Proposed testing rules promote SLOBs. (IRS rules, separate lines of business)

The IRS has issued its long-awaited proposed regulations for employers who want to test separate lines of business SLOBS) for the retirement plan nondiscrimination rules.

The regulations are the final piece in the comprehensive regulatory scheme made necessary by the Tax Reform Act of 1986.

Congress intended to tighten up the rules to prevent discrimination in favor of highly compensated employees (HCEs). But it recognized that companies having businesses in diverse industries might be placed at an unfair competitive disadvantage if forced by the tests to provide the same level of benefits for all workers. So it decided to allow employers to treat SLOBs as separate employers for testing purposes.

Why the …