WHEREAS:

Most public employees are covered by defined benefit pension plans, which provide a predetermined retirement benefit, usually by formula. In contrast, defined contribution plans provide only a predetermined contribution rate. In recent years, numerous private sector employers have replaced their defined benefit plans and some public employers are following suit; and

WHEREAS:

More recently, hundred of companies have converted their defined benefit pension plans into a relatively new type of plan - the cash balance plan. A cash balance plan is a hybrid plan that has characteristics of both defined benefit and defined contribution plans. Under cash balance plans, benefits accrue more evenly over the full career of the employee than in a traditional defined benefit plan, under which retirement earnings are greater in later employment years. Therefore, conversion from a traditional defined benefit plan to a cash balance plan can result in a substantial loss in retirement income, particularly for older, longer term workers; and

WHEREAS:

Many employers converting to cash balance plans and defined contribution plans are motivated by a simple desire to reduce employment costs under the guise of "pension portability." In particular, public employers who have failed to adequately fund defined benefit plans may seek to convert to defined contribution or cash balance plans. Because public employers are not covered under ERISA, in some circumstances, conversion to cash balance plans may allow an employer to escape the unfunded pension liability owed to employees at the expense of employees' retirement security.

THEREFORE BE IT RESOLVED:

That AFSCME continue to oppose the replacement of existing defined benefit plans with defined contribution plans and to monitor the development of cash balance plans to ensure that public employees' retirement income is protected; and

BE IT FINALLY RESOLVED:

That AFSCME International continue to provide educational materials and technical support on defined benefit, defined contribution, and cash balance plans.

SUBMITTED BY:

Jeannette D. Wynn, President and Delegate
AFSCME Council 79
Florida