Anti-discrimination Proposed Regulations offer useful safe harbors for qualified plans
Article Abstract:
The IRS issued Proposed Regulations under Section 401(a)(4) on 10 May 1990 that elucidate nondiscrimination provisions and safe harbors for qualified employee benefit plans. The intent of the regulations was to simplify and consolidate extant rules, reflect changes in statutory provisions, and implement an integrated framework of nondiscrimination rules for taxpayers. The regulations delineate three general requirements in order for Section 401(a)(4) to be satisfied: benefits or contributions must be nondiscriminatory; the plan's benefits, rights, and features must be available in a nondiscriminatory manner to employees; and the effect of the plan must be nondiscriminatory in special circumstances. Plans that fail to meet nondiscrimination tests will lose their exempt status with adverse consequences: the employer may lose all or part of the deduction for contributions, and the employees may be taxed on benefits or the value of allocated contributions.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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Plan changes no longer subject to phase-in rule
Article Abstract:
Revenue Procedure 92-42, IRB 1992-22, 41 provides that changes in the benefits structure of a defined benefit plan effected after Aug 2, 1992 are no longer subject to the separate ten-year phase-in limitation rule as expressed in Notice 87-21, 1987-1 CB 458. Another Revenue Procedure has been proposed by the IRS in Ann. 92-81, IRB 1992-22, 56. This proposal concerns the simplification of substantiating compliance with the nondiscrimation rules contained in Sections 401(a)(4), 410(b) and other related provisions. More guidelines on the nondiscrimination rules are, including those on the availability of safe harbors, are expected to be released by the IRS.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1992
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IRS allows good faith compliance with plan rules
Article Abstract:
The guidelines for determining if a qualified plan is being operated according to a 'reasonable, good-faith interpretation' of the Internal Revenue Code have been updated by the IRS. The new directive issued by the Service in June 1992 states that, except for some modifications, the IRS will use the definition of 'reasonable, good-faith interpretation' established before the introduction of the Tax Reform Act of 1986. The guidelines cover the transition years before the introduction of final Regulations.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1992
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