NU Online News Service, Sept. 29, 2004, 4:33 p.m. EDT
The Internal Revenue Service is updating the defined benefit pension plan tax form to help employers who sponsor cash-balance plans.[@@]
The move, discussed in IRS Announcement 2004-80, affects the 2003 Form 5500 Schedule B.
Sponsors of defined benefit pension plans use the form to give the IRS information about plan contributions.
Sponsors of traditional DB plans calculate contributions using a formula that assumes employees will work for the same company for many years. The formula lets employers make smaller contributions for newer employees than for employees with more years of service.
Sponsors of cash-balance DB plans calculate contributions 1 year at a time. They use a contribution formula that produces the same results for old employees and new employees.