TREASURY RESPONDS TO CARDIN REQUEST FOR RELIEF FOR SOFT-FREEZE PENSION PLANS
A Permanent Solution Is Sought to Protect Workers’ Retirement Security
WASHINGTON – The U.S. Treasury Department has responded to a letter from U.S. Senators Ben Cardin (D-Md.) and Rob Portman (R-Ohio) regarding a regulation that could have weakened the retirement security of many American workers with defined benefit plans. In Notice 2014-5, the IRS has provided temporary relief from the regulation – which unintentionally penalized plan sponsors’ decisions to soft freeze their defined benefit plans – while seeking public comment on a permanent solution.
In November, Senators Cardin and Portman, both members of the Senate Finance Committee, sent a letter to Secretary Lew warning that the regulation might inadvertently incentivize companies to hard-freeze the defined benefit pension plan of long-time employees and urge Lew to fix it, stating, “This is clearly not the intended effect of the nondiscrimination rules, which were written to strengthen retirement security, rather than to force many older employees into new pension plans that may not provide enough time to accumulate sufficient benefits before retirement.”
The full text of the letter is available here.