Closed DB Plan Nondiscrimination Relief Extended Further

The Internal Revenue Service (IRS) has issued Notice 2017-45, which extends the temporary nondiscrimination relief for closed defined benefit (DB) plans that is provided in Notice 2014-5, by making that relief available for plan years beginning before 2019 if the conditions of Notice 2014-5 are satisfied.

The IRS and the Treasury Department expect that the final regulations regarding closed DB plans will include a number of significant changes in response to comments received from stakeholders. However, it is anticipated that the final regulations will not be published in time for plan sponsors to make plan design decisions based on the final regulations before expiration of the relief provided under Notice 2014-5 (further extended by Notice 2016-57). This is why the IRS and the Treasury Department have determined that it is appropriate to extend the relief for an additional year. 

Notice 2014-5 permitted certain employers that sponsor closed DB plans and also sponsor a defined contribution (DC) plan to demonstrate the aggregated plans comply with the nondiscrimination requirements of Internal Revenue Code Section 401(a)(4) on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for individual testing on that basis.

Lawmakers have introduced a bill to permanently amend the nondiscrimination rules that apply to DB plans that have been closed or frozen.