2016 Cash Balance Plan Interim Amendment for Hybrid Plan Regulations Available on DGEM

The new 2016 Interim Amendment Package for ASCi’s individually-designed Cash Balance Plans is now available and must be executed by sponsoring employers by December 31, 2016.

Users may access the Cash Balance Plan Interim Amendment Package on the DGEM Download page under Interim Amendments. The Interim Amendment Package will also be available under DGEM’s Pre-Populated Forms, so you will have the option to batch generate and email directly to plan sponsors, if desired.

Background: In 2010 and 2014, the IRS issued “final” regulations relating to applicable defined benefit plans (hybrid plans, including cash balance plans). Among other requirements, the regulations specified permitted interest crediting rates for hybrid plans and that hybrid plans cannot provide for interest credits at an effective rate that is greater than a market rate of return. In recognition that some hybrid plans provided for interest credits greater than a market rate of return, the IRS in 2014 issued proposed regulations that would permit an amendment to change the interest crediting rate from an impermissible interest credit rate to a permissible rate, without violating the anti-cutback rules under Code §411(d)(6). Under the proposed regulations, plans needed to make the amendment before January 1, 2016.

Transition final hybrid plan regulations were released November 2015 that continue to allow a plan amendment to change the interest crediting rate from an impermissible interest credit rate to a permissible rate, but delayed the amendment deadline until January 1, 2017.

ASCi has drafted this good faith Interim Amendment with the intention of complying with the IRS’ Final Hybrid Regulations.

Action Required: The 2016 Cash Balance Plan Interim Amendment Package includes instructions, the Interim Amendment for Hybrid Plan Regulations, sample resolutions and sample SMM. We have designed the 2016 Cash Balance Plan Interim Amendment Package so that no employer elections are necessary. However, since Cash Balance Plans are individually designed, the sponsoring employer must execute the Interim Amendment by December 31, 2016.

If you have questions, please email Support@asc-net.com or submit via the ASC Client Support Center.

 

Date Posted: December 6, 2016