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To: Chispas who wrote (34199)	7/25/2005 11:51:59 PM
From: RealMuLan	Read Replies (2) \| Respond to of 116555

Pensions Freezing Out Younger Workers Sunday July 24, 3:34 pm ET Companies Looking to Cool Their Pension Problems Are Freezing Benefits of Younger Workers NEW YORK (AP) -- Companies looking to cool their pension problems are freezing benefits for the workers least likely to complain. This means cutting off new employees, or a combination of new employees and workers of a certain age -- often those under 40. Only people ages 40 and over are covered by federal age-discrimination labor laws, an area of growing concern to employers who are still reeling from age-discrimination lawsuits over so-called cash-balance plans. Hewlett-Packard Co. is the latest in what appears to be a growing number of companies freezing their pensions for select workers. Earlier this week, the technology giant said it will freeze pension benefits based on age and tenure starting next year. Workers whose combined age and tenure equal a minimum of 62 keep their pension benefits intact. The pension freezes for everyone else, who retain the benefits they have already accumulated but lose the potential for further accruals. Federal law protects workers from losing a benefit they have already earned, but not from losing the promise of future benefits. Companies that have taken similar actions in recent years include NCR Corp., Sears Holding Corp., International Business Machines Corp. and Motorola Inc. NCR froze pension benefits for workers under age 40 starting last September, and stopped offering its pension to new hires. Sears also stopped benefits for new workers and current employers under age 40 in 2004, but then changed course after its merger with Kmart. It announced this year that it will freeze plan benefits for all employees starting in 2006. IBM and Motorola, meanwhile, both shut their pension plans to new workers at the start of 2005. In the past, employers that sought to freeze pensions would generally do it to all employees, pension experts said. Employers that wanted to protect a segment of workers from losing future pension benefits would typically focus on people ages 50 and up. In more recent years, companies looking to freeze their pensions would generally have considered freezing them and then converting them to cash-balance plans, said Craig Copeland, a senior research associate with Employee Benefits Research Institute in Washington. The legality of cash-balance conversions is currently unclear, however, and employers are fearful of taking that route. Cash-balance plans are a type of defined-benefit plan, but they operate differently from traditional pensions. When a pension is converted to a cash-balance plan, the final benefit under the new plan can be calculated in such a way that older workers are hurt more than younger workers. "There was a period of conversion; that was the fad. Then there were bankruptcies, and now more people are freezing," said Copeland. Now, employers that seek to freeze their pension plans are simply moving workers to the 401(k), said Sylvester Schieber, U.S. director of benefits consulting with Watson Wyatt in Arlington, Va. At the same time, they are being more cautious about who gets cut. Recent lawsuits over cash-balance plans have employers feeling "exposed to potential court cases and age discrimination laws," he said. Employers dismiss the notion that they are concerned about claims of age discrimination. "We recognize that those over 40 have a shorter retirement planning horizon," NCR said. It's unclear how many companies have frozen their pensions and moved workers to 401(k) plans in recent years. Unlike other forms of termination, pension freezing isn't a reported event, said a spokesman for the Pension Benefit Guaranty Corp. What is known is that the percentage of companies with a frozen or terminated plan rose sharply in 2004, to 11 percent from 7 percent in 2003, 6 percent in 2002, and 5 percent in 2001, according to data from consulting firm Watson Wyatt. In addition to freezing, companies can also terminate their plans. In order to do that, however, they would need to either be in dire straits financially -- as UAL Corp. was when it dumped its pension earlier this year -- or able to fully fund the plan at the point of termination. Few companies are in a position to terminate, said William Arnone, a retirement expert with Ernst & Young in New York. As a result, freezing is expected to gain momentum in coming years, he said. Employers who freeze can still take their time to make up their existing pension shortfalls. At the same time, they eliminate a big chunk of the costs associated with paying future benefits. biz.yahoo.com