IRS Issues Explanations Related to Nondiscrimination Requirements

The IRS has issued publications that provide information and forms relevant to nondiscrimination requirements for DB and DC plans. The new versions are for use during the CYCLE A Submission Period — Feb. 1, 2016 through Jan. 31, 2017.

Employee Benefits Plans Explanation No. 5A, which is intended for DB plans, is to be used in conjunction with Form 9638 and Form 9640; Employee Benefits Plans Explanation No. 5, which is intended for DC plans, is to be used in conjunction with Form 5627 and Form 6045.

Forms 9638 and 5627 are to be used to determine whether DB or DC plans, respectively, satisfy the nondiscrimination safe harbor requirements of Treas. Reg. §1.401(a)(4) and associated requirement such as the nondiscrimination compensation requirements under Internal Revenue Code Section 414(s). Forms 9640 and 6045 are deficiency checksheets.

If the plans — DB or DC — are intended to satisfy these requirements and provide for permitted disparity, Worksheet Number 5B may be used to determine whether the disparity satisfies the requirements of Internal Revenue Code Section 401(l). The IRS also has updated Employee Benefits Plans Explanation 5B and its associated Form 9639 (Worksheet 5B) and Form 9637.