What Is a Nondiscrimination Rule?

A nondiscrimination rule is a clause found in qualified retirement plans stating that all employees of a company must be eligible for the same benefits, no matter their position within the company. The rule keeps plans from being discriminatory toward highly compensated employees and company executives. Nondiscrimination rules are required for a plan to be considered qualified under the 澳洲幸运5官方开奖结果体彩网:Employee Retirement Income Security Act (ERI❀SA).

Understanding Nondiscrimination Rules

Nondiscrimination rules must be kept up even when retirement plans such as 401(k)s are amended or transferred to another trustee, according to ERISA guidelines. A company may offer 澳洲幸运5官方开奖结果体彩网:nonqualified plans, meaning that contributions are not tax-deductible, that are discriminatory or selective in nature, in addition to standard qualified plans.

An 澳洲幸运5官方开奖结果体彩网:investment policy statement is recommended to serve as a guideline for investment decisions to be made. The statement may include comments on 澳洲幸运5官方开奖结果体彩网:risk tolerance, investment philosophy, time horizo💛ns, asseᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚt classes, and expectations regarding rates of return.

ERISA has requirements for 澳洲幸运5官方开奖结果体彩网:vesting options as well. Plan benefits may require a vesting period before employees earn the right to the benefit if they leave the company. ERISA regulations limit the length of such a vesting period to a reasonable schedule.

IRAs Not Subject

Not all employer plans are subject to ERISA. For example, government retirement plans are exempt from ERISA. IRAs are not subject to ERISA because an 澳洲幸运5官方开奖结果体彩网:individual retirement account (𓆉IRA) is not considered an employer plan. Also, nonqualified plans, which do not qualify for澳洲幸运5官方开奖结果体彩网: tax-deductible contributions, are not subject to ERISA.

For small businesses, a 澳洲幸运5官方开奖结果体彩网:Simplified Employee Pension plan is basically an IRA set up by an employer so that it can contribute to employee retirement savings. Typically, these plans are not subject to ERISA regulations.

ERISA History

ERISA was enacted in 1974 to protect the rights of employees under retirement plans offered by their employers. In particular, this set of laws was put into place to address irregularities in the administration of certain large 澳洲幸运5官方开奖结果体彩网:pension plans. In addition to its nondiscrimination rules stipulating that all plan participants must be treated equally, ERISA safeguards 澳洲幸运5官方开奖结果体彩网:retirement funds from employer mismanagement.

The plan's trustee must manage plan assets and make decisions in the best interests of the plan participants. The trustee cannot sell assets to the plan or earn commissions from plan investments. Also, plan assets must be kept separate from company assets. As for investment options, fiduciaries for the plan must follow the 澳洲幸运5官方开奖结果体彩网:Prudent Investor Rule.