IRS Focusing on Finalizing Hybrid Plan Transition Relief, Officials Say

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By Kristen Ricaurte Knebel

April 13 — The Internal Revenue Service is working with a “laser-like focus” to finalize proposed transition rules for hybrid plans, an IRS official said.

While questions may remain on the final regulations on hybrid defined benefit plans (T.D. 9693, RIN 1545-BI16) that were issued in September 2014, the IRS and Treasury are focusing on finalizing the proposed regulations (REG-111839-13, RIN 1545-BL62) on hybrid plans that were issued at the same time, Kyle N. Brown, an attorney-adviser, IRS Office of Chief Counsel, Tax Exempt and Government Entities, said April 13.

“We have received a variety of comments on the final regs that we will be looking at in the future. At the moment we are pretty focused on finalizing the proposed transition regs,” Brown said during a session of the 40th Enrolled Actuaries Meeting in Washington.

On Sept. 18, the IRS and Treasury issued final rules on hybrid defined benefit plans that the retirement plan community had been waiting for since the passage of the Pension Protection Act in 2006. The guidance came with some proposed transitional relief for plans not already in compliance with the final rules.

The transitional relief in the proposed rules stated that prior to the first day of the first plan year beginning on or after Jan. 1, 2016, a plan using an interest crediting rate that isn't permitted under the final rules issued Sept. 18 must amend the plan to a rate permitted under the final rules, the IRS said.

Transition Relief 

“These proposed regulations focus on taking a plan with a rate that’s not on the list that meet the market rate of return rules and bring it into compliance,” said Carol E. Zimmerman, an actuary at the IRS's Office of Employee Plans, said during the session.

Zimmerman said that the proposed rules grant relief from tax code Section 411(d)(6) but only to the extent necessary to comply with the final rules.

“These proposed transition regs would apply to changes that are made before the final regulations become effective, which would be the first day of the 2016 plan year,” Zimmerman said.

Because of this, the IRS and Treasury “strongly recommend” that employers wait to amend their plans that aren't in compliance with the final rules until after the final transition relief is issued, she said.

“If you were to make a change to your existing plan following the proposed regs” and then the final rules differ from the proposed transition relief, plans could end up “with a 411(d)(6) issue,” she said.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Sue Doyle at


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