IRS Provides Temporary Nondiscrimination Relief For ‘Closed’ Defined Benefit Plans

The IRS issued Notice 2014-5, which relaxes requirements for employers to qualify for aggregate plan testing. Employers had complained that it was difficult to satisfy the three conditions the IRS required to qualify for the testing.

Some employers maintain "closed" defined benefit pension plans (i.e., defined benefit 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). The employees to whom the defined benefit plan is closed are often generally covered by a defined contribution plan maintained by the employer. In many cases, the defined benefit plan covers more highly compensated employees than the defined contribution plan, making it difficult or impossible for the defined benefit plan to satisfy coverage and nondiscrimination requirements.