PENSION PLAN FRAUD MAY BE ON THE RISE

As has been widely reported in the media, in order to increase profits and decrease expenses, many United States corporations have converted their traditional pension retirement plans to 401(K) plans. Under the traditional pension plans offered to most employees by corporations in the past, employees would obtain retirement benefits after a certain number of years of service. Benefits were typically calculated based upon the number of years of the employment with the company and based on the employee’s annual pay. Some of the new plans that are being offered corporate America, however, involve cash balance plans which combines some of the attributes of a private 401(K) plan and a pension plan. Regrettably, many companies are converting the old defined benefit retirement plans to cash balance defined benefit plans at employee expense. Litigation has already commenced in Federal District Court in a variety of jurisdictions in which it is alleged that companies have improperly calculated employee benefits under the new cash balance plans and during the conversion process have essentially defrauded employees by reducing the benefits they would otherwise have received.
If you are any member of your family is recently retired and the company for whom they were employed has converted a defined benefit retirement plan to a cash balance defined benefit plan, such an employee or family member may wish to consult with an attorney to make sure that the calculation of their retirement benefits is made according to the requirements of the law. Regrettably, even though the law requires an accurate accounting for the conversion process, given the large amounts of money involved, some corporations have attempted to cheat their employees by calculating benefits in a manner favorable to the corporate entity and not to the employee. This practice needs to be addressed in litigation and as indicated, litigation has already commenced in several districts in which the regrettable practice of improper calculation of the employee benefits has occurred.

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