IRS/Treasury Proposes fix to “One Bad Apple” Retirement Plan Rule
On July 2, 2019, the Department of Treasury issued a proposed rulemaking on the so-called IRS “one bad apple” rule, which applies to Multiple Employer Plans. The current “one bad apple rule” states “the failure by one employer maintaining the plan (or by the plan itself) to satisfy an applicable qualification requirement will result in the disqualification of the [section 413(c)] plan for all employers maintaining the plan.” The rule, as drafted, is helpful to the PEO industry, it would prevent a PEO-sponsored 401(k) plan from being disqualified if one employer plan participant fails to maintain its commitment to the plan.
NAPEO’s comments on the “one bad apple” IRS proposed retirement plan regulation can be found here.
A detailed summary of this proposed rule from The Groom Law Group can be found here.