The IRS has extended temporary nondiscrimination relief for closed defined benefit plans. It now is making the relief it had made available in Notice 2014-5 available for plan years beginning before 2020 as long as the conditions Notice 2014-5 sets are satisfied. The IRS made the announcement on Aug. 24 in Notice 2018-69.
Notice 2014-5 provides temporary nondiscrimination relief for certain “closed” defined benefit pension plans (i.e., plans that provide ongoing accruals but that have been amended to limit those accruals to some or all of the employees who participated in the plan on a specified date). Specifically, for plan years beginning before 2016, Section III.B of Notice 2014-5 permits a DB/DC plan that includes a closed DB plan that was closed before Dec.13, 2013 and that satisfies certain conditions set forth in the notice to demonstrate satisfaction of the nondiscrimination in amount requirement of Treas. Reg. §1.401(a)(4)-1(b)(2) on the basis of equivalent benefits even if the DB/DC plan does not meet any of the existing eligibility conditions for testing on that basis under Treas. Reg. § 1.401(a)(4)-9(b)(2)(v).
Notice 2015-28, 2015-14 I.R.B. 848, Notice 2016-57, 2016-40 I.R.B. 432, and Notice 2017-45, 2017-38 I.R.B. 232, extended the temporary nondiscrimination relief Notice 2014-5 provided by applying that relief to plan years beginning before 2019 if the conditions of Notice 2014-5 are satisfied. Notice 2015-28 further provides that, during the period for which the extension applies, the remaining provisions of the nondiscrimination regulations under Internal Revenue Code Section 401(a)(4) continue to apply.
Proposed regulations relating to nondiscrimination requirements for closed plans were published in theFederal Register on Jan. 29, 2016 (81 FR 4976). They set forth relief for closed plans under Treas. Regs. §§1.401(a)(4)-4, 1.401(a)(4)-8, and 1.401(a)(4)-9 (subject to satisfaction of certain conditions set forth in the regulations), and contain other proposed nondiscrimination rules. The regulations were proposed to apply generally to plan years beginning on or after the date of publication of the final regulations. They provide that taxpayers are permitted to apply certain provisions of the proposed regulations (including all of the provisions that apply specifically to closed plans) for certain plan years beginning before the proposed applicability date.
The IRS further says that it is providing the extension of the relief in anticipation of issuing final amendments to the regulations under Internal Revenue Code Section 401(a)(4). It also expects that the final regulations will provide that the reliance granted in the preamble to the regulations proposed in 2016 may be applied for plan years beginning before 2020.
Notice 2018-69 will be published in Internal Revenue Bulletin 37 on Sept. 10, 2018.