Nondiscrimination Testing and Permitted Disparity in Qualified Retirement Plans (Portfolio 356)

Kyle Brown

Special Counsel (Retired)

Internal Revenue Service, Office of Chief Counsel

At a glance

I. Overview
II. Safe Harbors
III. Permitted Disparity
IV. General Test
V. Conversion of Contributions and Benefits
VI. Options and Special Rules
VII. Employee Contributions
VIII. Other Nondiscrimination Standards
IX. Plan Aggregation and Restructuring
X. Compensation Issues
XI. Effective Dates, Transition Rules and Other Compliance Matters


Bloomberg Tax Portfolio, Nondiscrimination Testing and Permitted Disparity in Qualified Retirement Plans, No. 356, discusses the rules governing the nondiscrimination in benefits and contributions requirement for qualified plans. The nondiscrimination rules analyzed include the safe harbors for plans with certain benefit or allocation formulas, including permitted disparity, and the general nondiscrimination test for other plans.

The treatment of the various special rules for testing a plan's benefits and contributions for nondiscrimination are examined. The special rules examined include the conversion of benefits or contributions for testing on an alternative basis, the treatment of employee contributions, the nondiscrimination standards for former employees, determining the plan to be tested under the aggregation, disaggregation and restructuring rules, determining the compensation to be used for various nondiscrimination tests, and the various effective dates, transition rules, and other compliance considerations under the nondiscrimination regulations.

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