You know, sometimes it just takes awhile for the message to get through. That is what I was thinking as I read Bill Sweetnam’s comments about cash balance plans in this great article from Plan Sponsor entitled “One Bad Apple.” The article provides stories of three companies and their successful implementation of hybrid plans, but goes on to provide comments from Bill Sweetnam concerning the present uncertainty that plan sponsors feel with respect to the “legal limbo” over cash balance plans:
William Sweetnam, benefits tax counsel at the US Department of the Treasury, understands the feeling. “You have got one court that says they are inherently age-discriminatory, and you have Congress not letting us finalize the regs and saying this is not age-discriminatory,” he says. “It is not surprising if plan sponsors look at that and say, ‘I am uncomfortable because it is an open issue out there.’”Treasury had put out proposed regulations stating that cash balance plans are not inherently age-discriminatory, but it cannot finalize those rules until Congress blesses hybrid plans. So, in June, the agency announced that it was withdrawing the proposed regulations to give Congress a chance to review the Bush administration’s cash balance proposals and come up with legislation. . .
Moreover, while some in Congress and elsewhere may question Treasury’s authority to deem the plans not age-discriminatory, “We do have the authority to say that,” Sweetnam contends, “because we interpret the age-discrimination laws for defined benefit plans. They just do not like our interpretation.”
The most interesting comment, in my opinion, came in response to a question about the possibility of Congress passing legislation in 2004 to address the legal uncertainty. Sweetnam responded with optimism, pointing to recent Congressional hearings as an “indicator that lawmakers may be willing to move forward” and seemed to indicate that the message might be finally getting through:
“Some people are realizing that plan sponsors can terminate their plans [or] freeze their plans,” he says.
You can read more about the cash balance plan controversy here or here at Benefitsblog. You can also access previous comments here that Mr. Sweetnam made in November 2003 that were not quite as optimistic.