Since 1984, when BankAmerica Corp. introduced the Cash Balance Plan, many questions arose as to how these plans satisfied IRS requirements that were designed to apply to traditional defined benefit plans. Nonetheless, the number of employers sponsoring Cash Balance Plans has increased dramatically.

Although it has taken over 20 years, the regulatory environment is finally catching up. The Pension Protection Act of 2006 has now formally recognized Cash Balance Plans in the law. We expect the regulations that will be issued under this new law will eliminate the confusion caused by trying to apply traditional defined benefit plan rules to Cash Balance Plans.