Washington (June 18, 2004) -- The Treasury Department and the Internal Revenue Service this week announced the withdrawal of proposed regulations on cash balance pension plans and cash balance conversions.
The regulations, which were proposed in December of 2002, would have applied the statutory age-discrimination rules to cash balance plans and cash balance conversions. The Treasury and the IRS will not publish new age-discrimination guidance for cash balance plans or other hybrid plans while these issues are under consideration by Congress.
The Treasury said that the regulations are being withdrawn to provide Congress an opportunity to review and consider a legislative proposal on cash balance plans that was included in the administration's budget for fiscal year 2005. The legislative proposal would require a five-year "hold harmless" period for current employees following a cash balance conversion, would ban benefit "wear-away" after a cash balance conversion, and would clarify the legal status of cash balance plans and other hybrid plans.
The Treasury said that it received thousands of comment letters on the proposed regulations, including comments from older and longer-service employees who said that they had been adversely affected by cash balance conversions. Other comments raised employer concerns that the regulations would create issues for certain traditional defined-benefit plans that hadn't previously been considered age-discriminatory.
-- WebCPA staff
