Guidance on Frozen Plans, DOMA Out ‘Imminently,' Treasury Official Says


The retirement plan community can expect guidance imminently on issues related to frozen defined benefit plans, a Treasury Department official said during a webcast.         

Over time, defined benefit plans that were frozen or closed to participants became predominantly populated with highly compensated employees, because as employees age their salaries tend to increase, George H. Bostick, benefits tax counsel in the Office of Tax Policy at Treasury, said Dec. 11 during a webcast hosted by the American Law Institute Continuing Legal Education.         

“What we're really talking about here is plans that were closed to new entrants years back when people shifted from [defined benefit plans] to [defined contribution] plans or from traditional DB [plans] to hybrids,” Bostick said during the webcast, Employee Benefits Law and Practice Update: Winter 2013.        

Treasury has had conversations with retirement groups about potential problems surrounding frozen plans and all parties agree there are some issues that need to be addressed, he said.

Bostick said “in the next few days” there should be guidance out with some “temporary relief” for companies with frozen plans, as well as a request for comments on what “the permanent fix should look like.”         

The issue was included on Treasury and the Internal Revenue Service's 2013-2014 Priority Guidance Plan, released in August, which said the department intended to work on guidance on “frozen defined benefit plans and related matters.”        

Bostick also said that further guidance is expected “fairly imminently” on the application of the U.S. Supreme Court's decision in United States v. Windsor (U.S., No. 12-307, 6/26/13), which struck down a key part of the Defense of Marriage Act.         

The guidance will cover retirement plans and welfare plans and will be released as two separate pieces, possibly at different times, he said.        

Other Guidance Expected          

Bostick also said to expect guidance in the first half of 2014 on a host of retirement plan-related issues, including guidance on employee stock ownership plans (ESOPs), which has been a long-term project.          

“The ESOP regs are woefully out of date and anybody who wasn't around at the creation and tracked it all the way through must have an awful time figuring out what the ESOP rules are,” he said, adding that he hopes Treasury will get guidance out on that issue in 2014.         

Bostick also said he hopes that guidance on hybrid plans will be released in 2014.         

“My personal hope was that we would get it out this year, that was certainly our target, probably not going to make that, but I think we hope to have guidance out, this would be final regs, under [tax code Sections] 411(a)(13) and 411(b)(5), as well as guidance on how you make plan amendments in connection with conforming to the final regulations,” he said.         

In addition, guidance related to Treasury's lifetime income project on embedded annuities and target date funds should come out in the first half of 2014, he said.

Excerpted from a story that ran in Pension & Benefits Daily (12/11/2013).