Two U.S. senators sent a letter to U.S. Secretary of the Treasury Jacob Lew this past week expressing concern over a regulation that they believe could weaken retirement security for many American workers.
The regulation has to do with not allowing new employees to enroll in defined benefit pension plans and, instead, enrolling them in defined contribution plans. Unfortunately, by doing this, companies may violate a Treasury rule that requires qualified plans to meet nondiscrimination tests.
These tests are intended to enforce a degree of pension benefit parity between higher and lower earning employees. By having most highly compensated employees remain in the DB plan and moving new or lower compensated employees to the DC plan it may trigger these nondiscrimination rules.
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