As a result, as much as half of a person's pension is earned in the last five years on the job. And it is portable when the employee leaves. But for those nearing retirement, the amount is far less. This is one way companies save money with the switch. The other is a bit more complicated.
Companies can also benefit from the way they invest the assets in the cash-balance accounts.
This is why the switch makes pension plans self-funding for many companies. Although employers can do this with regular pensions, the savings are greater and easier to measure in cash-balance plans. The savings often transform an underfunded pension plan into one that is fully funded. Motive for the Move Employers, however, are almost universally reticent about how they benefit. Sure, the move resulted in substantial cost savings, he says, but the company's goal was to become more competitive and adapt to changing times.