<nobr>Jun 15, 2004</nobr>

Treasury Cash Balance Regulation Withdrawn

William Sweetnam, Treasury Benefits Tax Counsel, announced to key stakeholders in a conference call this afternoon that the Treasury and IRS were withdrawing the proposed cash balance/hybrid plan regulations proposed in 2003 (67 Fed. Reg. 76123). Congress last year in a rider to the Treasury's appropriation barred the Treasury from spending any funds to promulgate the regulation. The rider passed both the House and the Senate with significant majorities. In addition, the announcement said, "Treasury and the IRS do not intend to process [requests for determination letters or technical advice] . . . while cash balance plan and cash balance conversion issues are under consideration by Congress."

Today's announcement appears to formalize earlier statements by Treasury officials that the Department did not intend to promulgate the regulation or issue determination letters or provide advice as long as Congress was considering broad new rules governing cash balance and hybrid plans.

The reason given for withdrawing the regulation is to "provide Congress an opportunity to review and consider the Administration's legislative proposal and to address cash balance and other hybrid plan issues through legislation." Some speculation about today's action suggests that the Administration was uncomfortable with having both its regulation and its legislative proposal before Congress and the public. Today's action leaves the Administration with its legislative proposal as its sole position on cash balance and hybrid plans.

It is unclear what impact, if any, the withdrawal will have on the legislative front. House and Senate committees of jurisdiction earlier indicated an intention to hold hearings and address the issue notwithstanding the regulation. The Treasury's action, however, appears to obviate any need for a rider on an appropriation bill and possibly another problematic recorded vote by Members of Congress in an election year. It is unclear whether there remains time on the congressional calendar for a vote on legislation setting broad new rules for cash balance/hybrid plans in either the House or the Senate this year although it is possible that one or more committees might approve a bill before the session ends.

The Treasury press release and announcement are below. See also ERIC On Line Briefing Book on Cash Balance Plans at:http://www.eric.org/members_only/documents/DocumentFormMembersOnly/searchByCat?id=2AFE00000001

Mark J. Ugoretz, President
The ERISA Industry Committee
1400 L Street, NW Suite 350
Washington, DC 20005
Tel: 202.789.1400 Fax 202.789.1120
http://www.eric.org

Websites:

Withdrawal Announcement

Press Release W/drawal Announcement

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