Four years after Congress passed the Pension Protection Act of 2006, the Internal Revenue Service (IRS) has released final regulations on hybrid pension plans, which combine defined benefits (payout at retirement) with 401(k)-style defined contributions.
According to consulting firm Towers Watson, nearly one-quarter of Fortune 100 companies offer hybrid plans, and it is estimated that nearly one-third of all participants in defined-benefit plans belong to the hybrid variety.
One of the longstanding complaints about such plans is that they discriminate against older workers, but the IRS regulations make it clear that these hybrids cannot discriminate. The regs also clear up confusion regarding the "market rate" at which plan sponsors must set the interest rate for hybrid accounts.
The firm Towers Watson is predicting that more companies will take a look at hybrid pension plans now that the IRS has cleared up confusion about implementing the plans.
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