Rev. Proc. 79-18

Section 1. Purpose.

The purpose of this Revenue Procedure is to outline the procedure by which a plan administrator or plan sponsor may file notice with and obtain approval from the Secretary of the Treasury for a retroactive plan amendment described in section 412(c)(8) of the Internal Revenue Code of 1954 and section 302(c)(8) of the Employee Retirement Income Security Act of 1974 (ERISA) [Pub. L. 93-406, 1974-3 C.B. 1, 40].

Sec. 2. Background Information.

.01 Statute -- Section 412(c)(8) of the Code and section 302(c)(8) of ERISA provide that no amendment may be used to reduce the accrued benefits of any plan participant unless the Secretary of Labor either approves such amendment or fails to disapprove the amendment within 90 days after the date on which a notice of such amendment is filed with the Secretary.

.02 Reorganization Plan -- Reorganization Plan No. 4 of 1978, page 480, this Bulletin, which became effective December 31, 1978, transferred the function described in subsection .01 to the Secretary of the Treasury.

.03 Filing -- The requirement for filing a notice with the Secretary of Labor, described in section 412(c)(8) of the Code and section 302 of ERISA, shall be satisfied by the submission of a request for approval pursuant to this Revenue Procedure.

Sec. 3. Requests for Approval of Retroactive Plan Amendments.

.01 Who May Submit -- Only a plan administrator, plan sponsor, or an authorized representative of either may make a request for approval of a retroactive plan amendment, as described in section 1.

.02 Where to Submit -- Such requests shall be submitted to the Commissioner of Internal Revenue, Attention: E:A, 1111 Constitution Avenue, N.W., Washington, DC 20224.

.03 When to Submit -- The request must be submitted during the first plan year in which the amendment is to become effective or within two and a half months after the close of such year (or, in the case of a multiemployer plan within the meaning of section 414(f) of the Code, no later than two years after the close of such plan year). For purposes of determining if the request was timely filed, the date on which the request is mailed or hand delivered to the address shown in subsection .02 shall be treated as the date of submission.

.04 Procedural Rules -- Any such request must be signed by the taxpayer or his authorized representative in accordance with section 6.06 of Rev. Proc. 72-3, 1972-1 C.B. 698. Since a request for approval of a retroactive plan amendment constitutes a request for a ruling, and since a ruling constitutes a written determination within the meaning of section 6110 of the Code, compliance with section 6110 of the Code is required with respect to a request for approval.

Section 601.201 of the Statement of Procedural Rules sets forth the requirements for complying with section 6110. Section 601.201(e) furnishes specific instructions to taxpayers.

Accordingly, any request for approval must include both the required declaration, properly signed by either the plan administrator or the plan sponsor, and a statement of proposed deletions for disclosure purposes. The 90-day period described in section 412(c)(8) of the Code and section 302(c)(8) of ERISA does not begin until all the information necessary to satisfy the requirements of this subsection is received at the address shown in subsection .02. The National Office will advise the applicant of the date on which the 90-day period begins. The applicant must respond promptly if the applicant believes that a different date should be used.

.05 Information Required -- In addition to submitting a copy of the plan amendment, the applicant must furnish evidence that the retroactive plan amendment is necessary because of a substantial business hardship and that a waiver of the minimum funding standard under either section 412(d) of the Code or section 303 of ERISA is unavailable or inadequate. What constitutes appropriate evidence will depend on the facts and circumstances of each case. Generally, such evidence should include the following:

(a) General facts concerning the employer.

A brief statement concerning the history of the company, its primary business, the ownership of the company, and any recent or contemplated changes (such as acquisition, mergers, discontinuances of operations) which might have a bearing on the company's organization or financial condition.

(b) The financial condition of the employer.

The annual financial statement of the company for each of the last five years. This submission should include at least the balance sheet and profit and loss statement for each year. Recent interim financial statements, if available, should also be submitted. If the employer submits reports on Form 10-K to the Securities and Exchange Commission, a copy of the most recent report should be included. Preferably, the financial statement should be a certified financial statement. However, if a certified financial statement has not been prepared, an uncertified statement is acceptable. If neither of these statements is available, copies of the company's Federal income tax returns, including all of the supporting schedules, should be submitted.

(c) Nature and extent of the business hardship.

A discussion of the underlying reasons which have led to the current situation (such as declining sales, unexpected losses, labor disputes, etc.) and a statement concerning the prospects for recovery, including reasons why such recovery is or is not likely.

(d) Need for the plan amendment.

A discussion as to why and to what extent it is considered necessary to amend the plan retroactively and a statement as to when any reduction in the plan benefits which result from the amendment might be restored.

(e) Funding waiver inadequate or unavailable.

A statement as to why a waiver of the minimum funding standard would be inadequate or unavailable.

(f) Effect of the plan amendment.

A statement from the plan's enrolled actuary in the case of a defined benefit plan, or the plan administrator in the case of any other plan, which provides an estimate of the reduction in the minimum funding requirement for the plan as a result of the amendment.

(g) Facts concerning the pension plan.

For the plan for which approval of a retroactive plan amendment is requested, the following information must be supplied:

(1) The name of the plan and the plan's identification number.

(2) The date the plan was adopted.

(3) The effective date of the plan.

(4) The classes of employees cov-

(5) The number of employees covered.

(6) A copy of the current plan document and a copy of the most recent summary plan description.

(7) A copy of the most recent determination letter issued to the plan. ered.

(8) A brief description of any plan amendments during the last five years which affected plan costs, including the approximate effect of each amendment on such costs.

(9) The most recent actuarial valuation report, plus any available actuarial reports for the preceding four plan years.

(10) A description of how the plan is funded (i.e., trust fund, individual insurance policies, etc.).

(11) A history of the contributions made to the plan for each of the last five plan years with the employee contributions and the employer contributions listed separately.

(12) The approximate contribution required to meet the minimum funding standard. For defined benefit plans, this amount should be as determined by the plan's enrolled actuary.

(13) A copy of the most recently completed Annual Return/Report of Employee Benefit Plan (Form 5500, Form 5500C, or Form 5500K, as applicable) and in the case of a defined benefit plan, a copy of the corresponding Actuarial Information schedule (Schedule B of Form 5500).

(14) A list of any waivers of the minimum funding standard which became applicable at any time during the past 15 plan years, including a description of the special conditions under which each waiver was granted, if any. A copy of each waiver ruling letter may be submitted to satisfy requirement.

(h) Other information.

(1) A description of the nature of any matters pertaining to the plan which are currently pending or about to be submitted to the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation.

(2) Details of any existing litigation or court proceeding which involves the plan.

(3) A statement of which IRS District Office maintains files concerning the plan.

(4) Other information, as requested by the Service, relating to factors listed in section 412(d)(2) of the Code.

(i) In certain cases (such as, for example, cases involving plans maintained by more than one employer) some of the material described in subsections (a) through (g) may be inappropriate or burdensome to furnish. In such cases, the applicant should furnish a statement indicating why it is either inappropriate or burdensome to furnish such material.

The applicant may incorporate by reference any of the material described in subsections (a) through (h) which has previously been submitted to the National Office in connection with a request for a waiver of the minimum funding standards.

.06 General -- Plan Administrators who have difficulty in furnishing the information specified in this Revenue Procedure may call or write the Actuarial Division, E:A, for guidance. In some instances, preliminary conferences will be afforded in addition to conferences available under Rev. Proc. 72-3. In all cases, however, the material described in the last paragraph of section 3.04 shall be furnished.

Sec. 4. Requests Regarding Plan Qualification.

This Revenue Procedure addresses only the question of whether a retroactive plan amendment satisfies the requirements of section 412(c)(8) of the Code and section 302(c)(8) of ERISA. Any such ruling under this Revenue Procedure approving an amendment will not be a determination as to the effect the plan amendment may have on the qualification of the plan.

Until the National Office has ruled under this Revenue Procedure on the request for approval of a retroactive plan amendment, the applicant should not submit a request for a determination letter as to the effect of the amendment on the plan's qualification to the Key District Director. Any such determination letter will not be a substitute for a ruling under section 412(c)(8) of the Code and section 302(c)(8) of ERISA. Accordingly, the determination letter has no effect on participants' rights to accrued benefits under Title I of ERISA.

Sec. 5. Adoption of Plan Amendment.

In order for a plan amendment to reduce an accrued benefit retroactively to a date no earlier than the first day of the plan year to which it applies, it must be adopted no later than 2 1/2 months after the close of that plan year.

Under certain circumstances, such as when a request for approval of a retroactive plan amendment is filed less than 90 days before the deadline for adoption of the amendment, a favorable ruling might not be issued until after the last day for such adoption. To assure the adoption of the amendment in a timely manner and to safeguard the qualified status of the plan, it is suggested that such amendment be adopted before the deadline contingent upon the issuance of a favorable ruling by the IRS and, if a determination letter is also requested, contingent upon the issuance of a favorable determination letter by the IRS.

Sec. 7. Tentative Disapproval.

The National Office may, within the 90-day period allowed under section 412(c)(8) of the Code and section 302(c)(8) of ERISA to disapprove a retroactive plan amendment, notify the applicant of a tentative disapproval. This tentative disapproval may be made if the National Office needs more information or more time to make a final determination, or if a conference described in section 3.06 cannot be held within the 90-day period. A tentative disapproval may be made without offering a conference to the applicant. The date of the tentative disapproval will start a new 90-day period.

Sec. 8. Effect on Other Documents.

Rev. Proc. 72-3, 1972-1 C.B. 698, is modified to the extent that this Revenue Procedure provides special procedures for issuing rulings with respect to requests for approval of a retroactive plan amendment.