IRS Extends Temporary Nondiscrimination Relief for Closed DB Plans Through 2020

The IRS announced on Aug. 23 that it is extending the temporary nondiscrimination relief for closed defined benefit plans that is provided in Notice 2014-5 by making that relief available for plan years beginning before 2021 if the conditions of Notice 2014-5 are satisfied. The relief is contained in Notice 2019-49.
 

Notice 2014-5 provided temporary nondiscrimination relief for certain closed DB plans. Specifically, for plan years beginning before 2016, the notice permits a DB or DC plan that includes a DB plan that was closed before Dec.13, 2013, and satisfies certain conditions set forth in the notice, to demonstrate satisfaction of the nondiscrimination requirements in Treas. Reg. §1.401(a)(4)-1(b)(2) on the basis of equivalent benefits, even if the 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).

Proposed regulations relating to nondiscrimination requirements for closed plans were published in the Federal 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 and contain other proposed nondiscrimination rules. The proposed regulations were to apply generally to plan years beginning on or after the date of publication of the final regulations, and provide that taxpayers may apply certain of their provisions for certain plan years beginning before the proposed applicability date.

The IRS reports that many comments have been submitted on the proposed regulations, including oral comments at a public hearing held on May 19, 2016. The IRS and the Treasury Department say that they expect that the final regulations will include a number of significant changes in response to those comments. However, The IRS says it expects that the final regulations will not be published in time for plan sponsors to make plan design decisions based on the final regulations before the relief Notice 2014-5 provides expires.

Accordingly, the IRS and the Treasury Department have determined that it is appropriate to extend the temporary nondiscrimination relief for closed plans that Notice 2014-5 provides to plan years beginning before 2021 as long as the conditions of Notice 2014-5 are satisfied. In addition, the final regulations are expected to provide that the reliance granted in the preamble to the proposed regulations may be applied for plan years beginning before 2021.