Part IV. Items of General Interest

who meet certain age or service criteria with a “choice” whether to accrue future benefits under the traditional plan formula or the cash balance plan formula; providing such participants, at retirement, the greater of the benefit under the traditional plan formula or the benefit under the cash balance plan formula; “grandfathering” current plan participants under the traditional plan formula; and providing “transition credits” to certain plan participants.

These consequences for plan participants who receive and plan sponsors who provide transition relief in cash balance conversions were not intended. Therefore, Treasury and the IRS will withdraw the proposed § 401(a)(4) regulations.

Treasury and the IRS remain concerned about the potential for plan sponsors to avoid the requirements of the new comparability regulations through the use of a cash balance plan. Treasury and the IRS intend to issue new proposed regulations that will address this specific concern without creating impediments to conversion practices implemented in the interests of fairness to plan participants. Comments are requested on this issue.

Comments may be submitted on or before July 27, 2003, in writing, and should reference Announcement 2003–22. Comments may be submitted to CC:PA:RU (Announcement 2003–22), room 5226, Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, DC 20044. In addition, comments may be hand delivered between the hours of 8 a.m. and 4 p.m. Monday to Friday to: CC:PA:RU (Announcement 2003–22), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, D.C. Alternatively, comments may be submitted via the Internet at Notice.Comments@irscounsel. treas.gov. All comments will be available for public inspection and copying.

Statutory Mergers and Consolidations; Hearing

Announcement 2003–25

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Change of location of public hearing.

Dutch Agreement on Pension Funds

Announcement 2003–21

Following is a copy of the News Release issued by the Director International (U.S. Competent Authority) on March 21, 2003 (IR–2003–37).

U.S. AND NETHERLANDS REACH AGREEMENT ON PENSION FUNDS

WASHINGTON — The Competent Authorities of the United States and the Kingdom of the Netherlands have entered into a mutual agreement to clarify the entitlement of exempt pension funds to benefits under the Convention between the United States of America and the Kingdom of the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed on December 18, 1992, and amended by Protocol signed on October 13, 1993.

It has come to the attention of the Competent Authorities that pension funds of one Contracting State, that are otherwise entitled to benefits under Article 35 (Exempt Pension Trusts) of the Convention, may invest in the other Contracting State through an entity that is organized and treated as fiscally transparent in the other Contracting State, but treated as taxable by the first Contracting State. In order to ensure the application of Article 35, and pursuant to the authority of Article 29 (Mutual Agreement Procedure) of the Convention, the Competent Authorities agree that interest and dividends paid to and through such an entity for the benefit of a pension fund entitled to the benefits of Article 35 of the Convention shall be considered to be derived by a resident of the first Contracting State to the extent of the share the pension fund has in the interest and dividends described in Article 35 and paid to the entity. Further, this agreement is effective only for interest and dividends that would have been exempt from tax had they been derived directly by the pension fund. This agreement has effect only for payments of interest and dividends made on or after January 1, 2001.

For further information in the United States, contact David Kosterlitz at (202) 874–1748. For further information in the

Netherlands, contact Arnaud de Graaf at (31) 70–342–8171.

Cash Balance New Comparability Regulations

Announcement 2003–22

On December 11, 2002, Treasury and the IRS published proposed regulations under §§ 411(b)(1)(H) and 411(b)(2) of the Internal Revenue Code (the “Code”). 67 Fed. Reg. 76123. These proposed regulations interpret the statutory age-discrimination rules for all qualified plans, including cash balance pension plans.

At the same time, Treasury and the IRS published proposed regulations under Code § 401(a)(4). The proposed § 401(a)(4) regulations provide that an “eligible cash balance plan” (as defined in the proposed § 411(b)(1)(H) regulations) may not demonstrate that the benefits under the plan do not discriminate in favor of highly compensated employees using the rules for defined benefit plans unless the plan complies with a modified version of the special § 401(a)(4) regulations related to crosstesting by defined contribution plans and certain arrangements involving combinations of defined contribution and defined benefits plans. This restriction on the use of inconsistent testing methods between §§ 411(b)(1)(H) and 401(a)(4) was intended to ensure that plan sponsors could not avoid the “new comparability” rules applicable to a defined contribution plan and those combination arrangements through the use of a cash balance plan (which has a benefit accrual pattern similar to that of a defined contribution plan).

However, comments submitted on the proposed § 401(a)(4) regulations have raised serious concerns about their effect on cash balance conversions. Specifically, comments have indicated that the proposed § 401(a)(4) regulations would make it difficult — or, in certain cases, impossible — for plan sponsors converting long-standing traditional pension plans to cash balance plans to provide different types of transition relief to plan participants. The practices that would be problematic under the proposed § 401(a)(4) regulations include, among others, providing plan participants

April 28, 2003 846 2003–17 I.R.B.

a.m. in the auditorium, room 7218, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Because of controlled access restrictions, attendees are not admitted beyond the lobby of the Internal Revenue Building until 9:30 a.m. The IRS will prepare an agenda showing the scheduling of the speakers after the outlines are received from the persons testifying and make copies available free of charge at the hearing.

Cynthia E. Grigsby, Chief, Regulations Unit, Associate Chief Counsel (Procedure & Administration).

(Filed by the Office of the Federal Register on April 10, 2003, 8:45 a.m., and published in the issue of the Federal Register for April 11, 2003, 68 F.R. 17759)

SUMMARY: This document changes the location of the public hearing on proposed regulations (REG–126485–01, 2003–9 I.R.B. 542) relating to statutory mergers and consolidations under section 368 of the Internal Revenue Code.

DATES: The public hearing will be held on Wednesday, May 21, 2003, beginning at 10 a.m.

ADDRESSES: The public hearing originally scheduled in room 4718, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC, is changed to the auditorium, room 7218, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning submissions of comments, the hearing, and/or to be placed on

the building access list to attend the hearing, contact Guy R. Traynor of the Regulations Unit, Associate Chief Counsel (Procedure and Administration) at (202) 622–7180 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

A notice of proposed rulemaking and notice of public hearing appearing in the Fed- eral Register on January 24, 2003 (68 FR 3477), announced that a public hearing on proposed regulations relating to statutory mergers and consolidations under section 368 of the Internal Revenue Code would be held on Wednesday, May 21, 2003, beginning at 10 a.m. in room 4718 of the Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

The location of the public hearing has changed. The hearing is scheduled for Wednesday, May 21, 2003, beginning at 10

2003–17 I.R.B. 847 April 28, 2003