Retirement Plans

The IRS and the Treasury Department issued final regulations containing nondiscrimination and other requirements for cash or deferred arrangements under section 401(k) and for matching and employee contributions under section 401(m) of the Internal Revenue Code ( www.treas.gov/press/releases/reports/401k122804td9169.pdf ). These regulations update and simplify many of the current rules for 401(k) plans and strengthen the nondiscrimination rules that ensure benefits for rank-and-file employees. They require employers to spread contributions over a large group of such employees before boosting high-paid employees’ ability to defer income under the plan. Although the regulations will be fully effective for plan years beginning on or after January 1, 2006, employers may implement them for plan years ending after December 28, 2004.