“The Treasury Department and IRS have decided to withdraw certain provisions of proposed regulations relating to the nondiscrimination rules for cross-tested plans,” Graff told reporters on Sunday. “[Media relations manager] Don Jackson put out a press release, but no one picked it up. His feeling were hurt.”
The provisions, published in January as part of a broader set of regulations involving large defined benefit plans, targeted the discrimination testing rules affecting “cross-tested” plans in a way that would have made it much harder for small businesses to keep or form new retirement plans – changing rules that have been in place and working for more than a decade.
In Announcement 2016-16, IRS and Treasury said that they will withdraw the proposed rules intended to address certain qualified plan designs that take advantage of flexibility in existing rules to provide a benefit formula solely for certain selected employees, without extending it to a reasonable classification of employees based on objective business criteria. Treasury noted that the withdrawal applies only to these provisions, and that most of the provisions of these proposed regulations remain intact.
In the announcement, the Treasury Department and the IRS said that, following publication of the Proposed Regulations, they have given additional consideration to the potential effects of the provisions, “and have concluded that further consideration will be needed with respect to issues relating to those provisions.”
The proposal would have set aside an objective nondiscrimination testing process that has been in place for more than two decades. The potential for it to have dramatically increased costs for many small business retirement plan sponsors was something that ARA Government Affairs Committee (GAC), with the support of ASPPA and ACOPA members, and their plan sponsor clients, had emphasized previously in multiple meetings with Treasury, IRS and Congressional staff.
“This is an important victory for both small business retirement plans, and the workers who benefit from them,” noted Brian Graff, CEO of the American Retirement Association. “We appreciate the input and participation of our members and the plan sponsors they serve, and the receptivity of Treasury and the IRS to those concerns.”