May 19, 1992
TO: PENSION COMMITTEE NO. 19-92
RE: PROPOSED SUBSTANTIATION GUIDELINES UNDER NONDISCRIMINATION
RULES
__________________________________________________________
Attached is a copy of IRS Announcement 92-81, which
contains a proposed revenue procedure which would simplify plan
sponsors’ substantiation of compliance with the nondiscrimination
rules of sections 401(a)(4) and 410(b) of the Code, and
regulation section 1.414(s)-1(d)(3).
The proposed revenue procedure would simplify
substantiation in four respects. First, plan sponsors that do
not have precise data available at reasonable cost would be
permitted to use a reliable substitute. Second, plan sponsors
would be able to substantiate compliance using "snapshot" testing
on a single representative day during the plan year. Third, plan
sponsors could use a simplified method for determining highly
compensated employees as of the "snapshot" day. Fourth, plan
sponsors would not be required to test a plan more than once
every three years in the absence of "significant change"
subsequent to the test.
The proposed revenue procedure would not generally be
available for ADP and ACP testing under sections 401(k) and
401(m) of the Code, but plan sponsors could use the simplified
method of identifying highly compensated employees, with certain
modifications.
We will keep you informed of further developments.
Kathy D. Ireland
Associate Counsel - Pension
Attachment