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Cash Balance Guidance


Guest Rick Murphy
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Guest Rick Murphy

I realize that governmental plans are generally exempt from the requirements of Code section 411, but it is my understanding that due to section 9201 of OBRA 86 governmental plans are subject to IRS regulations on post-retirement benefit accruals. Does anyone have an opinion as to what extent, if any, that governmental plans are subject to the the new proposed regulations Section 1.411(B)-2 - these are the regs that also address cash balance rules? I have not seen anything specifically mentioning governmental plans in relation to that guidance.

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Government plans will be subject to the 1.411(B)-2 regs to the extent they are based on 411 provisions that are the same as the provisions in the ADEA, primarily at 29 U.S.C. § 623(i) and (l). Most (perhaps all) of the 411 age descrimination rules are also in the ADEA. I recently dealt with this with a government plan that wants to add a cash balance formula to a traditional formula and provide participants the greater of the two formulas. My conclusion was that the cash balance formula needs to be an "eligible cash balance formula."

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