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Who protects participants in cash-balance pension plans? It isn't the Labor Department. Last month, a report by the Department's Inspector General, concluding that some plans short-changed workers, said Labor's Pension and Welfare Benefits Administration could do more. PWBA replied that the responsibility for issuing regulations falls to the Treasury Department.

Now critics of cash-balance plans say the Treasury isn't much help, either. A recent meeting of Capitol Hill staffers with Treasury and Internal Revenue Service officials left some staffers with the impression that federal officials are backing away from a six-year-old notice that adds to the pensions workers might have received.

"It definitely seems like [the Labor Department] is looking at the IRS, but the IRS is saying, 'we're not sure what the law is'," says one Democratic staffer.

Put simply, Notice 96-8 sets the interest rates used to calculate the amounts workers receive from their cash-balance plans. Depending on the rate used, workers could end up with more or less in their plans. The Inspector General's report found 20 percent of audited firms under paid workers by not following the notice. The Department has been considering how to deal with cash-balance plans for two years. A Treasury official notes that the notice was never enacted and provides only guidance for employers. But a Treasury spokeswoman says officials never said at the meeting that they would outright overturn 96-8.

Cash-balance critics point to court cases that found Notice 96-8 is the law of the land, adopted or not. J. Mark Iwry, a former Treasury official, says regulators have it tough. "Labor and Treasury/IRS aren't at fault. Their dilemma is that Congress, without having clarified the statute, is leaving it to regulators to fit the square cash-balance peg into a round hole," he says.

Employers are leaning on Treasury to go easy on the plans, while critics continue to hammer. The scrutiny comes "at a pretty crucial time" in Treasury's consideration of the issue, says the Treasury official. Employer groups say the controversy is overstated and the Inspector General's report is flawed. Still, they agree that the confusion needs to be resolved. "It's one of the gray areas, and that doesn't help anybody," says James Delaplane of the American Benefits Council.