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Cash Balance Plans and the Distribution of Pension Wealth
Author(s) -
Johnson Richard W.,
Uccello Cori E.
Publication year - 2003
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/1468-232x.00314
Subject(s) - balance (ability) , pension , cash , pension plan , economics , business , distribution (mathematics) , sample (material) , actuarial science , labour economics , finance , medicine , chemistry , chromatography , physical medicine and rehabilitation , mathematical analysis , mathematics
Recent pension plan conversions by numerous large employers have sparked debate about the merits of cash balance plans. This article compares pension wealth in traditional defined benefit (DB) plans and cash balance plans for a national sample of covered Americans aged 51 to 61. The simulations indicate that replacing DB plans with cash balance plans would redistribute pension wealth from those with long‐term jobs to those with multiple short‐term jobs and from those with substantial pension benefits to those with more limited benefits. Perhaps unexpectedly, women at midlife in 1992 with DB coverage would lose wealth in cash balance plans, but future cohorts of women are likely to fare better.