The U.S. Senate on CB voted to block

WASHINGTON, Oct 23 (Reuters) - The U.S. Senate on Thursday voted to block the Treasury from issuing regulations allowing companies to convert from traditional pensions to cash balance plans in a way that hurts older workers.

The voice vote follows a similar move in the House of Representatives, which last month forbade the Bush administration from trying to overturn a court ruling against a switch to a cash balance plan by International Business Machines Corp. (nyse: IBM - news - people)

"Withdraw this regulation," Iowa Democrat Sen. Tom Harkin said in support of his amendment to an annual spending bill that funds the Treasury department. "We must not let this age- discriminatory practice resume."

The Senate action would stop the Treasury finalizing the proposed cash balance plan regulations that were issued late last year.

The House measure was also attached to a spending bill and negotiators from both chambers will have to reconcile the two.

Benefits in traditional pension plans are typically based on a formula that factors in the length of employees' service and their highest salaries earned over the years, which tends to boost the payout for older workers.

In a cash balance plan, however, an employee's average salary over the years and contributions by the company are deciding factors.

While employers can save money by converting from traditional defined benefit pension plans to cash balance plans, older workers complain their pensions are reduced as a result.

A federal judge in Illinois ruled in August that IBM's switch to such a pension plan in the 1990s discriminated against older employees.

Harkin stressed that he was not trying to stop all cash balance plans -- just conversions that would hurt older employees. The cash balance regulations as proposed by Treasury would "turn the clock back" and "wear away the pensions of older workers," he said.

A Treasury spokesman could not be immediately reached for comment. Last week, legal journal Tax Analysts reported that Treasury might be backing off releasing the cash balance regulations.

Copyright 2003, Reuters News Service