Successful conversions have been going on for over ten years now among some of the largest Fortune 500 companies. However, a recent outcry from older plan participants over age discrimination issues have brought a huge amount of negative publicity to the cash balance plan. Senators and Congessmen have introduced legislation that would curtail or halt conversion of existing db plans to cash balance plans. In an internal memorandum, the IRS has instructed its personnel to refer any determination or examination case involving a cash balance conversion to the IRS National Office for technical advice. This move will almost surely delay an employer's efforts to adopt a cash balance arrangement.
Benefits clearly exist for the use or conversion of a cash balance plan.
An aggressive employer interested in such an arrangement may want to push to put a plan in place before their use is curtailed. A more cautious approach would be to take a wait and see approach until the IRS and our elected political officials resolve the matter. If you are like most law firms, you are sensitive to the importance of marketing your services to prospective clients. Maintaining accurate databases and mailing lists are an important part of getting your message out to the right people. However, the data you submit must be in a database compatible with theirs.