Close
Close

Proposed regulations for MEPs would protect compliant employers

RFP
Tax Hot Topics newsletterThe IRS recently issued proposed regulations (REG-121508-18) that would protect employers participating in a multiple employer plan (MEP) from a noncompliant employer by requiring a spinoff.

Under the current unified plan rule (also known as the “one-bad-apple rule”), the failure by one MEP employer to comply with the qualification requirements will result in the disqualification of the MEP for all employers participating in the plan. In order to encourage employers to participate in MEPs and to alleviate the harsh consequences of the unified plan rule, the proposed regulations provide an exception that would allow the plan administrator of a MEP to spin off the plan assets and account balances of a noncompliant employer unless remedial action is taken by the noncompliant employer. Additional requirements, including notice requirements, must also be met in order for the exception to the unified plan rule to apply.

The proposed regulations were issued in response to Executive Order 13847 issued by President Donald Trump on Aug. 31, 2018. Among other provisions, the executive order directed the IRS to consider proposing amendments to regulations regarding the circumstances under which a MEP can satisfy the tax qualification requirements, including the consequences if one or more participating employers fail to take the actions necessary to meet those requirements.

Comments may be submitted by Oct. 1, 2019. Taxpayers may not rely on these proposed regulations until final regulations are issued.
 
Contact
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107
 
Tax professional standards statement 
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.