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ASPPA, COPA Weigh In On Proposed Hybrid Regs

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Experts at the American Society of Pension Professionals & Actuaries and the College of Pension Actuaries have submitted detailed comments on proposed hybrid pension plan regulations.

The draft, released by the Internal Revenue Service in December 2007, would give guidelines for employers that want to allocate defined benefit pension benefits one year at a time, rather than using formulas that assume an employee will stay at the employer for many years.

The proposed IRS regulations “are a welcome step for practitioners who must implement and administer hybrid defined benefit pension plans,” members of the defined benefit subcommittee at ASPPA, Arlington, Va., and representatives of COPA, Oak Brook, Ill., write in the comments.

But the pension experts list 19 recommended changes, dealing with matters such as conversions to hybrid plan designs, interest crediting issues, calculation and selection of market rate of return benchmarks, and miscellaneous issues.

In a section on market rate of return, for example, the pension experts recommend that the IRS permit the use of a fixed rate of return, such as 5%, and that a plan be permitted to use an interest crediting rate based on a combination of published stock and bond indices, as well as the return on a well-diversified asset-allocation mutual fund.