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IRS backs off pension plan change

CNN, April 7, 2003

The Internal Revenue Service will withdraw controversial new regulations on converting traditional employee pension plans to "cash balance" plans, CNNfn has learned.

There had been significant opposition to the IRS proposals among workers and on Capitol Hill. Many workers would have ended up with significantly less money if their pension plans had undergone conversion.

The IRS plans to re-issue regulations covering such conversions, but is asking for more comments first.

"This is certainly a good day for the millions of American workers who, at least for the moment, will not see their benefits slashed by 20 to 50 percent due to a cash balance conversion," said Rep. Bernie Sanders, I-Vt., who had opposed the change.

"The IRS says it wants to make sure companies can give their employees a choice between a new cash balance plan and the traditional defined benefit plan. The real question here is whether companies should be required to give their workers that choice," Sanders said.

"I and hundreds of others in Congress think they should. Now we have got to continue pushing to make sure that the next round of regulations don't allow companies to cut their employees' pension in violation of federal age discrimination laws," he added.

A statement from Pam Olsen, the Treasury Department's assistant secretary for tax policy, said, "The proposed nondiscrimination regulations would have had the unintended effect of making it more difficult for employers to provide workers with transition relief in cash balance conversions.

"When the effect was identified, Treasury and IRS decided to withdraw the proposed nondiscrimination regulations immediately so they do not prevent employers from reducing the impact of cash balance conversions on their employees."

The announcement came just one day before Sanders and others were to introduce legislation that would have stopped the IRS from making the changes.