IRS Challenges “Greater of” Cash Balance Transitions
For the first time in eight years, the IRS is responding to determination letter requests for cash balance plans. But now the IRS is challenging some cash balance conversions that used a “greater of” formula. In a greater-of transition, participants receive benefits under the previous plan formula or under the cash balance formula, whichever gives them the bigger benefit. This is good for participants, but the IRS is claiming that these greater-of transitions violate the accrual rules that govern all pension plans. |
DOE Abandons Proposal to Restrict Defined Benefit Reimbursements to Contractors
The U.S. Department of Energy (DOE) has decided to drop a controversial proposal to stop reimbursing contractors for new employees' defined benefit coverage. Senate Approves Drug Importation Provisions
In May, the Senate approved a provision to allow the importation of prescription drugs from Canada and other industrialized countries, but a separate provision requiring the secretary of Health and Human Services to certify the safety of imported drugs would likely prevent the measure from taking effect. The developments constitute yet another point-counterpoint in the years-long legislative wrangling over prescription drug importation. Supporters vow to continue their push to legalize drug importation. IRS Proposes Mortality Tables for Pension Plan Minimum Funding Purposes Under PPA
The IRS recently proposed regulations regarding the mortality assumptions used to determine present values for minimum funding purposes under the Pension Protection Act of 2006 (PPA). In addition to establishing standard mortality tables, the guidance proposes a framework for using a plan’s mortality experience to establish a substitute mortality table and outlines the process for obtaining IRS approval. PBGC Proposes Changes to Variable-Rate Premium Calculations
The Pension Benefit Guaranty Corporation (PBGC) recently proposed changing the calculations that determine variable-rate premiums under the Pension Protection Act of 2006 (PPA). The proposed changes would take effect for 2008 premium payment years. IRS Addresses Midyear Changes to 401(k) Safe Harbor Plans
In Announcement 2007-59, the IRS clarifies that a plan will not fail to be a 401(k) safe harbor plan merely because of midyear changes to implement a qualified Roth contribution program or the hardship withdrawals relating to a primary beneficiary described in Notice 2007-7. Senate Subcommittee Holds Hearing on Taxation of Stock Options
On June 5, the U.S. Senate Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations held a hearing on executive stock options. The hearing focused on the mismatch between the expensing of stock options for financial reporting purposes and the tax treatment of those options. IRS Issues Final Roth 401(k) Regulations
The IRS has issued Roth 401(k) final regulations that address the taxation of distributions, rollovers, reporting and recordkeeping. The final regulations generally adopt the provisions of the proposed regulations with some modifications. Retirement Issues Remain on Legislative Agenda
After the drawn-out and arduous pension reform debate preceding enactment of the Pension Protection Act (PPA) last summer, Congress is unlikely to pursue new pension legislation this year. However, lawmakers are discussing a variety of retirement issues. IRS Finalizes Restrictions on NRA in Pension Plans
The IRS recently released final regulations on phased retirement that restrict a plan’s normal retirement age (NRA) to an industry-based typical retirement age and establish certain safe harbors for in-service distributions.
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