Department of the Treasury, Internal Revenue Service: Statement in Preamble to Regulations That Cash Balance Plans Are Not Age-Discriminatory

In its final regulations on pensions, the Internal Revenue Service's (IRS) included a statement indicating that IRS would not regard cash balance pension plans as age discriminatory. This correspondence determines whether the Department of the Treasury (1) followed normal operating procedures in promulgating the regulations and (2) violated either the Administrative Procedure Act (APA) or the requirement in the Omnibus Budget and Reconciliation Act (OBRA) that it consult with the Department of Labor (DOL) and the Equal Employment Opportunity Commission (EEOC). GAO found nothing improper about the inclusion of the preamble sentence. Treasury followed its normal procedures and the sentence reflected the agency's views at the time. GAO also found that Treasury's addition of the sentence did not violate APA or OBRA requirements. Nevertheless, although the coordination requirement technically was inapplicable, the underlying expectation was for consistency among the three agencies having roles in administering statutes generally prohibiting pension plans from discriminating based on age. Under the circumstances, Treasury should not have opined on whether cash balance plans were age discriminatory in a public manner without having coordinated that position with DOL and EEOC. The preamble sentence may have misled the public and practitioners into believing that the sentence reflected the coordinated views of all three agencies. Moreover, the statement may have limited the other agencies' policy options on this issue.