April 28, 2016

IRS Chief Counsel Advice Affecting Cash Balance Plans that Pay Lump Sums Greater than the Account Balance

On April 22, 2016, the Internal Revenue Service (IRS) issued Chief Counsel Advice (CCA) 201617006 addressing whether a cash balance plan that pays a lump sum that is greater than the account balance satisfies the age discrimination safe harbor for “lump-sum based” plans in Internal Revenue Code (IRC) §411(b)(5)(A). The CCA concludes that this type of plan is not eligible for the lump-sum based plan safe harbor from age discrimination, but generally would be eligible for the safe harbor for indexed plans found in the IRC §411(b)(5)(E).

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Serena Simons

Serena Simons

SVP, National Retirement Compliance Practice Leader