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EB Flash: Temporary Nondiscrimination Relief for Closed DB Plans Extended Through 2020

Employee Benefits Alert

The Internal Revenue Service (IRS) today issued Notice 2019-49, which extends temporary nondiscrimination relief for closed defined benefit plans through 2020.

The guidance extends the relief first issued in Notice 2014-5, which sets out certain conditions for qualification. "This extension is provided in anticipation of the issuance of final amendments to the section 401(a)(4) regulations," the IRS explains. "In addition, it is expected that the final regulations will provide that the reliance granted in the preamble to the proposed regulations may be applied for plan years beginning before 2021."

The IRS issued proposed regulations on nondiscrimination requirements for closed plans in early 2016. The agency says it expects that the final regulations will include "significant changes" in response to comments, but the rules are not expected to be finalized "in time for plan sponsors to make plan design decisions based on the final regulations before expiration of the relief provided under Notice 2014-5 (as last extended by Notice 2018-69)."

A permanent legislative remedy to the nondiscrimination testing rules for frozen defined benefit plans is included in the House-passed retirement savings bill (H.R. 1994). Although it passed the House overwhelmingly in May, the Setting Every Community Up for Retirement Enhancement (SECURE Act) has been stuck in the Senate for months over the objections of some. Sen. Ted Cruz (R-TX) and others have blocked attempts to pass it by voice vote and insisted the bill be modified to add back a provision to expand 529 accounts to cover more educational options.

When Congress returns to legislative work next month, supporters of the SECURE Act hope to regain momentum for the bill. As part of that effort and to call attention to the issue, Sens. Rob Portman (R-OH) and Ben Cardin (D-MD) recently introduced a stand-alone bill to address the nondiscrimination testing issue.

The two-page text of Notice 2019-49 is posted here.

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