The Internal Revenue Service is trying to clarify what it considers to be the limits on pension plan provisions that may lead to backloading.

IRS officials have given their views in Revenue Ruling 2008-7, which deals with a question about minimum vesting standards at pension plans and accrued benefit requirements.

In the ruling, officials answer a question about the method an employer uses to compute pension benefits after converting a traditional, “whole career formula” pension plan to a “fund one year at a time” cash balance plan.

The employer converted the plan before the new Pension Protection Act of 2006 plan conversion rules took effect.

The employer lets plan participants choose between the greater of the benefit under a continuation of the pre-conversion plan formula for a limited number of years after the conversion date and the benefit under the new cash balance formula, officials write.

In some cases, officials warn, relatively subtle changes in the methods used could cause the plan to violate federal pension requirements.

Plans that have received a favorable determination letter from the IRS by Feb. 19 and some other plans may qualify for relief from the accrual formula requirements, officials write.

A copy of the revenue ruling is available