IRS Pulls Portions of Proposed Nondiscrimination Rules

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By Kristen Ricaurte Knebel

April 14 — The IRS and Treasury Department are withdrawing portions of the proposed nondiscrimination rules for certain retirement plan benefit formulas.

The withdrawn provisions “were intended to address certain qualified retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending that formula to a classification of employees that is reasonable and established under objective business criteria,” the Internal Revenue Service said in Announcement 2016-16, issued April 14.

Under the IRS's nondiscrimination requirements, a retirement plan is considered qualified—that is, maintains its tax-preferred status—if the contributions or benefits provided under the plan don't discriminate in favor of highly compensated employees.

The proposed rules, which were issued on Jan. 28, feature changes to the nondiscrimination rules to provide relief for some closed plans and formulas, but include other changes that aren't limited to such plans and formulas, the IRS said (19 PBD, 1/29/16).

Following the issuance of proposed rules in January, the IRS examined the effects of the provisions it's withdrawing on the adoption and maintenance of qualified plans with varying designs and decided that further consideration of those provisions is needed, the agency said.

The other portions of the proposed rules aren't affected by the announcement, the IRS said.

The announcement is scheduled to be published in Internal Revenue Bulletin 2016-18, dated May 2.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

For More Information

A copy of Announcement 2016-16 is at