The Treasury Department and the Internal Revenue Service announced Monday
that they were withdrawing part of a proposed regulation concerning age discrimination
in retirement plans.
The proposal had been part of a broader proposal for companies to follow when
they convert traditional pension plans to "cash balance" plans. Critics
say cash balance plans hurt older workers.
Treasury and the IRS said the broader proposal, which among other things advises
companies on how to avoid age-discrimination lawsuits when switching to cash
balance plans, would not be affected by Monday's action.
The Associated Press reports that the provision jettisoned Monday said companies,
in setting up cash-balance plans, "may not provide disproportionate benefits
to highly compensated employees."
Plan conversions typically mean less money for workers close to retirement
and have been the subject of a rash of lawsuits.
Treasury said that the proposal would have made it hard for companies wanting
to make the switchover to provide certain workers with pension options, such
as how they would want to accrue future benefits or whether they would want
to be grandfathered under the traditional pension plan.
"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," said Pam Olson, Treasury's assistant
secretary for tax policy.
The government said it intends to rework the provision, according to the AP.
Currently, there is a moratorium on government approval of conversions to cash
balance pension plans given all the concerns about them. But the ban will be
lifted if Treasury's regulations ultimately are adopted.
Treasury's plan has drawn concern from some lawmakers on Capitol Hill, which
had thrown a temporary snag in the Senate confirmation process for Treasury
Secretary John Snow.