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5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

CCH® PENSION — 02/11/11

Elimination of plan transfer option did not violate anti-cutback rule

The anti-cutback rule does not prohibit the elimination of an unexercised option to transfer funds from a profit-sharing plan to a pension plan, ruled the U.S Court of Appeals in Boston (CA-1) in Tasker v. DHL Retirement Savings Plan.

An individual participated in a pension plan and a profit-sharing plan. Benefits under the pension plan were subject to an offset, pursuant to which a participant's pension benefit would be reduced by his account balance in the profit-sharing plan.When the participant retired in March 2004, the plans also contained a "transfer option" that would have enabled the participant to transfer his profit-sharing balance into the pension plan and, thereby, avoid the offset. However, before the participant could elect the option, the employer amended the plans, effective December 31, 2004, to eliminate the transfer provisions.

The First Circuit initially noted that the amendment had the incidental effect of significantly reducing the participant's projected benefits. However, the court explained that IRS Reg. 1.411(d)-4, Q-A 2(b)(2)(viii), explicitly authorizes the elimination of plan provisions permitting the transfer of benefits between and among plans.

Limiting language contained in the regulations does not, the court stressed, afford protection for a transfer option (or other ancillary benefit) even when its elimination results in a reduction of protected benefits.

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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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