The IRS has just announced in Notice 2019-60 that it is providing additional temporary nondiscrimination relief for closed definedbenefit plans through 2020.
Notice 2019-60 provides additional temporary nondiscrimination relief for DB 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 and that generally meet the eligibility conditions for the relief provided in Notice 2014-5. Specifically, Notice 2019-60 provides that, if a plan satisfies the conditions it specifies, the plan is deemed to have satisfied certain of the nondiscrimination requirements relating to benefits, rights, and features.
The IRS had earlier announced in Notice 2019-49, which it issued on Aug. 23, that it was extending this relief and making it available for plan years beginning before 2021 if the conditions of Notice 2014-5 are satisfied.
The IRS observes that at the time a DB plan is closed to new entrants, it may provide for benefits, rights or features that are not available to participants in other plans of the employer. For such a plan, it notes, proposed regulations issued in 2016 relating to nondiscrimination requirements for closed plans provide relief from the requirements of Treas. Reg. §1.401(a)(4)-4 relating to benefits, rights, or features only if the amendment restricting the availability of the benefit, right or feature also resulted in a significant change in the type of the DB plan's formula.
The IRS says that neither Notice 2014-5 nor the proposed regulations provide relief for a DB plan that is closed to new entrants but has not undergone a change in benefit formula regarding existing participants. In addition, it says, the relief in the proposed regulations is conditioned on compliance with requirements relating to plan amendments that may have occurred long before the proposed regulations were issued.
The New Relief
Notice 2019-60 provides a closed DB plan that generally meets the eligibility conditions for the temporary relief under Notice 2014-5 (as extended) with additional temporary relief from the requirements of Treas. Reg. §1.401(a)(4)-4 relating to benefits, rights or features.
The temporary relief applies to DB plans providing ongoing accruals that were amended, by an amendment adopted before Dec. 13, 2013, to provide that only employees who participated in the plan on a specified date continue to accrue benefits under the plan. Thus, this relief applies to DB plans for which the relief under Notice 2014-5 (as extended) is available. However, eligibility for this relief does not depend on the method used to satisfy the nondiscrimination requirements for the plan year beginning in 2013.
The temporary relief applies for plan years ending after Nov.13, 2019, and beginning before Jan. 1, 2021. Accordingly, the last plan year for which this relief applies is the same as the last plan year for which the relief under Notice 2014-5, as extended most recently by Notice 2019-49, applies.
Under Notice 2019-60, a plan is treated as satisfying Treas. Reg. §1.401(a)(4)-4(b) and (c) for the plan year with respect to a benefit, right or feature that was provided under the plan at the time the amendment Notice 2019-60 describes was adopted. This relief applies only if either:
- no amendment adopted after Jan. 29, 2016 expands or restricts the eligibility for the benefit, right or feature; or
- if any such amendment has been adopted, then, as of the applicable amendment date for that amendment (determined under Treas. Reg. §1.411(d)-3(g)(4)),[1] the post-amendment ratio percentage of the group of employees eligible for the benefit, right or feature was not less than the pre-amendment ratio percentage of the group of employees eligible for the benefit, right or feature.
Footnote
[1] Under Treas. Reg. §1.411(d)-3(g)(4), the term “applicable amendment date,” regarding a plan amendment, means the later of the effective date of the amendment or the date the amendment is adopted.
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