Many companies are changing their traditional employee pension plans to so-called cash bal...

Many companies are changing their traditional employee pension plans to so-called cash balance plans. The graph shows pension accrual by age for two hypothetical plans.†

(a) Assuming that you can take your accrued pension benefits in cash when you leave the company before retirement, for what age group is the cash balance plan better?

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(b) At what age is the accrued amount the same for either type of pension plan?

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(c) If you remain with the company until retirement, how much better off are you with a traditional instead of a cash balance plan?

†Data from Steve J. Kopp and Lawrence W. Sher, The Pension Forum, Vol 11, No. 1. Graph from “What if a Pension Shift Hit Lawmakers Too?” by M. W. Walsh, New York Times, March 9, 2003. Copyright © 2003 The New York Times Co.