An audit by the U.S. Labor Department reveals that one in five companies with hybrid "cash balance" pension plans is shortchanging workers who move on to other employers, according to the Washington Post.
Hundreds of corporations converted their workers' traditional pensions to cash-balance plans in the 1990s, arguing it would improve benefits for workers who changed jobs often.
But the audit, conducted by the Labor Department's inspector general, turned up evidence that the contrary is happening -- workers who leave for other jobs are receiving less than they should.
The underpayments could cost some workers as much as $100,000 over their working lives, a report based on the audit concludes.
The audit "proves that a number of companies are illegally slashing the pension benefits of their employees by hundreds of millions of dollars every single year by shifting to cash-balance plans," said Rep. Bernard Sanders (I-Vt.), a longtime critic of cash-balance plans.
The underpayments, which appear to be accidental, in most cases occur when employers incorrectly compute the benefits a departing worker has earned under the plan, the audit said.
The Labor Department's Pension and Welfare Benefits Administration, which oversees pension plans, said enforcement action should be taken against offenders, but that the Internal Revenue Service must confirm the underpayments. The findings were sent to the IRS in February.
Cash-balance conversions, which have become popular with corporations in recent years, are controversial because in many cases they result in lower benefits to long-serving employees.
A conversion by International Business Machines Corp. touched off widespread protests from workers that led to congressional hearings and greater government attention to the plans.
The audit noted that there are no hard numbers on cash-balance conversions, but estimates put the total at 300 to 700 since the mid-1980s. The audit looked at 60 plans. The companies were not identified.
