On November 13, 2019, the IRS issued Notice 2019-60, which provides additional nondiscrimination relief for certain closed defined benefit plans with respect to the requirement that all benefits, rights, and features of a plan must be currently and effectively available to all participants (see Practice Note, Requirements for Qualified Retirement Plans: Nondiscrimination Rules).

Over the last five years the IRS has provided nondiscrimination relief to certain closed defined benefit plans. Closed defined benefit plans limit ongoing accruals to some or all of the employees who participated in the plan on a certain date, also referred to as a "soft freeze" (for more information, see Practice Note, Freezing Defined Benefit Plans: Types of Defined Benefit Plan Freezes).

In Notice 2014-5, the IRS permitted sponsors of a closed defined benefit plan and a defined contribution plan to demonstrate that the aggregated plan (DB/DC plan) complies with the nondiscrimination requirements of Section 401(a)(4) of the Internal Revenue Code (Code) (26 U.S.C. § 401(a)(4)) and Treasury Regulation Section 1.401(a)(4)-1(b)(2) (26 C.F.R. § 1.401(a)(4)-1(b)(2)) on the basis of equivalent benefits, even if the DB/DC plan does not satisfy the current conditions for nondiscrimination testing on that basis under Treasury Regulation Section 1.401(a)(4)-9(b)(2)(v) (26 C.F.R. § 1.401(a)(4)-9(b)(2)(v)) (see Legal Update, IRS Notice 2014-5 Provides Temporary Nondiscrimination Relief for Closed Defined Benefit Plans).

In a series of notices, the IRS extended the nondiscrimination relief provided in Notice 2014-5. Most recently, in Notice 2019-49, the IRS extended the nondiscrimination relief provided in Notice 2014-5 through 2020 (see Legal Update, IRS Notice 2019-49 Extends Temporary Nondiscrimination Relief for Closed Defined Benefit Plans Through 2020).

The IRS has also issued proposed regulations under Code Section 401(a)(4) providing nondiscrimination relief for closed defined benefit plans (81 Fed. Reg. 4976 (Jan. 29, 2016)) (see Legal Update, Proposed Regulations Provide Nondiscrimination Relief for Closed Defined Benefit Plans and Other Changes to the Nondiscrimination Requirements).

Notice 2019-60 provides additional temporary nondiscrimination relief for certain closed defined benefit plans with respect to the requirement that all benefits, rights, and features of a plan must be currently and effectively available to all participants. This additional relief is available:

Under Notice 2019-60, defined benefit plans will be treated as satisfying the requirements of Treasury Regulation Section 1.401(a)(4)-4(b) and (c) (26 C.F.R. § 1.401(a)(4)-4(b) and (c)) concerning a benefit, right, or feature provided under the plan when the plan was amended to limit participation if either:

Employers that sponsor closed defined benefit plans should be aware of and review the additional temporary nondiscrimination relief in Notice 2019-60. The relief is particularly relevant for closed defined benefit plans that have plan amendments dated before the 2016 proposed IRS regulations on nondiscrimination. Plan sponsors should continue to monitor the finalization of the proposed regulations under Code Section 401(a)(4).