FROM THE OFFICE OF PUBLIC AFFAIRS

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Today, the Treasury Department and the IRS proposed regulations governing 401(k) plans. The 401(k) plan is the most common type of employer-sponsored retirement plan, providing retirement income security for millions of American workers and their families. The regulations apply to plans that permit employees to make pre-tax contributions and to plans that have employer matching contributions or employee after-tax contributions.
The existing regulations covering these plans were last updated in 1994.

Since then, there have been significant statutory changes. The new proposed regulations will replace the current regulations, incorporate the guidance issued since 1994, and address open issues.

"The proposed rules are the result of years of gathering useful and much appreciated insights from the retirement plan community," stated Treasury Assistant Secretary for Tax Policy Pam Olson. "Our goal with the proposed rules is to put all the rules in one place and resolve a number of open matters. Ending uncertainty will make it easier for employers to sponsor plans to help employees save for their retirement and will assist administrators who are charged with ensuring that their plans adhere to all the Internal Revenue Code requirements that apply to employer plans."

When finalized, the proposed regulations will update and simplify many of the current rules for 401(k) plans. In addition, the new regulations will strengthen the nondiscrimination rules that ensure benefits for rank-and-file employees. The proposed regulations will require certain employer contributions to be spread over a large group of rank-and-file employees before they can boost the ability of high-paid employees to defer income under the plan.

The proposed regulations will be effective for plan years that begin 12 months after they are issued in final form.

Related Documents:

• The text of the proposed regulations