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Extension of Nondiscrimination Relief to Certain Closed Defined Benefit Plans

The Internal Revenue Service (IRS) recently extended the temporary nondiscrimination relief for closed defined benefit plans. This extended relief is intended to enable closed pension plans (defined as pension plans that have been closed to new participants but continue to provide ongoing benefit accruals for certain participants) to more easily satisfy certain nondiscrimination testing requirements.  In most cases where the relief applies, the closed defined benefit plan is aggregated with a defined contribution plan to satisfy the nondiscrimination testing requirements, and the relief assists the aggregated plan in passing nondiscrimination requirements that apply to accrued benefits and to certain rights and features relating to those benefits.

The original nondiscrimination testing relief for closed pension plans was provided several years ago in an earlier IRS Notice. This relief was already extended on two prior occasions, and the recent IRS Notice further extends the relief until the end of plan years that begin before 2019, as long as the conditions of the original IRS Notice continue to be satisfied.  In 2018, the IRS also intends to issue final regulations under Section 401(a)(4) of the tax code that address the nondiscrimination requirements for closed pension plans.  Until then, the IRS indicated that plan sponsors can still rely on the proposed 2016 IRS regulations under Section 401(a)(4) for plan years that begin before 2019.

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About this Author

Kay Kemp, employee benefits advisor, McDermott Will Emery, Chicago law firm
Professional Advisor

Kay Kemp* is a Professional Advisor in the Employee Benefits, Compensation, Labor & Employment practice group of McDermott Will & Emery LLP and is based in the Firm's Chicago office.

Kay has over 30 years of experience in the employee benefits field, including experience both as a consultant and in industry. She regularly consults with public, private and not-for-profit employers on the design, administration, and tax impact of all types of employee benefit plans. She counsels clients on their nonqualified deferred compensation...

312-984-6881
Diane M. Morgenthaler, Corporate Tax Planning Attorney, Retirement Plans for Companies, McDermott Will Emery, Chicago Law Firm
Partner

Diane M. Morgenthaler focuses her practice on employee benefits and executive compensation. She represents clients in matters before the US Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation.

Diane serves as employee benefit counsel to Fortune 500 corporations and other global corporations, and represents both public and private clients. She regularly designs and implements a variety of employee benefit plans and programs. Diane has extensive experience in employee benefit issues involved in acquisitions, reorganizations and divestitures and in the design of employee benefits plans following such transactions. She also advises clients in matters involving multi-employer withdrawal liability, fiduciary liability and benefit claims.

Diane’s experience includes:

  • Representing a Fortune 500 company in its $8.5 billion tax-free spin-off
  • Representing a company in one of the year's largest private transactions
  • Implementing an offshore pension plan for a company's global expatriates
  • Implementing a lump-sum window for a pension plan as part of a company's de-risking strategy

Since 2004, Diane has been ranked by her peers as a “Leading Lawyer” in a survey published by the Law Bulletin Publishing Company.  Since early 2009, Diane also has been named as an Illinois Super Lawyer by Law & Politics.  Finally, she was selected to the Legal 500 in 2011, and is the senior editor of EmployeeBenefitsBlog.com.   

312-984-7676