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NEWS RELEASE
June 6, 2008
Council testifies before IRS: proposed hybrid plan regulations should provide more clarity, flexibilityWASHINGTON, D.C. — At an Internal Revenue Service hearing today on proposed guidance with respect to hybrid retirement plans, the American Benefits Council urged the agency to provide clarity on a number of issues for hybrid defined benefit plan sponsors.Kent Mason, a partner with Davis & Harman, LLP, testified on behalf of the Council and emphasized the critical importance of flexibility for plan administration. As the Council's March 27, 2008, comment letter to IRS illustrated, employers have a number of concerns with the proposed regulations: A reasonable interpretation standard: The regulations are proposed to be effective for plan years beginning on or after January 1, 2009. We strongly urge Treasury and IRS to clarify that prior to such regulatory effective date, a plan will be treated as having complied with the law if the plan complies with a reasonable interpretation of the applicable statutory provisions. Otherwise, the proposed regulations will function effectively as temporary regulations since they would provide the only clearly acceptable means of compliance before the issuance of the final regulations. Market rate of return: Under the Pension Protection Act of 2006 (PPA), an "applicable defined benefit plan" is treated as failing to satisfy the applicable age discrimination rules unless the plan provides that any interest credit (or an equivalent amount) shall not exceed a market rate of return. The issues regarding what constitutes a market rate of return are critical issues for hybrid plans. The age discrimination safe harbor: The new safe harbor applies differently based on the type of benefit formula used by the plan. We urge Treasury and IRS to clarify how the pre-existing age discrimination rule applies in various contingencies. Applicability of the conversion rule: In the case of an applicable plan amendment adopted after June 29, 2005, the PPA deems the amendment to be age discriminatory unless the accrued benefit is at least a minimum amount. We recommend that Treasury and IRS clarify what constitutes an applicable plan amendment, particularly in cases where participants are given a choice of coverage under the old or new formula. To arrange an interview with a Council staff member, please contact Jason Hammersla, Council director, communications, at jhammersla@abcstaff.org or by phone at (202) 289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.
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