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Entries in Cash Balance Plans (1)


Hybrid (Cash Balance/Pension Equity) Plan Regulations: Market Rate Amendments

In October the IRS released regulations, in final and proposed form, intended to provide clarity in the utterly complicated area of hybrid pension plans, the two most common of which are cash balance plans and pension equity plans.  These new regulations address:  

  • "market rate" of return limits for interest credits;
  • anti-wear away protections for cash balance plan conversions;
  • relief from the requirement to perform "whipsaw" calculations in determining lump sum distributions;
  • benefit designs that satisfy age discrimination rules;
  • three-year mandatory vesting; and 
  • new definitions and effective dates for conversion amendments.

The final regulations are generally effective for plan years beginning on or after January 1, 2011, but the proposed market rate of return standard is delayed for one year (plan sponsors may rely on this and other prior guidance before then).  Sponsors of cash balance and other hybrid plans should consult plan actuaries or legal advisors to determine how these new regulations impact their plans.

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