[Federal Register Volume 64, Number 202 (Wednesday, October 20, 1999)]
[Notices]
[Pages 56578-56579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27148]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service


Defined Benefit Pension Plans; Solicitation for Comments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Solicitation for comments.

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SUMMARY: The IRS and the Department of the Treasury are seeking public 
comments regarding potential issues arising under their jurisdiction 
with respect to retirement plans known as cash balance pension plans 
(``cash balance plans''), particularly with respect to conversions of 
other types of defined benefit pension plans into cash balance plans. 
The purpose of these comments is to provide the IRS and Treasury with 
information that may be taken into account in their analysis of these 
issues.

DATES: Comments are requested on or before January 19, 2000.

ADDRESSES: Send written comments to: Internal Revenue Service, Attn: 
CC:DOM:CORP:R (Cash Balance Plans and Conversions), Room 5226, P.O. Box 
7604, Ben Franklin Station, Washington,

[[Page 56579]]

DC 20044. Written comments may be hand delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to: Internal Revenue Service, 
Courier's Desk, Attn: CC:DOM:CORP:R (Cash Balance Plans and 
Conversions), 1111 Constitution Avenue, NW, Washington, DC 20224. 
Alternatively, written comments may be submitted electronically via the 
Internet by selecting the ``Tax Regs'' option on the IRS Home Page, or 
by submitting them directly to the IRS Internet site at: http:
//www.irs.gov/tax__regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Mr. Kenneth M. Griffin, (202) 622-4604 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    A cash balance plan is a defined benefit pension plan that 
typically defines an employee's retirement benefit by reference to the 
amount of a hypothetical account balance. In a typical cash balance 
plan, this account is credited with hypothetical allocations and 
interest that are determined under a formula set forth in the plan. The 
crediting of hypothetical allocations and hypothetical interest has 
been described as resembling the allocation of actual contributions and 
actual earnings to an employee's account under a defined contribution 
plan, such as a profit-sharing plan.
    In recent years, existing defined benefit plans covering a 
significant number of employees have been changed into cash balance 
plans. This change, made by amending the existing plan, is commonly 
referred to as a conversion. In a conversion, the new cash balance 
benefit formula generally applies to new employees and may also apply 
to employees who had already earned benefits under the plan before the 
conversion. The law protects benefits earned before the conversion by 
prohibiting a plan amendment that reduces those benefits.
    In some conversions, however, employees who had already earned 
benefits may not earn additional retirement benefits for varying 
periods of time after the conversion. This effect, often referred to as 
a ``wear-away'' or ``benefit plateau,'' continues until an employee's 
benefit under the ongoing cash balance formula ``catches up'' with the 
employee's protected benefit.

Comments

    The IRS and Treasury invite public comments regarding potential 
issues under their jurisdiction with respect to cash balance plans, 
conversions of traditional defined benefit plans to cash balance plans, 
and associated wear-away or benefit plateau effects. All comments 
submitted will be made available for public inspection and copying, 
although the comments will not be individually acknowledged. Therefore, 
commentators should refrain from including personal tax information or 
other information that they believe should not be publicly disclosed.
    The IRS and Treasury would like to receive comments from the full 
range of parties with interests in cash balance and similar plans, 
including employees, employers, and their representatives. The review 
of the legal issues relating to cash balance and similar plans is being 
coordinated with the agencies that have concurrent or overlapping 
jurisdiction over other Federal laws (such as the Age Discrimination in 
Employment Act (ADEA) and Employee Retirement Income Security Act 
(ERISA)). Accordingly, copies of comments received that relate to those 
laws will be provided to the appropriate agencies.

    Dated: October 13, 1999.
Nancy J. Marks,
Acting Associate Chief Counsel, Employee Benefits and Exempt 
Organizations, Internal Revenue Service.
[FR Doc. 99-27148 Filed 10-19-99; 8:45 am]
BILLING CODE 4830-01-U