The Internal Revenue Service (IRS) has published final regulations relating to hybrid retirement plans and started the process of writing additional hybrid plan regulations.

At traditional defined benefit pension plans, sponsors base benefits on a formula that assumes workers will spend many years participating in the plan. The final hybrid retirement plan regulations deal with cash balance plans and other types of plans insured by the Pension Benefit Guaranty Corp. that use a formula in which the right to pension benefits on a year-by-year basis, without regard to an employee’s future service.

The new final regulations build on guidance given in IRS Notice 2007-6 and on proposed regulations published in 2007.

The regulations define terms such as “statutory hybrid benefit formula” and “lump-sum-based benefit formula.” They also create a safe harbor to protect plan sponsors against charges of age discrimination, deal with crediting rate limits based on the market rate of return, and set rules governing how sponsors ought to treat participants affected by plan conversions.

Some parts will apply to plan years beginning on or after Jan. 1, 2011, and others will start to take effect Jan. 1, 2012.

The hybrid retirement plan proposed regulations would deal with many technical issues not settled in the final regulations, such as treatment of hybrid plans that adjust benefits using a variable rate, officials say.

The IRS expects to hold a hearing on the proposed regulations Jan. 26, 2011. Written comments are due Jan. 12, 2011.