Rev. Rul. 82-66

The purpose of this revenue ruling is to provide additional guidelines for determining when a plan may make retroactive qualifying plan amendments after the expiration of the remedial amendment period provided in section 401(b) of the Internal Revenue Code and section 1.401(b)-1 of the Income Tax Regulations.

Section 401(b) of the Code provides that a plan shall satisfy the qualification requirements of the Code for the period beginning with the date on which it was put into effect, or for the period beginning with the earlier of the date on which there was adopted or put into effect any amendment which caused the plan to fail to satisfy such requirements, and ending with the time prescribed by law for filing the return of the employer for his taxable year in which such plan or amendment was adopted (including extensions thereof) or such later time as the Secretary or his delegate may designate, if all provisions of the plan which are necessary to satisfy such requirements are in effect by the end of such period and have been made effective for all purposes for the whole of such period.

Section 1.401(b)-1(e) of the regulations provides that, at his discretion, the Commissioner may extend the remedial amendment period or may allow a particular plan to be amended after the expiration of its remedial amendment period and any applicable extension of such period.

Generally, once the remedial amendment period and any extension thereof have expired, amendment of a plan to eliminate a qualification defect will not cause the plan to be qualified for a year prior to the year in which the amendment that corrected the defect has been adopted and put into effect. However, pursuant to section 1.401(b)-1(e) of the regulations, and subject to the conditions set forth below, such a plan will be qualified for the plan year in which a request for a determination letter is made or is pending with the Internal Revenue Service and for the plan year prior to the plan year in which the plan is submitted for a determination letter if the plan is submitted by the end of the time for filing the tax return of the employer (including extensions) for the taxable year of the employer beginning with or within that prior plan year.

The Commissioner or his delegates will not permit a retroactive amendment to qualify a plan for prior years unless two conditions are met: (1) the plan is retroactively amended to comply with the qualification requirements as of the time the defect in the plan arose, and (2) employee benefit rights are retroactively restored to the levels they would have been had the plan been in compliance with the qualification requirements from the date the defect in the plan arose. Therefore, it is necessary to restore benefits to present or former employees and make any necessary amendments for plan years prior to the first year the plan is qualified by the Commissioner's exercise of discretion, even if that loss or defect in the plan does not adversely affect participants in the plan in the years for which the plan is to be qualified.

Exercise of the authority contained in section 1.401(b)-1(e) of the regulations is illustrated by the following examples:

Example I

On December 10, 1976, an employer adopted a profit-sharing plan with an effective date of January 1, 1976. A request for a determination letter was not made. The employer's taxable year and plan year are the calendar year. The plan as adopted had a disqualifying provision. On March 2, 1981, the employer adopted a remedial amendment retroactive to January 1, 1976, and submitted a request for a determination letter. The amendment placed its employees and former employees in the same position they would have been in if the plan had been qualified on its effective date. The Service will issue a determination letter to the effect that the plan qualifies as of January 1, 1980.

Example II

The facts are the same as in Example I except that the request for a determination letter was made on July 1, 1981, after the due date (including any extensions) for filing the employer's 1980 federal income tax return. The determination letter will conclude that the plan qualifies as of January 1, 1981.