The Internal Revenue Service (IRS) has lifted a moratorium on determination letter applications for conversions from traditional defined benefit pension plans to so-called cash balance plans. In addition to providing interim guidance on cash balance plan provisions of the Pension Protection Act of 2006, the IRS is also seeking comments on several other issues, including safe harbor provisions, in Notice 2007-6.

The notice further states that the IRS will not review any of the pending cases for age discrimination issues, a position which the agency says is consistent with past practice and with the Pension Protection Act. The Act did not address the issue of age discrimination on conversions made before June 30, 2005.

The processing of letter application from employers seeking to convert existing defined benefit plans to cash balance plans was suspended by the IRS in 1999, pending study on issues raised during conversions, including impact on older employees. With passage of the Pension Protection Act and the issuing of Notice 2007-6, the IRS can now resume processing the backlog of approximately 1,200 cases subject to the moratorium. The IRS hopes to resolve a significant majority of these cases by the end of 2007.