The Cash Balance Retirement Plan Conversion - A Fully Supported Case

Abstract

Abstract: This case deals with a current issue facing many mid-career employees as their companies adopt cash balance plans in lieu of the traditional pension plans. If they have a choice, should they stay in the old plan or enroll in the new plan? If not, how will their retirement be impacted by the change? All employees affected by such a conversion may have similar concerns. Accountants will be asked to resolve these dilemmas because they are generally the best informed about the traditional plans, and they have the skills necessary to weigh the alternatives. Working this case will give students the opportunity to develop their professional skills. The objective is for students to use their knowledge of pensions and time value concepts in an ambiguous context, where the need to make numerous assumptions and to consider their impact on the possible outcomes will demand careful analysis. A second but not secondary objective is to develop spreadsheet skills so that they can not only answer specific questions but also perform sensitivity analysis around their assumptions. Support Materials: This case is fully supported with teaching notes, as well as two Excelâ„¢ spreadsheet templates which provide a comprehensive basis for case analysis and discussion.