With a growing number of closed pension plans flunking the Internal Revenue Service's non-discrimination tests, 31.5% of P&I Online readers believe the best solution is to reopen pension plans to new participants, according to an online poll last week.
The next most common solution selected by poll respondents was “test once and plan passes permanently” with 25.8% of the votes. “Hard freeze plans” received 19.4%, “Change IRS rules” received 16.1%, “increase benefits” received 4.8% and “remove participants” received 2.4%.
When a pension plan is closed to new participants, over time more participants move into the highly compensated employee category, while newer employees and turnover keep overall benefit values lower in other plans leading to a gap that can cause the plan sponsor to fail the IRS' non-discrimination rules test.
Congress is unlikely to take action soon, prompting trouble for a growing number of plan sponsors.
The question was asked in conjunction with a Pensions & Investments story published last week titled, "Closed plans face non-discrimination peril."