CASE OF THE WEEK – Cash Balance Plan Amendment for Market Value Return

By Jenny Kiffmeyer, J.D – The Retirement Learning Center

Cash Balance Plan Amendment for Market Value Return

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with an advisor in New Jersey focused on a plan amendment. The advisor asked: “My client wants to stabilize his company’s employer contributions to its cash balance plan by switching the interest rate used in the allocation from a fixed-rate to a market-rate return. The actuary is telling my client that if a cash balance plan is amended to use a market-rate approach the plan document must be submitted to the IRS for approval to be valid. Must the plan be sent to the IRS for approval if the plan is amended to use a market-rate allocation method?”

Highlights of the Discussion

In most cases, no, it would not be necessary to submit the amended plan for IRS approval. The market-rate allocation option is available in many IRS pre-approved cash balance plan documents and no additional IRS filing or approval would be necessary when amending to a pre-approved plan with a market-rate option.

An employer that adopts a pre-approved plan may rely on the document provider’s IRS-issued opinion letter for the plan if the employer’s plan is identical to the provider’s pre-approved plan (Revenue Procedure 2017-41). The employer cannot have added any terms to the pre-approved plan or modified or deleted any terms of the plan other than by choosing options permitted under the plan.

Older plan documents may not include a market-rate return provision. Perhaps the actuary is using an older plan document with an outdated design.


When using a pre-approved plan document to amend a cash balance plan to include a market-rate allocation option, the plan sponsor can rely on the original IRS approval letter issued to the document provider. Therefore, no additional IRS filing for approval would be required.


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