NU Online News Service, June 16, 2004, 8:04 p.m. EDT – The Bush administration has decided against trying to use regulations to control conversions of traditional defined benefit pension plans to cash-balance formulas.[@@]
The Internal Revenue Service has withdrawn a proposed regulation released in December 2002 that would have provided guidance for employers conducting cash-balance plan conversions.
The Bush administration is withdrawing the proposed regulation to support congressional efforts to address the cash-balance conversion issue through legislation, the IRS says in Announcement 2004-57.
A proposal in the administration’s fiscal year 2005 budget would require companies converting to cash-balance plans to protect current employees through a 5-year “hold harmless” period. The proposal also would prohibit any benefit wear-way, set rules for interest crediting rates and set rules to protect sponsors of cash-balance plans from age-discrimination charges, the IRS says.
Rep. John Boehner, R-Ohio, chairman of the U.S. House Education and the Workforce Committee, says the committee will hold hearings on cash-balance conversions in July.
“Unfortunately, the ongoing uncertainty about cash-balance plan conversions is undermining the retirement security of American workers and jeopardizing employers’ willingness to continue offering defined benefit plans to their employees,” Boehner says in a statement about the issue.
The committee wants to come up with responsible solutions that will preserve the integrity of the defined benefit pension system, Boehner says.