<nobr>Mar 13, 2003</nobr>

ERIC Tells Treasury to “Start Over” on Cash Balance Regs - ASAP

Washington, DC - The ERISA Industry Committee (ERIC) today submitted a second round of comments to the Treasury Department reiterating its deep concern over proposed regulations that interpret application of the Age Discrimination in Employment Act (ADEA) to tax qualified plans, including cash balance plans and traditional defined benefit plans.

In its supplemental comments, ERIC told Treasury that the current proposed regulations are fundamentally flawed and that it should withdraw them and start over by proposing new regulations as soon as possible. ERIC also emphasized the need to issue new regulations in re-proposed form rather than final form.

ERIC stressed the need for swift action in resolving the issues raised by employer groups and other organizations over the flawed proposed regulations. “Failure to resolve the issues promptly will prolong the great uncertainty and risk that currently afflicts defined benefit plans and the employers that sponsor them,” ERIC wrote in its comments. “The Treasury and the Service (IRS) should put this project on a “fast track” and issue appropriately revised proposed regulations, and final regulations, as soon as possible.”

The organization also reiterated several of its concerns originally proposed in its January 30th comments to Treasury, including the need to incorporate a rule that is simple, straightforward and consistent with the current IRS Code [Sec.411(b)(1)(H)(i)] on age discrimination.

ERIC also reiterated that the proposed regulations should not rely on a “safe harbor” approach for certain cash balance and other hybrid plans citing that employers should not be compelled to conform their plans to the rigid requirements of narrow, Government-imposed “safe harbors.” Additionally, ERIC urged Treasury to remove proposed new nondiscrimination testing rules for cash balance plans, which it said are both unnecessary and contrary to the interests of older and longer-service employees.

The organization maintains that the proposed regulations with respect to both cash balance plans and defined benefit plans would:

* outlaw many commonplace pension plans, including plans that cannot reasonably be considered to be age discriminatory,
* subject plans and employers to the risk of years of costly litigation,
* impose enormous economic costs on the employers that sponsor defined benefit plans, and
* threaten the future of all defined benefit plans.

The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Media Contact: Doug Baj, Director of Communications, ERISA Industry Committee, (202)789-1400, dbaj@eric.org.

Click here for a copy of the supplemental regulations

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