The U.S. Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-121508-18) relating to the tax qualification of plans maintained by more than one employer—that is, “multiple employer plans” or MEPs.
The proposed regulations would provide an exception, if certain requirements are met, to the application of the “unified plan rule” for a defined contribution MEP in the event of a failure by an employer participating in the plan to satisfy a qualification requirement or to provide information needed to determine compliance with a qualification requirement.
Read the proposed regulations [PDF 408 KB] (19 pages) as published in the Federal Register on July 3, 2019.
Comments and requests for a public hearing must be received by a date that is 90 days after the July 3 publication date.
President Trump in August 2018 issued Executive Order 13847 providing a policy to expand access to workplace retirement plans for U.S. workers and to enhance workplace retirement plan coverage. Part of this policy was to expand access to MEPs so that employees of different private-sector employers may participate in a single retirement plan, and thereby efficiently reduce administrative costs of retirement plan establishment and maintenance while expanding the availability of workplace retirement plans, especially among small employers.
Executive Order 13847 directed the Treasury Secretary to consider proposing amendments to regulations or other guidance regarding the circumstances under which a MEP may satisfy the tax qualification requirements and to address what would be the consequences if one or more employers that sponsored or adopted the plan failed to take one or more actions necessary to meet those requirements.
The preamble to the proposed regulations notes that some had expressed concerns about the risk that the actions of one or more participating employers might disqualify a MEP and that some employers would be reluctant to join MEPs without an exception to the unified plan rule. In particular, it was asserted that without an exception to the unified plan rule, many employers perceived that the benefits of joining a MEP would be outweighed by the risk of plan disqualification based on the actions of an uncooperative participating employer.
According to the preamble to the proposed regulations, a defined contribution MEP would be eligible for the exception to the unified plan rule on account of certain qualification failures due to actions or inaction by a participating employer, if certain conditions were satisfied.
The proposed regulations include definitions of certain key terms.
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