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Hybrid retirement plan in the works

Companies must have at least two employees and cannot have more than 500 workers to implement a DB(k) plan. These plans are most likely to be offered by companies looking for professional workers in competitive fields -- those who feel they need to offer this enhanced retirement plan to attract the best in their field or keep workers from going to a competitor, said Jan Jacobson, a spokeswoman for the American Benefits Council. Law firms and accounting companies are a couple of examples.

Employers must completely fund the pension and provide matching contributions in the 401(k) plan. As a result, those adopting this plan need adequate cash to pay the cost, which Principal Financial's Mayer estimates to be about 6 to 8 percent of payroll. That's less than companies with separate pension and 401(k) plans pay now, he said. So, companies currently managing both a pension and a 401(k) might consider the new plans to reduce costs and paperwork.

How soon are we likely to see DB(k) plans launched?

The DB(k) is authorized by the Pension Protection Act of 2006, which authorizes companies to begin offering the plans starting on Jan. 1. However, the Internal Revenue Service and the U.S. Treasury only recently began developing rules for the plans, so adoption may be delayed until later next year. Still, the retirement services industry expects interest to increase once the economy improves and competition for workers intensifies.

How can I find out more?

A few organizations, law firms and accountants have set up Web sites to provide information about the plans. If you want to do further research, you can find information by searching "DB(k) plan." The government frequently refers to the plans as "eligible combined plans" in its documents. You may also find information under the IRS designation 414(x), which is the section of the tax code relating to the retirement accounts. The IRS details the plan in a document at:

Many details about the practical operations of DB(k) plans will not be known until the IRS and Treasury officials complete and publish the final rules, which could affect the number of interested companies.

-- Associated Press

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