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CASH-BALANCE RETIREMENT SYSTEMS ACCOMMODATE JOB-HOPPERS

Noli Kay Bentley's strategy for retirement involves some intense 401(k) action and buying her company stock as fast as she can.

She knows she'll get a pension, but it's an afterthought. Her other savings dwarf the value of her pension, so she doesn't think about it.

Unless you're hanging on the edge of that cliff looking at the green valley of retirement, the value of your pension likely isn't on your radar screen.

But it's probably on your employer's. An increasing number of companies are considering a drastic change in pension benefits that has kicked up controversy and challenges in Congress.

Ms. Bentley's employer, First Chicago NBD, made the switch about three years ago to a cash-balance-style pension plan. Now that Bank One Corp. has bought NBD, the cash-balance plan continues for Ms. Bentley, a senior appraiser in the bank's Indianapolis real estate appraisal group.

The traditional kind of pension plan has always been a reward for loyal workers who have stayed with the company for most of their career.

Once those loyal workers make the jump to retirement, they can count on monthly payments until they die.

The amount in a pension usually is based on the worker's years at the company and highest salary in the last five years of employment. To get the big payoff, you have to be with the company for a long time.

Now that we've become a nation of job-hoppers, the newfangled cash-balance plan has become more popular.

It works like this: Employers make a contribution -- usually equal to 3 percent to 7 percent of the worker's salary -- into a cash-balance account with a guaranteed rate of return, often tied to the yield of U.S. Treasury Bonds.

The company contributes the same percentage each year, and there's no big windfall at the end.

Workers don't have to wait until retirement age to collect, either. They can cash out the cash-balance account in a lump sum when they leave the company.

But those who do this must pay income taxes on the lump sum plus a 10-percent penalty if they cash out before reaching age 59 1/2 . They can avoid the penalty by rolling the money into an Individual Retirement Account.

The cash-balance plan works best for younger workers, according to the actuaries who analyze pensions. For the older worker who has put in the time to earn the big payoff, the traditional plan may be better.

Take these examples from a study conducted by the Society of Actuaries.

Our younger worker is 26 to 30 years old and has been at the job for five to 10 years, making $29,425 at termination. Under a traditional pension plan, the value of the worker's average pension would be $1,116 . But under a cash-balance plan, the worker would end up with an average of about eight times as much, $8,240, in his or her account.

But not so for our older worker.

Consider one who is 56 to 60 years old and been with the company for 21 to 25 years, leaving at a salary of $38,988. The pool of money, from which his traditional pension is drawn, would on average total $76,482. His cash balance? Just $47,218. Z

Many companies have tried to soften that blow for their older or longer-service workers by either offering to keep them in the old plan or tagging on incentives.

At Bank One, where Ms. Bentley works, workers whose age and years of service totaled 65 could stay in the old plan. Those whose age and years of service totaled 55 received additional funds put in their cash-balance accounts, said Tom Kelly, Bank One spokesman.

The company also increased the match it provided for 401(k) savings, and offers a stock purchase plan that guarantees a 15 percent rate of return.

Kelly said the bank was looking for an incentive that would appeal to newer workers who move around more. The bank hires about 25,000 employees each year.

"This is easier to understand, easier to take with you," Kelly said.

Ms. Bentley has been with the bank since May 1996. She says she paid little attention when the company made the switch to cash balance -- "I'm not a 20-year employee."

But she does like knowing that she could cash her pension out if she changes jobs.

"I'm not sure of all the exact details ... but you can take it with you, it is portable, and that's definitely one of the attractive parts," said the middle-aged Ms. Bentley.

"The more control I have, the better I feel," she said.

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