New lump sum and cash balance rules

[FAPInJax]

Wow!! The new rules being proprosed are a doozy!

Conversion of cash balance plans will now require the benefits earned by the participant to be not less than that he would have earned if the conversion had not taken place. (Of course, regulations will specify how to determine all this).

This, depending on the regulations, would kill conversions and just force employers to terminate their defined benefit plans. They would just install a cash balance for future purposes only (might even be generous and allow employees to increase their benefit by 'rolling' in additional monies from the old defined benefit).

The other provision which is really wild is the new 'yield curve'. Better yet is that it is phased in with weighting over a 3 year period.

I can't wait to see what the final result of this proposal is. Of course, they do recognize that small plans might consider this overkill, so they have opined that maybe a single rate might be more applicable in that case.