"The IRS removed some impediments that could have prevented companies from having catch-up contributions," says Ethan Kra, chief retirement actuary at Mercer Human Resource Consulting in New York.
One clarification that companies are welcoming is the ability to differentiate between union and nonunion employees in offering this benefit. In the past, employers believed they had to treat all workers equally under a "universal availability" requirement outlined in the proposed regulation of October 2001. So if they provided one group of employees with catch-up contributions, they had to offer it to another. This created some concerns. For example, if union employees vetoed the catch-up contribution in their retirement plan during contract negotiations, employers couldn‚t offer the contribution to to nonunion employees.
Also, the agency maintained that when one company that offers catch-up contributions merges with another that doesn‚t, the combined entity will have one to two years after the deal to coordinate their retirement plans.
The above was furnished by Dow Jones Financial Advisor Service. © Dow Jones. For a free trial, log on to www.fa-mag.com.