It's a No-Win Situation for Cash Balance
Pensions & Investments (06/25/01) p.1; Anand, Vineeta

The Internal Revenue Service (IRS) is cracking down on cash balance plan sponsors for giving their employees the option to choose their retirement packages. The IRS has reinterpreted the rules governing cash balance plans and has begun penalizing companies that automatically give some of their older, longer-tenured employees the most profitable plans. The action comes shortly after some employers converted traditional defined benefit plans to cash balance plans, which significantly reduced retirement benefits for mid-career employees. The IRS contends that companies that allow their employees to choose between the two options must ensure the combined plans pass a difficult test, the purpose of which is to make sure that employers do not "backload" benefits by offering premium benefits at the end of their employees' work careers and give little in the earlier years.


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