A cash balance plan operates like an individual account plan, but, instead of the employee choosing between different investment options, there is a fixed rate of return. Unfortunately, the underlying legal rules are somewhat complex, and this discourages the adoption of cash balance plans by small employers. A second general problem with current law in the pension area arises, in part, from our changing economy. Traditional employer-employee relationships are evolving. There is a growing use of employer leasing.
Many companies have hundreds, or even thousands, of contractual arrangements for services.
Work may be done long-distance, often by phone or computer. This standard evokes images of factory work a hundred years ago. It is not easy to apply to a large enterprise, with hundreds or thousands of subcontractors and suppliers, and a variety of professionals working in different roles. This noble concept has proved elusive in practice. In the view of this author, the present nondiscrimination and coverage rules produce enormous work for actuaries and consultants, with little benefit to employees and employers.