However, I'll go on record as saying that I get terrifically peeved when Congress manages to take perfectly good legislation and bury something in it that's no good for us. And, thanks to The Wall Street Journal, we now know that mutual-fund giant Fidelity Investments is using its web site to tempt its millions of investors into blindly supporting a piece of legislation that even I thought - until now - was good for most of us.
Here's why you may want to scrutinize this pitch very, very carefully.
Soured Retirement Goodies
In its September 15 issue, the Journal noted that Fidelity Investments is making it easy for its clients to pending legislation that would up the tax-advantaged annual limit on individual retirement account contributions to $5,000, and the yearly maximum 401(k) contribution to $15,000. By logging in to http://web100.fidelity.com:80/pensioninc... clients can link right into the site of the Securities Industry Association (SIA), where they can fill out a form letter of support for e-mailing to their senators.
Yet, as the Journal pointed out, buried in these terrific proposals is a provision that would protect companies from legal challenges if they switch from traditional to cash balance pension plans. (And let's not single out Fidelity. Many businesses out there with a stake in the retirement planning industry are solidly behind this legislation.)
If you don't already know, this newer type of plan is generally acknowledged by experts to reduce the potential pension benefit of many older workers. That's because traditional plans are fashioned to retain employees by yielding up to half the final benefit in the last five to 10 years at work. Cash balance plans, on the other hand, are designed to benefit today's more mobile work force by allowing employees to accumulate benefits steadily throughout their tenure on the job.
No, there's nothing wrong with the cash-balance concept in the midst of today's changing work force. In fact, many younger, job-hopping workers may end up with a better retirement thanks to the concept. But the problem arises when classes of older employees are not "grandfathered" in their traditional plans once a conversion to cash balance takes place. And that's where the well-publicized court challenges have arisen. To protect companies from these challenges is nonsense. Even more infuriating is how this protection wound up in the middle of a good piece of legislation in the first place.
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