U.S. Senators Ben Cardin (D-Maryland) and Rob Portman
(R-Ohio), both members of the Senate Finance Committee, and U.S.
Representatives Pat Tiberi (R-Ohio) and Richard E. Neal
(D-Massachusetts), both members of the House Ways & Means Committee,
introduced updated legislation —The Retirement Security Preservation
Act of 2017 (RSPA)—amending the nondiscrimination rules that apply to
defined benefit (DB) plans that have been closed or frozen.
The bill builds on previous legislation and Internal Revenue Service (IRS) regulations
to address this issue, and was approved unanimously by the Senate
Finance Committee as part of a retirement-related legislative package in
Over the past several years, many companies have
transitioned from DB plans to other retirement plan models. When a plan
is “soft closed,” existing participants or a subset of participants
continue to earn benefits under the DB plan. When a plan is “hard
frozen,” employees earn no new benefits under the plan.
time, existing employees in the closed plan typically build seniority
and become more highly compensated than younger, newer employees, who
are more likely to have greater job turnover. This widens the income gap
between the employees in the closed plan and the new employees.
the grandfathered group in the closed plan generally becomes more
highly compensated, closed plans almost always end up inadvertently
violating the IRS nondiscrimination testing rules.
addresses the problem by amending the nondiscrimination rules to protect
older workers in plans that have been closed or frozen. The bill also
contains anti-abuse rules related to closed and frozen plans.
Text of the bill may be found here