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ARTICLE · 08 MAY 2023

IRS Issues Proposed Forfeiture Regulations

Mayer Brown
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The IRS has issued proposed regulations on the treatment of forfeitures under defined benefit and defined contribution plans. The proposed guidance, which would amend Treasury Regulation...

United StatesEmployment and HR
Maureen Gorman
Maureen Gorman
Rebecca Davenport
Rebecca Davenport
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The IRS has issued proposed regulations on the treatment of forfeitures under defined benefit and defined contribution plans. The proposed guidance, which would amend Treasury Regulation 1.401-7, synthesizes (and updates the existing regulation to reflect) guidance previously found in Revenue Rulings, an IRS newsletter, and certain changes to the Internal Revenue Code (the "Code"), made during the last 35 years or so. The proposed regulation would also generally clarify and extend what had been previously understood to be the deadline for "zeroing out" forfeiture accounts under defined contribution plans.

Defined Benefit Plans. Prior to the Tax Reform Act of 1986, Code Section 401(a)(8) provided that a "pension plan" (which term includes both defined benefit and money purchase pension plans) will not be qualified unless the plan provides that forfeitures may not be applied to increase the benefits that any employee would otherwise receive under the plan. Treasury

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