these claims?

Someone who recently retired was suffering from asbestosis. This person had a choice between the old plan and the cash pension plan (not everyone will have a choice). Duke does not like to talk about it, but some still have a choice of plans. Those with a choice usually choose the old plan, because they will receive a lot more money, provided they live long enough.

This person took the cash-retirement settlement, because asbestosis victims have a decreased life expectancy. An annuity is only valuable if you live long enough to collect a number of payments. He calculated the amount he lost by taking the cash-retirement benefit to be 200 thousand dollars. The amount he expects to receive from the asbestosis settlement is roughly 200 thousand dollars. Even after the asbestosis settlement, he will just break even financially. He will have no net compensation for his reduced quality of life and decreased life expectancy. And, what about the rest of the people? Most of them will not receive any settlements to compensate for their pension losses.

It is hard to beat the house. A few people break even, the majority lose. This is similar to an incident that happened at an old time general store. A man came in and made a purchase to be charged to his account. The store owner did not charge the account immediately. When he got around to it, he could not remember who the customer was. So, he just charged the amount to the accounts of all his customers, to be fair about it! Some people will receive asbestosis settlements, everyone is being billed for it, and then some. It is just hard to lose when you make all the rules - and change them at will.

The Ernst & Young accord 'sends a strong message that corporate responsibility goes beyond the corporation and extends to accounting firms upon whom pension funds and other investors rely in making investment decisions,' said Charles Valdes, chairman of the Calpers Investment Committee.

Yes, just follow the money and you will find the answers. No one has received a prison sentence in the scandal, YET. But, this whole thing is just beginning to unravel. Some experts think that the loses will be greater than those of the savings and loan scandal, and just guess where the money comes from!

The Philadelphia Inquirer reports that a U. S. grand jury has determined that the pension-adviser for several agencies took more than $6.9 million in kickbacks.

It is just one pension scandal after another these days, and the end is not in sight! Shaky plan conversions, shady investment dealings, and corporate greed are all intertwined in a big, rotten can of worms. Some CEO's, actuaries, and fund managers are probably praying that Y2K destroys all finical records for the past 10 years. Hmmmm, will Y2K get any assistance in destroying data?

Here is one quote from “New Pensions May Hurt Young Professionals” by Ellen E. Schultz: "Many younger workers are no more likely to collect a benefit from these new-fangled plans than they are from traditional pensions." Most of the media have been sold the line that these cash balance rip offs are sooooo great for younger people. The only ones who truly profit from them are the unscrupulous members of senior management.

People must still work five years to become vested, just as with the old plans. Most job-hoppers do not work anywhere for five years. So, they leave with nothing! Guess who just won again? - the company. The company then gets to pay the amount of pension payments that it really wants to pay - ZERO!

Follow the money. Duke is the casino. For the casino to win, most patrons have to lose. For Duke to win the game, most employees have to lose. It is not that hard to do, when you make up all the rules as you go along! The casinos want a few people to win, to serve as "sucker bait." A slot machine in a highly visible location may be set for a greater percentage of pay outs than the other machines. This machine will be wired with horns and lights to announce any big payoffs. Press releases will announce the big winners. The thousands of losers are never mentioned. All that is left for them are the 24 hour a day pawn shops, where they can surrender their remaining possessions for transportation money to go back home.

Duke runs the same scam with the cash balance plan. All they will talk about is the very few people who will actually come out better under the cash pension plan. These people are few, and any increases are meager. To hear Duke tell it, cash-balance plans are the greatest thing since sliced bread. And, they are...for Duke-Energy, NOT for us! In one example, someone got to take his cash balance with him after five years. But, the amount was less than seven-hundred dollars! Wow! It sure sounds like younger people are really making a killing! Ms. Schultz regularly exposes pension scams in The Wall Street Journal.

Click the link below to read the full article:

New Pensions May Hurt Young Professionals

Oh dear! Duke-Energy is back in the news. Only, this time it is not for trying to buy South America.

The L. A. Times published "Workers' 'Cash Balance' Pension Plan Revolt Spreads," by Robert A. Rosenblatt, on December 15, 1999. The article covered the problems that Duke Energy, and other, employees have experienced with cash balance conversions.

Duke keeps trying to whitewash their plan, but the truth continues to shine through. Comments are included by the Equal Employment Opportunity Commission Chairwoman Ida Castro. She is a great lady who is trying to get to the bottom of the cash balance disaster. Comments are also included by Laurie McCain, a staff attorney for the AARP.

"Older workers at AT&T, Bell Atlantic Corp., Duke Energy Corp. and other big companies have followed angry IBM personnel in flooding the Equal Employment Opportunity Commission with complaints charging that their employers discriminated against them when the firms switched to a new form of pension plan that favors younger workers and penalizes them."

Aging Today published a very similar article by Mr. Rosenblatt, "Big Firms Hit on Pension Changes."

To read the article, click the link below:

Big Firms Hit on Pension Changes

The Charlotte Observer reported this extra special Christmas surprise for Duke employees. All the money saved by giving these people the ax will be put to good use. Duke has announced that they will be running "Duke holiday advertisements" frequently on TV!

What will these advertisements be selling? Nothing. They are designed to "enhance the company's image and increase its visibility. The holiday season offers prime timing for media exposure and an emotional opportunity." One thing about it, Duke is always giving opportunities. The only problem is that these “opportunities” always mean more for executives and less for employees!

The Charlotte Observer reported that a customer attacked a cashier because he did not get a Pokemon toy. We hope they don't take HIS pension away!

USA Today published an account of the letter sent to Labor Secretary Alexis Herman, which was signed by employees of various corporations. The letter questioned the ethics and legality of the actuarial advice sold to the corporations.

The article stated: "The letter was signed by six employees representing workers at AT&T, Bell Atlantic, Boeing, Duke Energy, IBM and Pacific Bell."

Click on the link below to read the actual letter:

Employees' Letter to the Department of Labor

The foe is formidable. Big business has many politicians in its pocket. Big business has the best ERISA attorneys to cover for the "renegade" actuaries. To stand a chance of victory, the employees of America must unite against the common enemy.

With that goal in mine, the IBM Employee Benefits Action Coalition sent a letter to Alexis M. Herman, Secretary United States Department of Labor. The letter was signed by employee representatives from IBM, Duke-Energy, Bell Atlantic, Boeing, AT&T, and Pacific Bell.

The pension benefits of the employees of the above companies have been ravaged by onerous cash balance plans. The letter thanked Secretary Herman for her decision to investigate the actuaries who may have acted inappropriately in promoting cash-balance plans, which "mask" reductions in pension benefits.

The letter commended Representative Ken Bentsen and other members of Congress who requested the investigation. In addition to the investigation of possible violations of actuarial codes of conduct, it was requested that they also be investigated for possible violations of federal law – specifically - 20 C.F.R. part 901.31(c), regarding "Disreputable conduct" of enrolled actuaries, provides that the enrollment of an actuary may be suspended or terminated if it is found that the actuary has engaged in conduct evidencing fraud, dishonesty or breech of trust.

The prohibited conduct includes "Knowingly making false or misleading representations, either orally or in writing, on matters relating to employee benefit plans or actuarial services, or knowingly failing to disclose information relative to such matters. There are probably some actuaries that wish they could hide under a rock about now. There are probably a few CEO's who wish that they could join them. People in other companies are welcome to join in this effort.

Congressman Hinchey told the plain truth about the cash balance conversions!

The protest of the World Trade Organization meeting in Seattle is only a symptom of the same affliction that we are facing with the cash balance plan: overpowering and all consuming corporate GREED.

People are sick of curmudgeons holed up in a room somewhere making decision that will enrich themselves at the expense of the workers. These rooms may hold the WTO members or the Duke-Energy Board of Directors. The real decisions are always veiled in secrecy, and every attempt is made to obfuscate the truth. If questions are asked, a silly excuse, or an outrageous lie is tossed out. Lips will move, but no truth ever comes out. The perpetrators seem to believe that if their silly explanations are repeated enough, people will actually believe them. They do not care how stymied they look parroting their statements, as long as they keep the truth hidden.

The violence at the protest is attributed to only a few. The majority had a real message. They do not want a corporate profits feeding frenzy at the expense of exploited wage earners. They do not want to see corporations reap obscene profits on child labor, slave labor, and all manner of human rights violations.

The ONLY reason we no longer have 16 hour work days, child labor, and grossly unsafe working conditions in America, is because people protested. Left to the conscience of big corporations, we would still have 16 hour work days, etc.

National Public Radio reports that in Bangkok, two women were trying to establish labor union representation at their factory. They were being paid only pennies and did not have enough money to buy food. Their manager had one of the women brought to his office, where she was beaten with a rod. The other woman was slashed with a razor in the parking lot.

Are large corporation concerned about such matters? They are concerned - concerned about PROFITS. What are a few beatings or a razor slashing if they can squeeze out an extra dime?

In America, with its multitude of labor laws, you have witnessed the extreme contortions that Duke will go through to circumvent those laws. Does anyone want to work for Duke in Bangkok? Some good has already come out of the protest. Issues are being forced out into the open, that would have been swept under the rug. The conditions of the workers are NEVER considered, unless the issue is forced. When Duke-Energy blithely jumped into the cash balance plan, the damage to the employees received zero consideration. Duke’s senior management’s heads were drunk with the elixir of greed, and dollar signs were rolling in their eyes.

The Charlotte Observer story ran the Catawba Study Team story on the front page of the local section (in the Catawba area). Duke has long attempted to project a "Goody Two-Shoes" image. Many people see through that image, and see a control freak, and an overbearing bully.

This group turned down fifty thousand dollars cash and a two hundred and fifty thousand dollar computer model from Duke. Why? Here are some quotes from the story: "...they fear Duke would dominate...," "It was appropriate that this effort be de-Duked," "They don't need to have their thumbprint all over it," "It feels like the group is being run by Duke," "Here's a group of people who can't clean up their own back yard trying to tell us what to do."

Al Gore announced that he would actively seek pension reform if elected for president. More candidates will likely get on the bandwagon. Those who do not, deserve zero votes from working Americans!

Hundreds of companies have switched to cash-balance pension plans. But outraged employees who have seen the value of their pensions shrivel have spurred lawmakers to investigate and have pressured some companies, including IBM, to reverse themselves. Here are some common questions about the plans:

Q. How do cash-balance plans differ from traditional pensions?

How do traditional and cash-balance pension plans compare? Click on the links below to see examples, using a person who takes a job starting at $45,000 and retires 30 years later. It assumes that each year the employee gets a 3 percent raise. The calculations were done by Watson Wyatt Worldwide, a consulting firm in Princeton, N.J.

A. With old-fashioned pensions, employees earn most of their retirement benefits toward the end of their careers, because benefits are calculated using factors including years of service and final pay. Under cash-balance plans, workers accrue benefits evenly over their careers. Their employer deposits a percentage of their pay in their accounts every year and guarantees they will grow by a certain percentage annually.

Q. Who wins and who loses if a company converts to a cash-balance plan?

A. That depends. Some companies let employees stay with the old plan. But at others, employees must switch, and some have seen the value of future benefits drop 20 percent to 50 percent. Generally, younger employees, especially job hoppers, can do better under cash-balance plans because they will accrue benefits faster. But middle-aged and older workers often do worse because conversions come just as they reach the age when the old formula begins to sharply bolster the value of pension payouts.

Q. What does a company get out of switching to a cash-balance plan?

A. Plenty. For starters, many see savings right off the bat. Before it backed down, IBM said the switch would save $200 million annually.

But there's more. Companies love predictability, but they don't have much with old-fashioned pensions. Since they invest pension reserves in stocks and bonds, which have been in a bull market, many now have overfunded pensions. But not long ago, many had underfunded pensions. A drop in the markets could put them back there.

With cash-balance plans, companies are responsible only for paying out the annual percentage of the employee's pay plus the yearly promised increase in the account. That growth rate is typically linked to Treasury bond rates. Thus, the company is more certain about what it will owe.

Q. Are switches to cash-balance plans legal?

A. That depends on whom you ask. Conversions cannot cause a current or retired employee to lose retirement benefits, nor can they discriminate illegally against older workers. Federal law is also clear that pension plans are voluntary, so any employer can terminate or alter a plan, as long as it doesn't take away benefits already earned or violate age-discrimination rules. Companies may also be limited by union contracts.

Q. Are government officials looking at the issue of conversions to cash-balance plans?

A. Yes. The Internal Revenue Service and Equal Employment Opportunity Commission are investigating whether the plans discriminate illegally. Proposals have been made in Congress to widen disclosure about conversions or scale back companies' ability to switch plans in ways that hurt older workers.

A graph was shown of a typical cash-balance plan versus a traditional pension plan after 30 years. The traditional plan was worth 377,600 dollars; the cash-balance plan was only worth 248,700 dollars. Even with a lot of job jumping, the person would still have considerably less that the 377,600 dollars offered by the old plan! And this assumes that one does not dip into the fund when it is rolled over. It also assumes that one can average a 7.5 percent annual return on the equity. Must register with the New York Times site to view article (no charge).

CLICK HERE FOR MORE

FOR RELEASE: 10/19/99 IR-1999-79

WASHINGTON -- The Internal Revenue Service and the Treasury Department invite comments from employees, employers and their representatives on issues relating to retirement plans known as cash-balance plans. The agencies will use the comments in their analysis of tax law issues raised by these plans. A cash-balance plan is a defined benefit pension plan that typically bases an employee's retirement benefit on the balance of the employee's account. This account balance grows through the addition of hypothetical allocations and earnings, each of which is determined under a formula in the plan. In recent years, employers have converted traditional defined benefit plans covering many employees to cash balance plans. The new cash balance formula often applies to employees who had earned benefits under the old plan benefit formula. The law protects these employees by prohibiting plan amendments that reduce benefits once employees have earned them. In some conversions, employees with previously-earned benefits may earn no additional retirement benefits for varying periods of time, until the ongoing cash balance formula catches up with the employees' protected benefits. This effect is often called a "wear-away" or "benefit plateau." The IRS and Treasury welcome comments on tax issues related to cash balance plans, conversions, and wear-away or benefit plateau effects. The IRS will make the comments available to the public, so commentators should not include personal tax data or other information that they do not want disclosed. The comments will also be shared with federal agencies that administer other laws governing pension plans, such as the Age Discrimination in Employment Act (ADEA) and the Employee Retirement Income Security Act (ERISA). Comments are requested by January 18, 2000, and may be sent to IRS, Attn: CC:DOM:CORP:R (Cash-Balance Plans and Conversions), Room 5226, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Comments may also be submitted electronically through the "Tax Regs" option on the IRS Web site, www.irs.gov. A formal notice requesting comments will be published in the Federal Register on October 20, 1999.

If enough Duke employees write the IRS, YOUR comments could help determine the final ruling regarding Duke's cash balance plan! Contrary to what Rick Priory would have you believe, this issue is FAR from settled!

The Charlotte Observer ran an exhaustive series of articles about the overcrowded conditions around Lake Norman and Lake Wiley. The problem would be in evacuating the area during a nuclear emergency at McGuire or Catawba Nuclear Station.

Duke has made much profit by selling land and packing people into the area. In an emergency, “unpacking” the people would be a problem.

For more information call: (202) 693-4650

More than 300 women and minority employees of Duke Energy Corp. are sharing $770,000 in increased pay as part of a settlement with the U.S. Labor Department. The agreement signed today resolves pay inequities found during a corporate management review of Duke Energy's Charlotte, N.C., headquarters by the department's Office of Federal Contract Compliance Programs (OFCCP).

"Our analysis of Duke Energy's pay data found that women and minorities in administrative, professional and management positions were receiving lower base pay than non-minority men in comparable positions," said Labor Secretary Alexis M. Herman. "We urge contractors to schedule routine self audits to be sure they have not built glass ceilings and that all their employees are paid fairly."

Duke today agreed to a one-time salary adjustment of $258,000 in back pay for 252 white women, 32 African-American men and eight other minorities. The back pay is in addition to $512,000 in salary adjustments Duke began paying two years ago following the department's 1996 review.

"Duke has been very cooperative and wants to correct the problems we found," said Shirley Wilcher, Deputy Assistant Secretary of Labor for OFCCP. "To avoid future pay discrepancies it will also include $250,000 in its 2000 budget for an enhanced pay monitoring system."

Duke has agreed to conduct two equity analyses under its new pay monitoring system. The first analysis will cover the last half of 1999 and the second will cover calendar year 2000. Duke will report the results of the analyses to OFCCP and will make appropriate salary adjustments, if necessary.

Duke has a contract to supply power to federal agencies and as a federal contractor is prohibited from discriminating on the basis of race, gender, religion, color, national origin, disability or Vietnam-era veteran status.

In 1971, Duke Power Co. was involved in a landmark Supreme Court case that established disparate impact as a form of employment discrimination. Duke once segregated black workers into one department. After passage of Title VII of the Civil Rights Act, Duke required black workers who wanted to transfer out of the segregated jobs to have a high school education. In Griggs vs Duke Power, the court ruled that companies discriminate when they impose requirements that appear neutral but in reality exclude women or minorities at disproportionate rates. Duke Power is a division of Duke Energy.

OFCCP, part of the Labor Department's Employment Standards Administration, enforces Executive Order 11246 and other laws that prohibit employment discrimination by federal contractors. OFCCP monitors federal contractors to ensure that they provide equal employment opportunity without regard to race, gender, color, religion, national origin, disability or veteran status and meet affirmative action requirements.

The compliance review was done by OFCCP's district office in the Mart Office Building, 800 Briar Creek Road, Suite BB-401, Charlotte, N.C. 28205; telephone (704) 344-6113.

It seems that the cash-balance plan debacle is not the first run in that Duke Energy has had with the U. S. Department of Labor. And, Duke's problems with the U. S. Supreme Court go back at least to the early 1970's.

Duke has settled a pay bias claim with 292 employees, according to The Charlotte Observer. Duke paid 257,700 dollars in salary adjustments.

Here is a quote from the story: " 'Our analysis of Duke Energy's pay data found that women and minorities in administrative, professional and management positions were receiving lower base pay than nonminority men in comparable positions,' said Labor Secretary Alexis Herman."

Here is Another quote: "In a 1971 case filed against Duke Power Co., the Supreme Court found it was discriminatory for Duke to require black workers to have a high school diploma to transfer out of a department that employed all of its black workers, the Labor Department said."

The AARP gave testimony to the Senate Health Education, Labor and Pensions Committee's hearing. "In a statement submitted for the record, AARP told the Committee that many of the conversions to cash balance pension plans have been done with little regulatory guidance and only limited notice to employees. According to AARP, large numbers of older employees are becoming aware of the negative impact that conversion to cash balance plans can have on their benefits. Older workers may see their future benefits drastically reduced, and in many cases may not earn any new benefits for a period that could last ten years. At present, legislation is pending which would require a company to provide its employees with information about the impact conversion to cash balance plans could have on their benefits. Furthermore, a number of lawsuits challenging cash balance plans on age discrimination and other grounds are pending. The courts have provided little guidance on this issue thus far. AARP promised to work with the Committee and other interested parties to make sure that cash balance pension plans fully comply with the law, and in particular the prohibitions against age-discrimination."

AARP testimony. "Many employers have used conversions as an opportunity to reduce overall plan costs. A number of issues are raised in a plan conversion. Because the plan remains a defined benefit plan, it is viewed as a plan amendment, not a plan termination. As a result, employers can avoid the steep excise taxes that would occur should an employer decide to terminate a plan and convert to a new defined contribution plan. Avoiding excise taxes is a key feature in the rise of cash balance plans." Now you see why Duke Energy wanted a conversion. Not only did they want our pension money, they did not want to pay a lot of tax on it either!

"Employees have reported reductions in their expected benefits in the tens and even hundreds of thousands of dollars. The conversion of defined benefit plans to cash balance plans raises a number of critical age discrimination issues. AARP has received numerous complaints from AARP members (over ten million of whom are employed) and other older workers regarding the lower benefits they will receive as a result of the conversion. In many instances, these reductions are based solely on age, precisely the form of discrimination that the 1986 pension accrual amendments were intended to prevent. The 'wearaway' period effectively deprives older workers of any accruals to their pension for years, directly contrary to current law age prohibitions. The 'wearaway' represents precisely the form of age-discrimination that the 1986 pension accrual amendments were intended to outlaw - older workers failing to earn additional accruals despite continued employment. Other more basic questions have been raised about the very nature of cash balance formulas. Under traditional formulas, older and longer-service workers often earn substantially greater annual accruals than their younger counterparts. The reverse is often true with respect to cash balance formulas, where the rate of accrual is based on proximity to retirement age and may therefore diminish with increasing age. If under a cash balance formula the accrual rate for older workers decreases with age, this too would conflict with the 1986 pension accrual amendments. Neither the courts nor the regulatory agencies have yet to speak definitively on these issues. Some proponents of cash-balance plans have pointed to a 1991 preamble to another IRS regulation as a defense to the charge of age discrimination. However, a recently released internal IRS memo states that it has not been established that 'a sentence in the preamble to the since replaced September 1991 regulations can take precedence over an established section of the Internal Revenue Code.' In fact, the memo went on to state that the particular cash balance plan in question "does not satisfy the clear and straightforward requirement of" the pension accrual section because the "plan's benefit accrual rate decreases as a participant attains each additional year of age." There is little doubt, however, that older workers often face drastic benefit reductions in plan conversions. A number of lawsuits are currently pending, challenging age discriminatory practices and many other aspects of cash balance plans, but as yet there is little guidance from the courts. The regulatory agencies are only now beginning to focus on the real questions that have been raised. In the meantime, there has been precious little public policy debate on a fundamental pension plan design change that affects the retirement security of millions of employees." Cash-balance plans have "age-discrimination" written all over them!

WASHINGTON, D.C. - U.S. Rep. Maurice Hinchey (D-NY) today called for strong federal protections for workers whose companies switch from traditional defined-benefit pension plans to cash-balance plans. In testimony before a Senate committee, Hinchey criticized corporations for reneging on promises made to long-time workers by reducing their pension benefits mid-career.

"While the switch to cash balance pension plans is probably a good deal for younger workers who want flexibility and portability in their benefits, these plans are often structured in such a way that older workers lose a significant amount of their final benefits after conversion," said Hinchey in his testimony before the Senate Health, Education, Labor and Pensions Committee. "In a traditional defined benefit plan, contributions rise exponentially the closer workers are to retirement, while under a cash balance plan, the rate of accrual remains basically constant throughout an employee's tenure."

Hinchey discussed his involvement in the issue since IBM announced its intention to switch from a defined benefit plan to a cash balance plan in July. IBM initially offered workers within five years of retirement the option of staying in the defined-benefit plan, but thousands of other long-time employees faced a reduced benefit under the cash-balance plan. IBM, one of the largest employers in his congressional district, announced on Friday that it would extend the option of choosing between pension plans to all workers age 40 and older with 10 years of service.

"The corporation's announcement on Friday that it would expand eligibility for staying in the defined-benefit plan is certainly good news for those affected employees. IBM's decision is certainly a testament to the activism of thousands of dedicated employees who brought attention to the issue," Hinchey said. "Nevertheless, federal law does not currently require corporations to do what IBM did. In fact, federal pension law doesn't provide many of the protections that workers should expect. While I appreciate IBM's recent decision, it does not negate the need for strong pension reform."

In his testimony, Hinchey highlighted the legislation he introduced in August, the "Older Workers' Pension Protection Act." The bill would require employers to disclose how the conversion to a cash balance plan would impact each employee's retirement account and give workers a choice, based on that disclosure, of converting to a cash balance plan or staying with the defined-benefit plan.

Hinchey's bill would also prohibit a company from discrimination against long-time workers by not contributing to their pension plans if they convert to a cash balance plan. This process is known as "wearing away." Some corporations have, after switching to a cash balance plan, stopped contributing to older employees' accounts until their benefits are equal to what they would have earned under the cash balance plan. Hinchey has met with representatives of the Internal Revenue Service and the Equal Employment Opportunity Commission and asked for a ruling on whether or not this practice violates federal age discrimination laws.

This press release listed some of the dangers and possible law violations of cash balance conversions. The points made apply directly to Duke Energy's cash balance conversion. AARP Executive Director Horace B. Deets raised questions about whether cash balance plans conflict with the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Age Discrimination in Employment Act (ADEA). He expressed his concerns in identical letters sent to Secretary of the Treasury Lawrence H. Summers, Secretary of Labor Alexis M. Herman, Internal Revenue Service Commissioner Charles O. Rossotti, and Equal Employment Opportunity Commission Chairwoman Ida L. Castro. "Boomers and mid-life workers beware," Deets said today in discussing the growing controversy over cash balance pensions.

"Many -- if not most -- of these plans conflict with age discrimination laws."

"Under cash balances, older longer-service employees often fail to accrue any new retirement benefits until the new account balance exceeds the employee's accrued benefit already earned under the old plan.

The 'wearaway' represents precisely the form of age discrimination that the 1986 amendments were intended to outlaw - older workers failing to earn additional accruals despite continued employment,' Deets wrote the Administration officials."

A controversial type of pension plan being adopted by major U.S. corporations may violate federal age-discrimination laws by cutting retirement benefits for veteran employees, according to a confidential ruling by the Internal Revenue Service that was leaked yesterday.

The IRS memo was released by Rep. Bernard Sanders, I-Vt., a vocal critic of cash-balance pensions.

This congressman and reporter are old friends of American workers. Mr. Rosenblatt has done an excellent job of covering the pension issue. Congressman Sanders has been leading the battle against the cash pension injustice.

The memo is a significant development in the growing debate because it provides the first official sign that key regulators are worried about possible abuses associated with the new plans.

Many people in the IRS have known for some time that most cash balance plans violate federal age bias laws. A lot of effort has been spent by actuarial firms promoting these plans to slip them past IRS scrutiny. Their cover is now blown. Unscrupulous actuarial firms and the CEO's who fell for the scams are scrambling in the damage control mode. They will attempt to buy their way out of this. That can only happen if the American public stands silently by and allows it to happen. Your senators and representatives are only a letter or phone call away.

The potential losers in the new programs are workers in their 40s and 50s with 15 and more years of service, whose final pensions are often reduced, according to critics. At IBM, which switched to the new plan in July, dissident workers have argued that employees with 24 years of service could find their pensions reduced by 30 percent to 50 percent.

A corporate pension-plan application was reviewed by the IRS district office in Cincinnati, which said it violates the federal rules because the pension-benefit accumulation declines for older workers. The corporation's name was blacked out in the copy of the document released yesterday.

This is true for the Duke Energy cash balance conversion also. Duke cannot hide this fact, no matter how they try to distort the truth. Some people in America have literally gotten away with murder because, they were able to buy their way out. Their crimes have gone unpunished because they were able manipulate the judicial system and no one protested. Again, this can only happen if the American public stands silently by and allows it to happen!

The IRS ruling could prompt further age-discrimination lawsuits by older workers against companies making a conversion to cash-balance pensions.

Forty members of Congress, including Sanders, have appealed to the Equal Employment Opportunity Commission, which enforces the anti-discrimination laws, and the Labor Department, to investigate cash-balance pensions.

This gives the EEOC added power to investigate age discrimination in cash balance pension conversions - for those who have filed charges (HINT, HINT).

The Charlotte Observer reported that Rick Priory's 1988 salary was 810,000 dollars. His bonus was 1,801,000 dollars, and his estimated value of stock options was 4,495,000 dollars.

AT FIRST GLANCE, it seems like major corporations are boosting their bottom lines by taking it out of the backs of their employees with a change to cash-balance pensions.

It's not the first time they've fiddled with pensions.

Once companies put money in a plan, they can't take it out without paying a hefty excise tax. But thanks to the booming stock market, many plans have more money than needed to fund benefits. So in the 1980s, companies started terminating their plans, setting up new ones with the same benefits, and keeping the extra money. It's legal, and employees really didn't lose anything - unless they expected that extra cash would be used to increase pension payments. Fat chance.

This time, many employees are losing.

Traditional pension plans reward longtime employees. If you quit after, say, 10 years, your pension was vested but your benefit upon retirement wouldn't keep you in cat food.

Work for one company until retirement, and you did much better. Most pensions pay retirees based upon their length of service and their highest wage-earning years.

Different calculations

Cash-balance plans don't calculate your pension based upon your final, and usually higher-earning, years. Each year you are with the company, the employer puts the same percentage of your salary into the pension plan.

If you change jobs after your pension is vested, you can transfer this much bigger hunk of cash into an Individual Retirement Account, or to your new employer's pension plan, if it agrees.

Companies shifting to cash-balance plans say that's why they're making the change. It's rather like the principle used by the military. They want their combat units filled with teen-agers. People that age don't really believe they will either die or get old.

Companies find it hard to use the considerable money spent on pension plans to motivate younger workers. They hope the steady buildup of the amount in the cash balance plan will be a better motivator.

But if cash-balance plans are better for the young job-hopper, they are worse for longtime workers. That's because their expected pensions are refigured as if the cash - balance plan had been in effect their entire time with the company.

In practice, that means cash-balance plans often result in smaller pensions for longtime employees.

The company also fattens its bottom line. Since fewer dollars are needed for pension obligations, it can cut that expense. And under accounting rules, while it can't draw out those unneeded pension dollars, it can use them to make its books look better. That leads usually to higher stock prices, and more money for top executives who receive stock options.

Supplemental plans for executives

Now, long-term top executives - and most of them are - also will see the value of their pensions fall with a cash - balance plan .

Not to worry about them, however. Most major corporations have special, supplementary pension plans for top executives.

Reliant Energy of Houston, which owns the electric and natural gas utilities here, went to a cash - balance plan Jan. 1 for its 13,000 or so employees.

But Reliant's latest filing with the U.S. Securities and Exchange Commission also shows a supplemental plan for "small groups of employees." It didn't say who or how many, but a good guess would be the 273 eligible for stock options. The extra pension obligation for the top employees totaled $37.7 million, the filing said.

Most companies adopting cash-balance plans say they will pay pensions to older employees as if they were in the old plan - usually those within five to 10 years of retirement. But not to those in their 40s. And that's the hidden demographic agenda to cash-balance plans.

Americans are retiring earlier than ever. Now, the majority retire at 62 or earlier. The current baby boom generation is the largest demographic bulge in history.

Coming along behind them are the baby busters, a much smaller group.

If boomers continue to retire at an early age, companies are simply not going to have enough people to replace them. They need those boomers to work to a later age - especially with the unemployment rate hovering around 4 percent.

And with a smaller pension, there is an incentive not to retire early.

Maybe, at second glance, corporations are boosting their bottom lines by taking it out of the backs of their employees with a change to cash-balance pensions.

Many utility executives are receiving higher pay because of perceived greater risk facing their companies. Duke Energy Co. Chief Executive Rick Priory received a 75 percent pay raise and a one-time grant of shares valued at $2.6 million as of Dec. 31...

Yes, Duke Energy has faced greater risk since Rick Priory has been in charge. He has a day traders mentality.

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