IRS Rights the Apple Cart for Multiple Employer Plans


New IRS proposed regulations would implement the statutory exception to the "one bad apple" rule for defined contribution (DC) multiple-employer plans (MEPs), as provided in the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (Div. O of Pub. L. No. 116-94). The exclusion allows MEPs to maintain their tax-qualified status despite a participating employer's errors. The proposal sets conditions for MEPs to use the exception and provides a framework to address a participating employer's failures, including detailed notice requirements. The proposal also explains the administrative duties of a pooled plan provider — the administrator of new type of MEP, known as a pooled employer plan (PEP), established by the SECURE Act. Pending final regulations, IRS will allow reliance on the proposal. The agency is accepting comments through May 27 and has scheduled a public hearing for June 22.