Proposed Cash-Balance Regs (remainder)

[Guest RSNOW]

I believe the 411(b) parts of the proposed cash-balance regs were not part of the withdrawn sections, if so, can anyone explain the importance of the 1st of the two criteria for being an "Eligible Cash Balance Plan" where it states:

".... for accruals in the current plan year, the normal form of benefit is an immediate payment of the balance in a hypothetical account......a plan does NOT fail to be an eligible cash balance plance merely because single-sum distributions of that amount is NOT actually available as a distribution option".

I recognize CB plans don't have to offer lump sums, but don't understand then the importance the IRS is placing on the normal form being an immediate payout of a hypothetical account when you don't actually have to offer a lump sum distribution ?

[david rigby]

My oversimplified view is that the IRS is stuck in the box of thinking that a DB plan has to be defined one way just because it always has been.

[MGB]

In discussions with the authors of the regulation, they say that this reference to "normal form" is not the same as what we think of as the normal form at NRA. They are using it generically that the benefit formula is defined in terms of a lump sum.

However, that doesn't necessarily mean that these rules, if finalized this way, would result in this really being the normal form.

Numerous comments on the proposed regulation stated emphatically they need to change this language.

[Guest RSNOW]

Thanks for the input and help.