Withdrawal of Proposed Nondiscrimination Rules Applicable to Certain Qualified Retirement Plan Benefit Formulas

Announcement 2016-16

Withdrawal of Proposed Nondiscrimination Rules Applicable to Certain Qualified

Retirement Plan Benefit Formulas

The Department of the Treasury (Treasury Department) and the Internal

Revenue Service (IRS) announce that they will withdraw certain provisions of proposed

regulations published on January 29, 2016 (81 FR 4976) (“Proposed Regulations”)

relating to nondiscrimination requirements applicable to qualified retirement plans under

§ 401(a)(4). The provisions of the Proposed Regulations that will be withdrawn are the

provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c).

The provisions of the Proposed Regulations that would modify §§ 1.401(a)(4)-

2(c) and 1.401(a)(4)-3(c) 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. See Part IV of the preamble to the Proposed Regulations for a

discussion of these provisions.

Following publication of the Proposed Regulations, the Treasury Department and

the IRS have given additional consideration to the potential effects of the provisions that

would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c) on the adoption and continued

maintenance of qualified retirement plans with a variety of designs and have concluded

that further consideration will be needed with respect to issues relating to those

provisions. Accordingly, the Treasury Department and the IRS will withdraw the

provisions of the Proposed Regulations that would modify §§ 1.401(a)(4)-2(c) and

1.401(a)(4)-3(c)

1.401(a)(4)-3(c) on the adoption and continued

maintenance of qualified retirement plans with a variety of designs and have concluded

that further consideration will be needed with respect to issues relating to those

provisions. Accordingly, the Treasury Department and the IRS will withdraw the

provisions of the Proposed Regulations that would modify §§ 1.401(a)(4)-2(c) and

1.401(a)(4)-3(c).

The Proposed Regulations also include provisions, in addition to those that would

modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c), that would provide relief from the

nondiscrimination requirements for certain qualified retirement plans that provide

additional benefits to a grandfathered group of employees following certain changes in

the coverage of a defined benefit plan or a defined benefit plan formula and would make

other changes to the nondiscrimination rules. These provisions of the Proposed

Regulations are not affected by this announcement.

For further information regarding this announcement, contact Linda S. F.

Marshall or Kelly C. Scanlon at 202-317-6700 (not a toll free number).