Is there any reason that a government employer could not set up a Cash Balance plan? The employer currently maintains a traditional DB plan with mandatory employee contributions. They would like to consider switching to a CB plan for employer contributions and a 457 plan for employee contributions.

A government employer may set up a cash balance plan. A local government cash balance plan is subject to the ADEA.

A Govt CB plan will not have any problems getting IRS approval because govt plans are exempt from nondiscrimination requirements and age discrimination provisions under ERISA which prohibit the use of a formula which uses time value of money to determine the accrued benefit at age 65. However, a public employer plan will be subject to state age discrimination laws which may prohibit discrimination against younger employees. The fed ADEA does not protect employees under age 40. You need to retain counsel to review all legal issues.