In September IBM Corp. settled a case with current and former older workers over the company's switch from a traditional pension plan to a cash-balance plan. We asked AARP's director of federal affairs, David Certner, to discuss AARP's efforts to stop the erosion of pension benefits.

What is AARP's position on cash-balance plans as opposed to traditional pensions?
AARP believes that cash-balance plans—such as the one IBM implemented—violate current age discrimination law. When a traditional plan converts to a cash-balance plan, older, longer-service workers—in the absence of any transition protection—generally experience significant reductions in their expected pension benefits. We think the law should be clarified to ensure that older workers are protected when any pension plan changes to a cash-balance plan.

What are the implications of the IBM settlement?
IBM's partial settlement with workers—as well as a recent vote in Congress to prevent the U.S. Treasury from overturning this case and a five-year IRS moratorium on cash-balance conversions—sends a strong and unmistakable signal that such plans have legal problems and must be modified to protect older workers. In the IBM case, the federal court generally agreed with AARP that cash-balance plans violate age discrimination law and disadvantage older workers. Regardless of how the IBM appeal is eventually settled, AARP believes that Congress must act to clarify the law and protect longer-service and older workers.

Some companies say they simply can no longer afford traditional plans. Employers remain free to modify their plans to meet the changing needs of the workplace. However, changes must be made within the law to prevent age discrimination.

What will AARP do in the coming months to protect the pensions of older workers?
AARP will work with Congress and federal agencies to ensure that older workers are protected in any cash-balance conversion. One solution already adopted by many companies is to permit older workers to remain under the old plan formula. Congress should ensure good corporate practices. AARP will also weigh in with the courts when appropriate.