Cash Balance Plans and the Distribution of Pension Wealth

Recent pension plan coversions by numerous large employers have sparked debate about the merits of cash balance plans. This paper compares pension wealth in traditional defined benefit (DB) plans and cash balance plans for a national sample of coverred 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 ad midlife in 1992 with DB coverage would lose wealth in cash balanace plans, but future cohorts of women are likely to fare better.