IRS ISSUES NEW PROCEDURES FOR QUALIFIED PLAN DETERMINATION LETTERS.

Rev. Proc. 93-39

Table of Contents

SECTION 1. PURPOSE

SECTION 1. PURPOSE

.01 This revenue procedure contains procedures of the Internal Revenue Service pertaining to the issuance of determination letters on the qualified status of pension, profit sharing, and annuity plans under sections 401(a) and 403(a) of the Internal Revenue Code, as amended by the following laws (hereinafter referred to collectively as "TRA"):

     (1) The Tax Reform Act of 1986 (TRA '86), Pub. L. 99-514;

.03 This revenue procedure provides for a new graduated user fee schedule for applications filed for a determination letter. This new schedule does not increase the user fee applicable to the types of TRA determination letters that have been previously available under other revenue procedures, but provides the fees that will apply to the additional types of letters available under this revenue procedure.

.04 This revenue procedure provides guidance pertaining to the submission of determination letter requests involving plans that are relying on the separate line of business rules under section 414(r) of the Code to satisfy the minimum coverage requirements and minimum participation requirements.

.05 This revenue procedure modifies Rev. Proc. 93-12, 1993- 3 I.R.B. 14, relating to the required amendment dates for plan amendments to comply with the requirements of section 401(a)(31) of the Code.

.06 This revenue procedure provides extended reliance procedures for individually designed defined contribution and defined benefit plans that satisfy the requirements contained in this revenue procedure, and supersedes, in part, Rev. Proc. 93-9, 1993-2 I.R.B. 20.

.07 This revenue procedure modifies Rev. Proc. 93-10, 1993- 5 I.R.B. 13, to provide special submission instructions applicable to determination letter applications for nonstandardized safe harbor plans that are filed on or after October 12, 1993.

SECTION 2. BACKGROUND

.01 Rev. Proc. 93-6 contains the general procedures of the Service pertaining to the issuance of determination letters on the qualification of pension, profit-sharing, stock bonus, and annuity plans. These procedures pertain to determinations involving both plans that have not terminated and terminating plans.

.02 On September 3, 1993, final nondiscrimination regulations under section 401(a)(4) of the Code were published in the Federal Register, 58 Fed. Reg. 46773 (1993). The regulations under section 401(a)(4) are part of a comprehensive package of nondiscrimination regulations that provides guidance with respect to the requirements of various sections of the Code, including sections 401(a)(4), 401(a)(17), 401(a)(26), 401(l), 410(b), and 414(s). On September 7, 1993, proposed amendments to the final regulations under section 414(r) of the Code, concerning separate lines of business were published in the Federal Register, 58 Fed. Reg. 47090 (1993). These regulations reflect the provisions of TRA '86 and certain subsequent legislation.

.021 In order to be considered nondiscriminatory under the section 401(a)(4) regulations, a plan must satisfy three general requirements. First, either contributions or benefits under the plan must be nondiscriminatory in amount. The regulations provide a number of design-based and simplified testing safe harbors for plans to meet the nondiscrimination in amount requirement, as well as general testing rules for plans that do not satisfy the safe harbor requirements. Second, benefits, rights, and features provided under the plan must be made available in a nondiscriminatory manner. Third, the effect of plan amendments (including grants of past service credit) and plan terminations must be nondiscriminatory.

.03 Prior to the publication of the final section 401(a)(4) regulations, the Service had issued a notice and several revenue procedures concerning the extent to which determination letters issued by the Service regarding the qualified status of plans would take into account the requirements of TRA.

.031 Notice 86-13, 1986-2 C.B. 377, which was published after the passage of TRA '86, provided that, until further notice, determination letter requests would not be reviewed for qualification requirements changed by TRA '86, other than certain retroactive technical corrections.

.032 Rev. Proc. 88-42, 1988-2 C.B. 613, modified Notice 86-13 to allow plan sponsors to obtain determination letters that would take into account those requirements of TRA '86, OBRA '86, and OBRA '87 that are effective for plan years beginning before January 1, 1989. Rev. Proc. 88-42 did not provide for determination letters that would take into account those qualification requirements first effective in 1989 or later plan years.

.033 Rev. Proc. 90-20, 1990-1 C.B. 495, modified Rev. Proc. 88- 42 to provide that, beginning April 30, 1990, sponsors of certain defined contribution plans could obtain determination letters that would take into account those provisions of TRA that are first effective for plan years beginning after December 31, 1988.

.034 Rev. Proc. 91-41, 1991-2 C.B. 697, superseded Rev. Proc. 88-42 and Rev. Proc. 90-20 to allow plan sponsors to obtain a determination of qualified status for both defined contribution and defined benefit plans that would take into account the requirements of TRA first effective for plan years beginning after December 31, 1988. To qualify for submission under Rev. Proc. 91-41, a plan was required to meet certain eligibility criteria, including that the plan be nondiscriminatory in amount on the basis of design-based safe harbors described in the section 401(a)(4) regulations proposed on May 14, 1990.

.035 Rev. Proc. 91-66 superseded Rev. Proc. 91-41 and essentially restated the procedures therein to conform them to the regulations issued under section 401(a)(4) of the Code on September 19, 1991. Under Rev. Proc. 91-66, a plan is eligible to receive a determination of qualified status that takes into account all the requirements of TRA, including those first effective in 1989 or later, if the plan satisfies a design-based safe harbor under the 1991 regulations and satisfies certain other eligibility requirements.

.036 Rev. Proc. 92-60 modified Rev. Proc. 91-66 to allow stock bonus plans and ESOPs to be submitted under the latter revenue procedure. In addition, Rev. Proc. 92-60 expanded the determination letter program to allow sponsors of plans ineligible under Rev. Proc. 91-66 to obtain determination letters that would take into account the requirements of TRA, including those first effective for the 1989 plan year or later. Rev. Proc. 92-60 also provided, however, that, with the exception of letters issued for plans not benefiting any highly compensated employees, letters issued for plans ineligible under Rev. Proc. 91-66 would include a caveat regarding the nondiscrimination requirements.

.04 In addition to the revenue procedures described above, the Service has issued several other revenue procedures, notices, and announcements relating to compliance with TRA and other matters addressed in this revenue procedure. A synopsis of the principal revenue procedures, notices, and announcements follows.

.041 In Notice 87-57, 1987-2 C.B. 368, the Service advised plan sponsors that a plan that is terminated prior to the date by which the plan would otherwise be required to be amended to comply with TRA must be amended to reflect the law in effect at the time of termination. Rev. Proc. 93-6 contains procedures pertaining to determination letters for plans that will be terminated prior to the date by which they would otherwise have to be amended.

.042 In a series of notices and revenue procedures that include Notice 88-131, 1988-2 C.B. 546, Notice 89-92, 1989-2 C.B.410, Rev. Proc. 89-65, 1989-2 C.B. 786, Notice 90-73, 1990-2 C.B. 153, Notice 91-38, 1991-2 C.B. 636, Ann. 92-29, 1992-9 I.R.B. 37, and Notice 92- 36, 1992-2 C.B. 364, the Service has provided transitional relief generally enabling plan sponsors to preserve their design options for complying with the regulations under section 401(a)(4) through the end of the remedial amendment period. Notice 92-36 extended the expiration date of the remedial amendment period under section 401(b) of the Code for amending a plan to comply with TRA until the end of the first plan year beginning on or after January 1, 1994, and, generally, until the end of the first plan year beginning on or after January 1, 1996, for plans maintained by tax-exempt organizations and governmental plans. Notice 92-36 also extended certain other transitional relief, including the availability of Alternative II D of Notice 88-131 through the remedial amendment period.

.043 Announcement 89-107, 1989-36 I.R.B. 25, provides information pertaining to the approval of volume submitter specimen pension and profit-sharing plans under TRA '86.

.044 Rev. Proc. 89-9, as modified by Rev. Proc. 90-21, 1990-1 C.B. 499, Rev. Proc. 91-66, and Rev. Proc. 93-10 contains the procedures of the Service pertaining to the issuance of opinion letters for M&P pension, profit-sharing, and annuity plans under sections 401 and 403(a) of the Code. Rev. Proc. 89-13, as modified by Rev. Proc. 90-21, Rev. Proc. 91-66, and Rev. Proc. 93-10, contains the procedures of the Service pertaining to the issuance of notification letters for regional prototype defined contribution and defined benefit plans.

.045 Rev. Proc. 93-9 makes available an extended reliance period for eligible individually designed defined contribution plans, and extends the period of extended reliance already available to certain M&P and regional prototype plans. Under Rev. Proc. 93-9, sponsors of plans eligible for extended reliance are not required to amend their plans to reflect regulations or Service releases (e.g., revenue rulings) that are issued after the date of the plan's favorable TRA determination letter until, generally, the last day of the 1998 plan year. Rev. Proc. 93-9 provided that, after subsequent publication of the nondiscrimination regulations, procedures for a similar extended reliance period for individually designed defined benefit plans would be forthcoming.

.046 Rev. Proc. 93-12 provides a simplified method for sponsors to amend their plans to comply with the requirements of section 401(a)(31) of the Code, which was added by UCA.

.047 Rev. Proc. 93-23, 1993-19 I.R.B. 6, sets forth procedures relating to the payment of user fees for requests to the Service for rulings, determination letters, and similar requests.

.048 Rev. Proc. 93-42, this bulletin, simplifies the process of substantiating compliance with the section 401(a)(4) regulations by prescribing testing alternatives that reduce the frequency of testing where appropriate and by describing the quality of data that may be used to substantiate compliance (substantiation quality data).

.049 Rev. Proc. 93-40, this bulletin, sets forth procedures pertaining to notification to the Secretary, under section 414(r)(2)(B) of the Code, that the plan sponsor is using the separate lines of business rules. Rev. Proc. 93-41, this bulletin, contains procedures for requesting, pursuant to section 1.414(r)- 1(b)(2)(iv)(D) of the regulations, an individual determination that a separate line of business satisfies administrative scrutiny.

SECTION 3. OVERVIEW

.01 Opening of full TRA determination letter program - As a result of the issuance of final nondiscrimination regulations, the Service is now able to issue determination letters that provide reliance with respect to whether a plan satisfies the requirements of sections 401(a)(4) and 410(b) of the Code and the regulations thereunder, including whether the plan satisfies a nondesign-based safe harbor or the general test with respect to the nondiscriminatory amounts requirement under the section 401(a)(4) regulations, and whether the plan satisfies the minimum coverage requirements on the basis of the average benefit test. Therefore, determination letter applications filed on or after October 12, 1993 will be reviewed for compliance with the requirements of TRA, including those first effective in plan years beginning on or after January 1, 1989. Accordingly, Rev. Proc. 91-66, with the exception of sections 8.03 - 8.08 relating to M&P and regional prototype plans, and Rev. Proc. 92- 60 are being superseded by this revenue procedure with respect to determination letter applications filed on or after October 12, 1993.

.011 This revenue procedure provides supplemental instructions regarding applications for determination letters on the qualified status of pension, profit sharing, and annuity plans under sections 401(a) and 403(a) of the Code that are filed with the Service on or after October 12, 1993. These supplemental instructions are contained generally in section 5. This revenue procedure also provides special instructions pertaining to collectively bargained plans, plans that benefit no highly compensated employees, and plans maintained by employers that employ no nonhighly compensated employees (section 6); governmental plans and plans of tax-exempt employers (section 7); plans that are aggregated, disaggregated or restructured for purposes of sections 401(a)(4) and 410(b) of the Code (section 8); M&P, regional prototype and volume submitter plans (section 9); and plan amendments and terminations (section 10). The general instructions in Rev. Proc. 93-6 (as modified herein) also continue to apply to all determination letter requests.

.012 Section 11 of this revenue procedure provides special procedures for plan sponsors relying on the separate line of business rules under sections 410(b)(5), 414(r), and 401(a)(26)(G) of the Code to satisfy the minimum coverage and minimum participation requirements. See Rev. Proc. 93-41 for procedures for requesting, pursuant to section 1.414(r)- 1(b)(2)(iv)(D) of the regulations, an individual determination that a separate line of business satisfies administrative scrutiny.

.013 Section 5.13 of this revenue procedure provides for a new graduated user fee schedule with respect to certain plans filing for a determination letter. The amount of user fee under this new fee schedule was determined to reflect the degree of difficulty inherent in reviewing the plan submitted.

.02 Scope of determination letter - In general, under this revenue procedure, applicants may obtain determination letters that take into account all the plan qualification requirements of TRA, including form and certain non-form requirements. (For this purpose, a form requirement means plan language required as a condition of qualification by section 401(a) of the Code. Examples of non-form requirements are the minimum participation requirements of section 401(a)(26) and the minimum coverage requirements of section 410(b) of the Code.) However, in order to accommodate the different needs of plan sponsors, this revenue procedure allows applicants to modify the scope of a determination letter and the review accorded their plans. Procedures with respect to determining the scope of the determination letter are set forth in section 4 below.

.03 Section 12 of this revenue procedure modifies Rev. Proc. 93- 12 to clarify that the time by which amendments under that revenue procedure must be made to comply with section 401(a)(31) of the Code is concurrent with the remedial amendment period of Code section 401(b).

.04 Extended Reliance Period - Section 13 of this revenue procedure makes available an extended reliance period for sponsors of individually designed defined contribution and defined benefit plans (including volume submitter plans) that satisfy certain requirements and that are submitted for determination letters on or before June 30, 1994.

SECTION 4. SCOPE OF DETERMINATION LETTERS

.01 In general, except as provided below, applications for the determination of the qualified status of a plan that are filed with the Service on or after October 12, 1993 will be reviewed by the Service for compliance with all form and certain non-form requirements of TRA, including the minimum participation requirements of section 401(a)(26). However, under this revenue procedure, applicants are given the option of electing whether the determination letter issued with respect to the plan considers certain requirements, as described below.

.02 Unless the applicant elects otherwise, a plan that is not intended to satisfy any of the design-based safe harbors described in section 5.05 below will not be reviewed for (and determination letters may not be relied on with respect to) the nondiscrimination in amount of contributions or benefits requirement of section 1.401(a)(4)-1(b)(2) of the regulations. Determination letters issued with respect to such plans that are not reviewed for these issues will be caveated for the nondiscrimination in amount of contributions or benefits requirement. Other determination letters issued under this revenue procedure will specifically indicate whether the plan satisfies the nondiscrimination in amounts requirement of section 1.401(a)(4)-1(b)(2) of the regulations on the basis of a design- based safe harbor, nondesign-based safe harbor, or a general test.

.03 Unless the applicant elects otherwise, a plan that does not satisfy the ratio percentage test of Code section 410(b)(1) and the regulations thereunder will not be reviewed for (and determination letters may not be relied on with respect to) the average benefit test of section 410(b)(2) and the regulations thereunder. Determination letters issued with respect to plans that are intended to satisfy the average benefit test, but for which the applicant is not providing a demonstration will be caveated for the minimum coverage requirements of section 410(b) of the Code and the regulations thereunder. Determination letters issued with respect to plans that are reviewed for the average benefit test will indicate that the plan satisfies the minimum coverage requirements on the basis of the average benefit test.

.04 Except with respect to those benefits, rights, and features specified by the applicant, applications submitted under this revenue procedure will not be reviewed for (and determination letters may not be relied on with respect to) the requirements of section 1.401(a)(4)-4(b) of the regulations, relating to the current availability of benefits, rights, and features. Thus, applicants may request the Service to determine whether specific benefits, rights, or features under a plan satisfy the current availability requirement without being required to show that all benefits, rights, and features under the plan satisfy this requirement. Determination letters issued under this revenue procedure will state that the letter may be relied on with respect to whether the plan satisfies the nondiscriminatory current availability requirement only with respect to those specific benefits, rights, or features for which the applicant has provided information relevant to such a determination.

.041 In no event will any application submitted under this revenue procedure be reviewed to determine (and determination letters may not be relied on with respect to) whether any benefit, right, or feature under the plan satisfies the effective availability requirement of section 1.401(a)(4)-4(c) of the regulations.

.05 Section 5 below contains general instructions for requesting a determination letter under this revenue procedure. In accordance with those instructions, applicants must indicate whether a determination of any of the requirements referred to in sections 4.02 through 4.04 is requested, and submit the appropriate information and demonstrations that the requirements are satisfied.

.06 Section 5.07 of this revenue procedure contains instructions and Appendix B of this revenue procedure contains guidelines that describe the elements that ordinarily should be addressed in demonstrations relating to the requirements referred to in sections 4.02 through 4.04. Applicants determine the exact format and content of their demonstrations of the requirements referred to in sections 4.02 through 4.04. Applicants are strongly encouraged to follow the guidelines in Appendix B when preparing demonstrations and to indicate in their demonstrations where each element listed in the guidelines is addressed. Nevertheless, the Service recognizes that there may be situations in which it can be demonstrated that the tests described in sections 4.02 through 4.04 are satisfied without addressing specific elements described in Appendix B. In such cases, the demonstration need not address those elements in Appendix B that the applicant considers unnecessary. However, the demonstration should contain a brief explanation as to why those elements were not addressed. In addition, the Service may request additional information (including information pertaining to any of the elements described in Appendix B) that it considers necessary to a determination. Applicants may, of course, provide information in addition to that listed in the guidelines.

.07 The extent of an applicant's demonstration will determine the extent of reliance provided by the determination letter issued with respect to the plan. Therefore, applicants are advised to retain copies of all demonstrations and supporting data submitted with their applications. Failure to do so may limit the scope of reliance on issues for which demonstrations have been submitted. Also see section 5.10.

.08 Additional information relating to the scope of determination letters - Determination letters may generally be relied on with respect to whether the timing of a plan amendment (or series of amendments) satisfies the nondiscrimination requirements of section 1.401(a)(4)-5(a) of the regulations, unless the plan amendment is part of a pattern of amendments that significantly discriminates in favor of highly compensated employees. In addition, a favorable determination letter does not provide reliance for purposes of section 404 and section 412 of the Code with respect to whether an interest rate (or any other actuarial assumption) is reasonable. Furthermore, a favorable determination letter will not constitute a determination with respect to the use of the substantiation guidelines contained in the Rev. Proc. 93-42; e.g., a determination letter will not consider whether data submitted with an application is substantiation quality. Lastly, a favorable determination letter will not constitute a determination with respect to whether any requirements of section 414(r) of the Code, relating to whether an employer is operating qualified separate lines of business, are satisfied. However, if an employer is relying on section 414(r) of the Code to satisfy the minimum coverage or minimum participation requirements, a determination letter will take into account whether the plan satisfies the nondiscriminatory classification test of section 410(b)(5)(B) of the Code, and, if the requirements of section 410(b) or section 401(a)(26) are to be applied on an employer-wide basis under the special rules for employer-wide plans, a determination letter will take into account whether the requirements of the applicable special rule set forth in section 1.414(r)-1(c)(2)(ii) or section 1.414(r)-1(c)(3)(ii) of the regulations are met.

.09 Reliance and retroactive amendment - With respect to plans that are not amended to comply with the regulations retroactive to the 1989 plan year (or, if a later TRA effective date is applicable, such later year), a determination letter issued under this revenue procedure may not be relied on as to whether the plan has been operated in accordance with a reasonable, good faith interpretation of section 401(a)(4) or whether plan provisions constitute such an interpretation. Furthermore, if there has been a failure to operate such a plan in accordance with a reasonable, good faith interpretation of section 401(a)(4) in any plan year beginning before January 1, 1994 (or, in the case of plans maintained by organizations exempt from tax under section 501(a), January 1, 1996), the fact that a favorable determination letter is issued for the plan under this procedure will not preclude an adverse effect on the qualification of the plan resulting from such failure either in the year the failure occurred or in any later year.

SECTION 5. GENERAL INSTRUCTIONS TO SPONSORS

.01 In general - The instructions in this section generally apply to all determination letter applications submitted on or after October 12, 1993.

.02 Special instructions that modify or supplement the general instructions in this section apply in the case of certain plans. Applicants should refer to the following sections, if applicable, for these special instructions:

(1) for plans benefiting collectively bargained employees, plans that benefit no highly compensated employees, and plans maintained by employers that employ no nonhighly compensated employees, see section 6;

(2) for governmental plans and plans of tax-exempt employers, see section 7;

(3) for aggregated, disaggregated and restructured plans, see section 8;

(4) for M&P, regional prototype and volume submitter plans, see section 9;

(5) for plan amendments and terminations, see section 10;

(6) for plans of employers operating qualified separate lines of business, see section 11.

.03 The applicant must include with the application form an attachment (separate from any cover letter submitted with the application) which provides the information described in sections 5.04 through 5.06 below. A model attachment, entitled "Attachment to Applications Filed under Rev. Proc. 93-39," is included in Appendix A of this procedure. Applicants are strongly encouraged to use the format of the model attachment in order to facilitate the processing of their applications. Use of other formats, while not prohibited, will result in delays in processing.

.04 The attachment described in the preceding paragraph must indicate:

(1) whether the applicant is electing to receive a determination with respect to whether any benefit, right, or feature specified by the applicant meets the nondiscriminatory current availability requirement under section 1.401(a)(4)-4(b) of the regulations;

(2) the manner in which the plan satisfies the minimum coverage requirements of section 410(b), and if the plan is intended to satisfy the average benefit test of section 410(b)(2), whether the applicant is electing to receive a determination with respect to the minimum coverage requirements;

(3) the manner in which the plan satisfies the requirement under section 1.401(a)(4)-1(b)(2) of the regulations that it be nondiscriminatory with respect to the amount of employer-provided contributions or benefits, and if the plan is not intended to satisfy one of the design-based safe harbors listed in section 5.05 below, whether the applicant is electing to receive a determination with respect to whether such contributions or benefits under the plan are nondiscriminatory in amount; and

(4) if the plan is a defined benefit plan, whether a determination is being sought with respect to the special rule in section 1.401(a)(4)-3(c)(3) of the regulations for defined benefit plans that would otherwise fail the general test under section 1.401(a)(4)-3(c)(1) of the regulations.

.05 If the plan is intended to meet a safe harbor described in sections 1.401(a)(4)-2(b)(2), 1.401(a)(4)-3(b)(3), 1.401(a)(4)- 3(b)(4)(i)(C)(1), 1.401(a)(4)-3(b)(4)(i)(C)(2), 1.401(a)(4)-3(b)(5), 1.401(a)(4)-8(b)(3), or 1.401(a)(4)- 8(c)(3)(iii)(B) of the regulations (herein referred to as the "design-based safe harbors"), the attachment must indicate the following:

(1) the location of the various plan provisions satisfying the design-based safe harbor; and

(2) in the case of a contributory defined benefit plan (i.e., a defined benefit plan with employee contributions not allocated to a separate account), the method the plan meets for determining the employer provided benefit for purposes of section 401(a)(4) (including, in the case of a minimum benefit method plan, the applicable plan factor), the location of the various plan provisions satisfying the method (if applicable), and the rule under which the plan satisfies section 401(a)(4) with respect to the amount of employee-provided benefits.

.06 In the case of a plan that is part of a floor offset arrangement intended to meet the safe harbor in section 1.401(a)(4)- 8(d) of the regulations, the attachment must indicate the name, file folder number (if available), and plan type (e.g., defined benefit or profit sharing) of the other plan that is part of the arrangement, and whether the other plan has received a favorable determination letter or is being submitted for a determination letter simultaneously.

.07 Demonstrations Required To Be Submitted With the Application - In addition to the attachment described in section 5.03, applicants must include with their applications the following demonstrations:

(1) a demonstration that the plan satisfies the requirements of section 401(a)(26) of the Code and the regulations thereunder with respect to current employees (a demonstration regarding a defined benefit plan's prior benefit structure need not be submitted);

(2) a demonstration that a definition of compensation satisfies section 1.414(s)-1(d) of the regulations where -

(a) the plan is a design-based safe harbor plan that bases contributions or benefits on a definition of compensation that does not satisfy the requirements of section 1.414(s)- 1(c)(2) or section 1.414(s)-1(c)(3) of the regulations; or

(b) the plan is a section 401(k) or section 401(m) plan that provides for an actual deferral percentage or actual contribution percentage test using a definition of compensation that does not satisfy the requirements of section 1.414(s)- 1(c)(2) or section 1.414(s)-1(c)(3);

(3) if the plan is a contributory defined benefit safe harbor plan that uses the composition-of-workforce method in section 1.401(a)(4)-6(b)(2) of the regulations to determine the employer provided benefit, a demonstration that the eligibility requirements of section 1.401(a)(4)-6(b)(2)(ii) are satisfied;

(4) if the plan is a contributory defined benefit safe harbor plan that uses the grandfather rule in section 1.401(a)(4)-6(c)(4) of the regulations to determine the employee- provided benefit, a demonstration, if applicable, that the benefits provided on account of employee contributions at lower levels of compensation are comparable to those provided on account of employee contributions at higher levels of compensation, as required by 1.401(a)(4)- 6(c)(4)(iv);

(5) if the applicant is electing to receive a determination with respect to whether any benefit, right, or feature satisfies current availability, a demonstration that each such benefit, right, or feature specified by the applicant meets the current nondiscriminatory availability requirement under section 1.401(a)(4)- 4(b) of the regulations;

(6) if the plan is using the average benefit test to satisfy the minimum coverage requirements of section 410(b) with respect to employees, and the applicant is electing to receive a determination with respect to the minimum coverage requirements, a demonstration that the plan satisfies the average benefit test;

(7) if the plan uses either the safe harbor for uniform points plans in section 1.401(a)(4)-2(b)(3) of the regulations or the alternative safe harbor for flat benefit plans in section 1.401(a)(4)-3(b)(4)(i)(C)(3) (hereinafter referred to as the "nondesign-based safe harbors"), or any of the tests in sections 1.401(a)(4)-2(c), 1.401(a)(4)-3(c), 1.401(a)(4)-8(b)(2), 1.401(a)(4)- 8(c)(2), or 1.401(a)(4)-8(c)(3)(iii)(C) (herein referred to as the "general tests") to show nondiscrimination in the amount of contributions or benefits, and the applicant is electing to receive a determination with respect to whether contributions or benefits under the plan are nondiscriminatory in amount, a demonstration that the plan satisfies this requirement;

(8) if any plan amendment, or plan provision in the case of an initial determination letter, provides for a period of past service that exceeds the period set forth in the safe harbor provided in section 1.401(a)(4)-5(a)(5) of the regulations, a description of the nature of such grant of past service and the location of the various plan provisions providing for the granting of such past service; and

(9) if any plan provision or amendment provides for pre- participation service or imputed service as defined in section 1.401(a)(4)-9(d)(3)(ii), a description of the nature of such service, whether it is being taken into account in determining whether the plan satisfies section 1.401(a)(4)-1(b)(2) of the regulations, and the location of the various plan provisions providing for the granting of such service.

.071 No format is provided for the demonstrations specified in section 5.07. However, included with this revenue procedure as Appendix B are guidelines that describe the elements that ordinarily should be addressed in the demonstrations required by section 5.07, other than sections 5.07(3), (4), (8), and (9). The Service strongly encourages applicants to follow the guidelines in Appendix B when preparing demonstrations and to indicate in their demonstrations where each element listed in the guidelines is addressed. Also see sections 4.06 and 4.07. The content of the applicant's demonstrations will determine, in part, the extent to which the applicant may rely on the determination letter.

.072 In certain circumstances, the Service may request any additional information or demonstrations it may consider necessary to make a determination of a plan's qualified status. Among the requirements for which such additional information or demonstrations may be requested are the following:

(1) the requirements of section 401(l), relating to permitted disparity;

(2) the requirement under section 1.401(a)(4)-5(a) of the regulations that the timing of an amendment granting past service credit not have the effect of discriminating significantly in favor of highly compensated employees or former employees;

(3) the requirements under sections 1.401(a)(4)-10, 1.410(b)- 2(c) and 1.401(a)(26)-4 of the regulations that a plan satisfy the coverage, nondiscrimination and minimum participation requirements with respect to former employees;

(4) the requirement under section 1.401(a)(4)-11(d) that the manner in which the plan credits service be nondiscriminatory; and

(5) the requirement under section 1.401(a)(26)-3 of the regulations that a defined benefit plan's prior benefit structure satisfy section 401(a)(26).

.08 The following forms are required to be filed for applications for determination letters under this revenue procedure, regardless of whether the application relates to the initial qualification, amendment, or termination of a plan:

 1.  Initial Qualification, Restatement, Amendment, Partial

.09 Form 5302, Employee Census, need not be submitted with applications filed under this revenue procedure.

.10 Data submitted with the application may be for a prior plan year, provided the following conditions are satisfied: (1) the data is the most recent data available, (2) there is no misstatement or omission of material fact with respect to such prior year's data, (3) there has been no material change in the facts (including a change in the benefits provided under the plan and employee demographics) since such prior plan year, (4) the coverage data submitted with the application is for the same prior plan year, (5) the data is relevant to the operational effect of the plan provisions that are under review, and (6) the applicant clearly discloses that prior year's data is being submitted with the application. Data submitted with any compensation demonstration may also be for any 12 consecutive month period ending within the plan year for which coverage data is given. The applicant is responsible for the accuracy of any factual representations and conclusions contained in the application. Also see sections 4.06 and 4.07.

.11 Restatements required - When a plan (other than an M&P or regional prototype plan, or a plan that has received a favorable determination letter under Rev. Proc. 90-20, Rev. Proc. 91-41, Rev. Proc. 91-66, or section 5 of Rev. Proc. 92-60) is first submitted under this revenue procedure, the application must include a copy of the restated plan. Pages of amendments, in lieu of the restated plan, will not be accepted. A working copy of the plan in a restated form is acceptable. (For this purpose, a "working copy" of a plan means one complete, self- contained document. Thus, a copy of the old plan, with separate amendments that must be integrated into the plan document, will not be acceptable.) The effective dates for required amendments must be clearly identified.

.12 Prior letters - If the plan has received a favorable determination letter in the past, the application must include a copy of the latest determination letter, if available. If the letter is not available, an explanation must be included with the application.

.13 User fees - Applications filed under this revenue procedure must include the appropriate user fee determined in accordance with the following schedule. Form 8717, User Fee for Employee Plan Determination Letter Requests, is being revised to incorporate the following fee schedule, and should not be filed with applications submitted under this revenue procedure until further notice.

 1. If the plan is intended to satisfy a design-based or

SECTION 6. COLLECTIVELY BARGAINED PLANS, PLANS BENEFITING NO HIGHLY COMPENSATED EMPLOYEES, AND PLANS OF EMPLOYERS THAT EMPLOY NO NONHIGHLY COMPENSATED EMPLOYEES

.01 This section provides special rules and instructions for plans that benefit collectively bargained employees within the meaning of section 1.410(b)-6(d)(2) of the regulations or employees treated as collectively bargained employees (hereinafter referred to as "collectively bargained employees"), plans that benefit no highly compensated employees, and plans maintained by employers that employ no nonhighly compensated employees.

.02 Under the rules of sections 401(a)(4) and 410(b) and the regulations thereunder, a plan that benefits only collectively bargained employees automatically satisfies the coverage and nondiscrimination requirements of these sections. Plans that benefit no highly compensated employees for the plan year and plans maintained by employers that employ no nonhighly compensated employees at any time during the plan year are also treated under sections 401(a)(4) and 410(b) as automatically satisfying the coverage and nondiscrimination requirements of those sections.

.03 A plan that benefits only collectively bargained employees should be indicated as such in the attachment required by section 5.03. In this event, the applicant should not provide the other information or demonstrations required by sections 5.04 through 5.07. See the model attachment in Appendix A.

.04 In the case of a plan that benefits both collectively bargained and noncollectively bargained employees, the applicant should provide the information and demonstrations required by sections 5.04 through 5.07 only with respect to the noncollectively bargained portion of the plan. See the model attachment in Appendix A. Also see section 8 if the plan benefits the noncollectively bargained employees of more than one employer.

.05 A plan that benefits no highly compensated employees or a plan maintained by an employer that employs no nonhighly compensated employees should be indicated as such in the attachment required by section 5.03. In this case, the applicant should include a demonstration that the plan satisfies the requirements of section 401(a)(26) and should not provide the other information and demonstrations required by section 5.04 through 5.07. See the model attachment in Appendix A.

SECTION 7. GOVERNMENTAL PLANS AND PLANS OF TAX-EXEMPT EMPLOYERS

.01 The instructions contained in this section apply to governmental plans, as defined in section 414(d) of the Code, and plans maintained by organizations exempt from income taxation under section 501(a) of the Code. (See section V of Notice 92-36 for the definition of "plan maintained by a tax-exempt organization".)

.02 A governmental plan is deemed to satisfy the minimum coverage requirements of section 410(c), the nondiscrimination requirements of section 401(a)(4), the limitation on compensation under section 401(a)(17) of the Code, and the minimum participation requirements of section 401(a)(26) until generally the first day of the first plan year beginning on or after January 1, 1996. While a plan maintained by a tax-exempt employer is required to satisfy statutory requirements (including the statutory nondiscrimination requirements), such plan is not required to comply with the requirements of the regulations under sections 401(a)(4), 401(a)(17), 401(l), 414(s), or, if applicable, 410(b) of the Code until the first day of the first plan year beginning on or after January 1, 1996. Thus, for plan years beginning before the first day of the first plan year beginning on or after January 1, 1996, and after the relevant statutory effective date, a plan maintained by a tax-exempt employer must be operated in accordance with a reasonable, good faith interpretation of the coverage, and nondiscrimination requirements. (See sections 1.401(a)(4)-13, 1.410(b)-2(d) and (e) and 1.410(b)-10, section 1.401(a)(17)-1(d)(1), section 401(l)-6(b)(2), and section 1.401(a)(26)-9(b)(1) of the regulations.)

.03 If the plan is a governmental plan and the applicant wishes to request a letter that does NOT take into account the requirements of sections 410(c), 401(a)(4), 401(a)(17), and 401(a)(26) of the Code that are effective for the plan in plan years beginning after 1995, the applicant should so state in the attachment required by section 5.03. In this case, the information and demonstrations required by sections 5.04 through 5.07 should not be submitted with the application and the determination letter will be caveated. See the model attachment in Appendix A.

.04 If the plan is a plan of a tax-exempt employer and the applicant wishes to request a letter that does NOT take into account the requirements of sections 401(a)(4), 401(a)(17), 401(l), 414(s), or, if applicable, 410(b) of the Code that are effective for the plan in plan years beginning after 1995, the applicant should so state in the attachment required by section 5.03. In this case, the information and demonstrations required by sections 5.04 through 5.07, other than a demonstration that the plan satisfies section 401(a)(26) of the Code, should not be submitted with the application, and the determination letter will be caveated. See the model attachment in Appendix A.

SECTION 8. AGGREGATED, DISAGGREGATED, AND RESTRUCTURED PLANS

.01 The instructions in this section apply to the following types of plans:

(1) plans that are mandatorily disaggregated under any of the rules in section 1.410(b)-7(c) of the regulations, other than plans that are disaggregated solely because the plan benefits both collectively bargained and noncollectively bargained employees;

(2) plans that are permissively aggregated under section 1.410(b)-7(d) of the regulations; and

(3) plans that are restructured into component plans under section 1.401(a)(4)-9 of the regulations.

.02 Plans that are mandatorily disaggregated are treated as consisting of separate plans each of which must separately satisfy the requirements of sections 401(a)(4) and 410(b). Plans that are permissively aggregated are treated as consisting of a single plan subject to the requirements of sections 401(a)(4) and 410(b). Under the restructuring rules, a plan may be treated as consisting of two or more component plans for purposes of determining whether the plan satisfies section 401(a)(4). If each component satisfies the requirements of sections 401(a)(4) and 410(b) as if it were a separate plan, the plan is treated as satisfying section 401(a)(4).

.03 In the case of an application involving a plan that is disaggregated, permissively aggregated, or restructured, the instructions in section 5 are modified as follows:

(1) the applicant must indicate on the attachment required by section 5.03 that the plan is being disaggregated, permissively aggregated, or restructured;

(2) the applicant must include with the attachment required by section 5.03 a schedule explaining the basis of the disaggregation, permissive aggregation, or restructuring, identifying the aggregated or separate disaggregated plans or restructured component plans, and demonstrating how, for purposes of section 401(a)(4) of the Code, any restructured component plans satisfy section 410(b) as if they were separate plans; and

(3) the applicant must generally provide the information and demonstrations required by section 5 that pertain to coverage separately with respect to each permissively aggregated plan or separate disaggregated plan, and the information and demonstrations that pertain to nondiscrimination in amount separately with respect to each permissively aggregated plan, separate disaggregated plan, or restructured component plan. See the model attachment in Appendix A.

.04 If a plan is disaggregated, the applicant must also indicate on the attachment required by section 5.03 how the minimum coverage requirements are satisfied by each separate disaggregated plan, demonstrating each separate ratio test. If any separate disaggregated plan satisfies coverage on the basis of average benefits, the determination letter issued for the plan will be caveated with respect to the minimum coverage requirements unless the applicant provides a demonstration of how the requirement is satisfied with respect to each separate disaggregated plan.

.05 If the plan is disaggregated or restructured, the applicant must indicate on the attachment required by section 5.03 how each separate disaggregated plan or restructured component plan satisfies the nondiscrimination in amount requirement. If any separate disaggregated plan or restructured component plan relies on a nondesign-based safe harbor or a general test, the determination letter issued for the plan will be caveated with respect to the nondiscrimination in amount requirement unless the applicant provides a demonstration of how the requirement is satisfied by each separate disaggregated plan or restructured component plan.

SECTION 9. M&P, REGIONAL PROTOTYPE, AND VOLUME SUBMITTER PLANS

.01 Procedures Apply to Pre-Approved Plans - Except as provided in section 9.02, the instructions in this revenue procedure apply to applications involving adoptions of M&P, regional prototype, and volume submitter plans.

.02 Special Instructions for Adopters of Nonstandardized Safe Harbor Plans - Adopters of nonstandardized safe harbor plans that satisfy coverage without relying on the average benefit test and whose plans are neither disaggregated nor permissively aggregated should identify themselves as such in the attachment required by section 5.03. In this case, the applicant should include a demonstration that the plan satisfies the requirements of section 401(a)(26) and, if the plan uses a definition of compensation in determining contributions or benefits that is required to be tested for nondiscrimination under section 1.414(s)-1(d) of the regulations, a demonstration that the test is satisfied. A copy of the plan's favorable opinion or notification letter should also be attached to the application. The other information and demonstrations described in sections 5.04 through 5.07 should not be submitted. See the model attachment in Appendix A.

.03 Adoptions of Plans that Received Opinion, Notification, or Advisory Letters Before Final Regulations - See section 17.03 of Rev. Proc. 89-9 and section 15.02 of Rev. Proc. 89-13, regarding extended reliance. In issuing determination letters under this procedure the Service will not require applicants that have adopted pre-approved plans and are entitled to continued reliance to amend such plans to comply with the final nondiscrimination regulations. Sponsors and adopters of such plans may be required to make such amendments when the extended reliance period has expired.

SECTION 10. PLAN AMENDMENTS AND TERMINATIONS

.01 The instructions in this section apply to determination letter applications involving plan amendments and terminations.

.02 Determination letter applications involving plan amendments must generally comply with the instructions in section 5. However, the instructions in sections 5.03 through 5.07 will not apply to such an application if the following requirements are met:

(1) the plan is the subject of a favorable determination letter under Rev. Proc. 90-20, Rev. Proc. 91-41, Rev. Proc. 91-66, section 5 of Rev. Proc. 92-60, or this revenue procedure that takes into account all TRA issues (including those requirements that became effective in 1989); and

(2) in the case of a plan other than an M&P, regional prototype, or volume submitter plan, the plan sponsor files the application on Form 6406, Short Form Application for Determination for Amendment of Employee Benefit Plan, and the employer is eligible, under Rev. Proc. 93-6, to use this form.

.03 For purposes of section 10.02(2), an amendment that involves a significant change to plan benefits or coverage is considered to be a complex amendment which would render a plan ineligible to use a Form 6406.

.04 Applications that meet the requirements of section 10.02 should be submitted in accordance with section 10 of Rev. Proc. 93-6, but need not include Form 5302, Employee Census.

.05 This revenue procedure also applies to determination letter requests involving terminating plans and supersedes the procedures relating to terminating plans in section 11.05 of Rev. Proc. 93-6. In general, in order for a plan to remain qualified upon termination, it must be amended to comply with all qualification requirements that are in effect at the time of termination, even if the plan is terminated prior to the expiration of the section 401(b) remedial amendment period.

.06 In general, an applicant submitting a request for a determination letter upon termination must follow the procedures in section 5; however, applicants will not be permitted to choose whether or not to submit a demonstration with respect to the average benefit test (if applicable), or with respect to whether the plan satisfies the nondiscrimination in amounts requirement, as permitted under sections 5.04(2) and (3) above, respectively, unless the following conditions are satisfied:

(1) with respect to the average benefit test (if applicable), the plan must have received a favorable determination letter that considered whether the plan satisfied the requirements of the average benefit test;

(2) with respect to the nondiscrimination in amounts requirement, the plan must have received a favorable determination letter that considered whether the plan satisfied the requirements of either a nondesign-based safe harbor or one of the general tests listed in section 5.07(7) above;

(3) the favorable determination letter was issued during the immediately preceding three plan years; and

(4) there has been no material change in the facts (including benefits provided under the plan and employee demographics) upon which the determination was based.

If the applicant chooses on the attachment required by section 5.03 not to submit a demonstration with respect to the average benefit test (if applicable), or with respect to whether the plan satisfies the nondiscrimination in amounts requirement, the Service will treat this as a representation that the foregoing requirements in subparagraphs (1), (2), (3), and (4) of this section 10.06 have been met. In this case, the determination letter will be caveated with respect to the average benefit test or the nondiscrimination in amount requirement, as applicable.

.07 An application for a determination letter on termination is made on a Form 5310, accompanied by a Form 6088, or statement of actuarial evaluation describing distributions to participants. Copies of the plan and any plan amendments made since the most recent determination letter was issued must also be submitted.

.08 Applications for a determination letter on termination of a qualified plan prior to the delayed amendment date of section 1140 of TRA '86 need not be accompanied by the representations regarding compliance with section 1139 of TRA or section 415 of the Code that were previously required by Rev. Proc. 93-6.

SECTION 11. SPECIAL PROCEDURES FOR EMPLOYERS OPERATING QUALIFIED SEPARATE LINES OF BUSINESS

.01 This section provides procedures relating to the submission of determination letter requests for employers that are relying on the separate line of business rules under sections 410(b)(5) and 414(r) of the Code to satisfy the minimum coverage requirements of section 410(b) or the minimum participation requirements of section 401(a)(26) of the Code.

.02 If the employer wishes to be treated as operating qualified separate lines of business and is requesting a determination letter on the qualified status of any pension, profit sharing, or annuity plan maintained by any qualified separate line of business of the employer, the determination letter request must be sent to the Key District Director for the district in which the principal place of business of the employer (within the meaning of Code sections 414(b), (c), and (m)) is located.

.03 If a request for an administrative scrutiny determination on any separate line of business of the employer is pending with the National Office, the applicant should submit a copy of the confirmation receipt issued by the National Office with the application submitted under this revenue procedure.

.04 At the time of the submission for a determination letter, the applicant must attach a schedule providing the following information: (1) the separate lines of business that have employees benefiting under the plan, (2) the section or sections of the Code for which the employer is testing on a separate line of business basis (i.e., section 410(b) or section 401(a)(26)), (3) a demonstration of how the plan meets the nondiscriminatory classification requirement of section 410(b)(5)(B) of the Code and section 1.414(r)-8(b)(2) of the regulations on an employer-wide basis, and (4) if the requirements of section 410(b) or section 401(a)(26) are to be applied on an employer-wide basis under the special rules for employer-wide plans, a demonstration of how the plan meets the requirements of the applicable special rule set forth in section 1.414(r)-1(c)(2)(ii) or section 1.414(r)-1(c)(3)(ii) of the regulations. See section 3.03 of Rev. Proc. 93-40 for information that must be submitted under that revenue procedure to satisfy the notice requirement of section 414(r)(2)(B) of the Code.

SECTION 12. MODIFICATIONS TO REV. PROC. 93-12

.01 This section modifies section 4 of Rev. Proc. 93-12 relating to the required amendment dates for plan amendments that are made in accordance with that revenue procedure to comply with the requirements of section 401(a)(31) of the Code.

.02 Section 4.01 is modified to read as follows: "Sponsors of M&P, regional prototype, and volume submitter specimen plans that have received an opinion, notification, or advisory letter for the Tax Reform Act of 1986 must amend their plans by December 31, 1994, to include language that meets the requirements of section 401(a)(31) of the Code. Employers that have adopted volume submitter plans or individually designed plans and have received a determination letter for the Tax Reform Act of 1986 must amend their plans for section 401(a)(31) by the later of the last day of the first plan year beginning on or after January 1, 1994, (or, if later, the last day by which amendments must be made to comply with the Tax Reform Act of 1986 and related provisions, as permitted in other administrative guidance of general applicability)."

SECTION 13. EXTENDED RELIANCE PERIOD

.01 Rev. Proc. 93-9 provides procedures relating to an extended reliance period that is available to certain eligible defined contribution plans. This section supersedes Rev. Proc. 93-9 (with the exception of section 4, relating to M&P and regional prototype plans) by making available an extended reliance period for sponsors of individually designed defined contribution and defined benefit plans (including volume submitter plans) that satisfy the requirements in section 13.02 below.

.02 Requirements - except as provided in section 13.06, below, an individually designed plan (including a volume submitter plan) satisfies the requirements of this section 13.02 if: (a) the plan is eligible for submission under Rev. Proc. 90- 20, Rev. Proc. 91-41, Rev. Proc. 91-66 (as modified), section 5 of Rev. Proc. 92-60, or this revenue procedure; (b) the sponsor requests, or has requested, a determination letter on or before June 30, 1994; and (c) pursuant to that request, the Service issues a favorable determination letter that takes into account all TRA issues (including those requirements that became effective in 1989).

.03 Sponsors of plans that are described in section 13.02 above will be entitled to extended reliance on their determination letters. Under this extended reliance, sponsors will not be required to amend their plans during the extended reliance period to reflect regulations or administrative guidance of general applicability (e.g., revenue rulings) that are issued after the date of the plan's determination letter. The extended reliance period continues until the earlier of: (a) the last day of the last plan year commencing prior to January 1, 1999, or (b) the date established for plan amendment by any legislation that is effective after the date of the plan's determination letter.

.04 Notwithstanding clause (b) in the last sentence of section 13.03, sponsors otherwise eligible for extended reliance that have received a favorable determination letter that does not take into account section 401(a)(31) of the Code may continue to rely on the favorable determination letter, provided the sponsor amends the plan to satisfy section 401(a)(31) of the Code in accordance with Rev. Proc. 93-12 (as modified by this revenue procedure), which provides model plan language and simplified amendment procedures for amending plans to satisfy section 401(a)(31).

.05 As described in section 17.034 of Rev. Proc. 89-9 and section 15.02 of Rev. Proc. 89-13, under limited circumstances, the Service may require a plan to be amended for or to operationally comply with certain qualification requirements prior to the expiration of the extended reliance period. These circumstances generally are limited to cases where it is necessary to correct a fundamental error or omission that is likely to affect participants' rights or tax revenues in a significant number of plans.

.06 A defined contribution plan that incorporates an age or service weighted allocation formula does not satisfy the requirements of section 13.02, above, unless the plan's sponsor has received a favorable determination letter for the plan under this revenue procedure. Such a plan is not eligible for extended reliance on a determination letter issued under any revenue procedure listed in clause (a) of section 13.02 above, except for this Rev. Proc. 93-39. Also, other plans that are not described in section 13.02 above are not eligible for extended reliance. For example, extended reliance is not available to an individually designed plan that is submitted under section 3 of Rev. Proc. 92-60, for which an employer elects to receive a determination letter that takes into account all TRA issues (including those requirements that became effective in 1989), other than the requirements of section 401(a)(4), 410(b) and related sections of the Code.

.07 Extended reliance is available only to the extent a plan sponsor is entitled to rely on the determination letter issued with respect to the plan. For example, a sponsor of a plan described in section 13.02 above that is not intended to satisfy a design-based safe harbor and for which the sponsor does not elect to demonstrate compliance with a nondesign-based safe harbor or a general test, as provided in section 4.02 of this revenue procedure, will not be entitled to extended reliance with respect to the nondiscrimination in amount requirement of section 1.401(a)(4)-1(b)(2) of the regulations.

.08 Subsequent amendments - A plan that is described in section 13.02 above that is subsequently amended and submitted for a determination letter will be entitled to extended reliance on the subsequent determination letter issued with respect to the plan provided (1) the amendment is a minor amendment and the plan is submitted on a Form 6406, (2) the plan is amended to reflect legislation, regulations, or Service administrative pronouncements issued on or before the date the subsequent application is submitted, or (3) the plan is a volume submitter plan that is submitted on a Form 5307.

SECTION 14. EFFECT ON OTHER DOCUMENTS

.01 Rev. Proc. 91-66, with the exception of sections 8.03 - 8.08 relating to M&P and regional prototype plans, is superseded.

.02 Rev. Proc. 92-60 is superseded.

.03 Sections 5.02 through 5.04 of Rev. Proc. 93-6 are modified with respect to determination letter applications filed on or after October 12, 1993. In addition, section 11.05 of Rev. Proc. 93-6 is superseded.

.04 Rev. Proc. 93-9, with the exception of section 4 relating to M&P and regional prototype plans, is superseded.

.05 Rev. Proc. 93-10 is modified to provide that, in lieu of section 5 of Rev. Proc. 93-10, the instructions in section 5 and section 9.02 of this revenue procedure apply with respect to determination letter applications for nonstandardized safe harbor plans that are filed on or after October 12, 1993.

.06 Rev. Proc. 93-12 is modified as provided in section 12 of this revenue procedure.

.07 Section 6.09 of Rev. Proc. 93-23 is modified as provided in section 5.13 of this revenue procedure.

SECTION 15. EFFECTIVE DATE

This revenue procedure is effective on October 12, 1993.

DRAFTING INFORMATION

The principal author of this revenue procedure is Joyce Kahn, of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue ruling, you may contact Ms. Kahn by calling (202) 622-6214, or you may contact the Employee Plans Technical and Actuarial Division's taxpayer assistance telephone service between the hours of 1:30 p.m. and 4 p.m. Eastern Time, Monday through Thursday by calling (202) 622-6074/6075. (These telephone numbers are not toll-free numbers).

APPENDIX A

ATTACHMENT TO APPLICATIONS FILED UNDER REV. PROC. 93-39

Plan Name:______________________________________________________

Part I

Enter in Part I of the attachment the letter that describes the plan from the following list:

A = The plan benefits only collectively bargained employees within the meaning of section 1.410(b)-6(d)(2) of the regulations (or employees treated as collectively bargained employees) and no noncollectively bargained employees.

B = The plan is a governmental plan as defined in section 414(d) and you are applying for a determination letter that does not take into account the nondiscrimination, coverage, and minimum participation requirements that are effective for the plan in plan years beginning after 1995.

C = The plan is maintained by an employer exempt from income tax under section 501(a) AND you are applying for a determination letter that does not take into account the nondiscrimination and coverage requirements that are effective for the plan in plan years beginning after 1995.

D = The plan benefits no highly compensated employees.

E = The plan is maintained by an employer that employs no nonhighly compensated employees.

F = The plan is a nonstandardized safe harbor plan that satisfies the conditions of section 9.02 of Rev. Proc. 93-39, and the plan does not use a definition of compensation that must be tested for nondiscrimination under section 1.414(s)-1(d) of the regulations.

G = The plan is a nonstandardized safe harbor plan that satisfies the conditions of section 9.02 of Rev. Proc. 93-39, and the plan uses a definition of compensation that must be tested for nondiscrimination under section 1.414(s)-1(d) of the regulations.

H = The plan is not described above.

If the plan is described in A or B, complete only Part I of the attachment. If the plan is described in C, D, E, or F, complete only questions 1 and 2 of Part II, and Part IV. If the plan is described in G, complete only questions 1 and 2 of Part II, question 12 (Part III), and Part IV. If the plan is described in H, complete all questions, unless directed otherwise.

PART II

If this plan benefits both collectively bargained employees within the meaning of section 1.410(b)-6(d)(2) of the regulations (or employees treated as collectively bargained employees) and noncollectively bargained employees, answer the questions in Parts II and III only with respect to the portion of the plan that benefits noncollectively bargained employees.

1. If the separate lines of business rules of section 414(r) are being used in testing whether a plan of the employer satisfies section 401(a)(26) or section 410(b), attach to the application a schedule that contains the information required by section 11.04 of this revenue procedure.

2. See Appendix B, Demo 2, for guidelines relating to the required section 401(a)(26) demonstration.

3. Answer this question "yes" if you are requesting a determination that any specified benefit, right, or feature meets the nondiscriminatory current availability requirement under section 1.401(a)(4)-4(b) of the regulations. Generally, a separate demonstration must be provided for each benefit, right, and feature you wish considered. See Appendix B, Demo 3, for guidelines relating to this demonstration.

4. Answer this question "yes" if, for purposes of satisfying section 410(b) or section 401(a)(4) of the Code, the plan is: mandatorily disaggregated under any of the rules in sections 1.410(b)-7(c)(1), (2), (3), (4), or (6) of the regulations; permissively aggregated with another plan under section 1.410(b)- 7(d); or restructured into component plans under section 1.401(a)(4)-9. (Do not answer this question "yes" if the plan is disaggregated solely because it benefits both collectively bargained and noncollectively bargained employees.) Also attach a schedule explaining the basis of the disaggregation, permissive aggregation or restructuring, identifying the aggregated or separate disaggregated plans or component plans, and demonstrating how any restructured component plans satisfy section 410(b) as if they were separate plans.

If the plan is permissively aggregated with another plan, the questions on the attachment should be answered with respect to the aggregated plan.

5. Enter on line 5 the letter that describes the coverage test being met by the plan:

a. Ratio percentage test (1.410(b)-2(b)(2))

b. Average benefit test (1.410(b)-2(b)(3))

c. Section 401(a)(3) as in effect on September 1, 1974 (1.410(b)- 2(e) for certain governmental and nonelecting church plans)

If you answered "yes" to question 4 and the plan is disaggregated into two or more separate disaggregated plans, show on the schedule required by question 4 (i.e., Demo 4) the coverage test that is being met by each separate disaggregated plan, demonstrating each ratio percentage test. Also, enter "b" on line 5 if the average benefit test is being used by any separate disaggregated plan.

6. If you answer "yes" to this question, see Appendix B, Demo 5, for guidelines relating to the average benefit test demonstration. If you answer "no" to this question, the determination letter issued with respect to this plan will indicate that, at your request, the letter does not consider and may not be relied on with respect to whether the plan satisfies the minimum coverage requirements of section 410(b) of the Code. If this is a terminating plan that is meeting coverage on the basis of the average benefit test, you must answer "yes" to this question unless a favorable determination letter that considered the average benefit test was issued for the plan during the preceding three years and there has been no change in material facts on which that determination was based.

7. Leave this question blank only if the plan is a section 401(k) plan or a section 401(m) plan as defined in section 1.410(b)-9 of the regulations. Otherwise, answer this question "yes" or "no". For purposes of this question, a plan is not a section 401(k) plan or a section 401(m) plan if the plan also provides for any contributions (such as nonelective contributions) that are not subject to the special rule in section 1.401(a)(4)-1(b)(2)(ii)(B) of the regulations.

If you answered "yes" to question 4 and this plan has been disaggregated into separate disaggregated plans or restructured into component plans, show on Demo 4 how each separate disaggregated plan or restructured component plan satisfies the nondiscrimination in amount requirement. If any separate disaggregated plan or restructured component plan relies on a nondesign-based safe harbor or a general test, answer "no" to question 7.

8. Enter on line 8 the letter that describes the design-based safe harbor that is intended to be met by the plan:

a. 1.401(a)(4)-2(b)(2) (defined contribution plan with uniform allocation formula)

b. 1.401(a)(4)-8(b)(3) (target benefit plan)

c. 1.401(a)(4)-3(b)(3) (unit credit defined benefit plan)

d. 1.401(a)(4)-3(b)(4)(i)(C)(1) (unit credit defined benefit fractional rule plan)

e. 1.401(a)(4)-3(b)(4)(i)(C)(2) (flat benefit defined benefit plan)

f. 1.401(a)(4)-3(b)(5) (insurance contract plan)

g. 1.401(a)(4)-8(c)(3)(iii)(B) (cash balance plan)

9. If you answer "yes" to this question, see Appendix B, Demo 6, for guidelines relating to the required demonstration. The demonstration must show that the plan satisfies either of the nondesign-based safe harbors described in section 1.401(a)(4)- 2(b)(3) (defined contribution plan with a uniform points allocation formula) or section 1.401(a)(4)-3(b)(4)(i)(C)(3) (alternative flat benefit safe harbor for defined benefit plans), or the contributions or benefits general test.

Also indicate in the space provided in question 9 whether the determination requested relates to: (a) a defined benefit plan being tested under the general test in section 1.401(a)(4)-3(c) of the regulations that also involves a facts and circumstances determination under the "safety valve" rule in section 1.401(a)(4)- 3(c)(3); (b) a plan being tested under a general test that does not involve a determination under the safety valve; or (c) a plan that is intended to satisfy a nondesign-based safe harbor.

If this question is answered "no," the determination letter issued with respect to this plan will indicate that, at your request, the letter does not consider and may not be relied on with respect to whether the plan is nondiscriminatory in the amount of contributions or benefits under section 401(a)(4) of the Code. If this is a terminating plan that is meeting the nondiscrimination in amounts requirement on the basis of a general test or a nondesign based safe harbor, you must answer "yes" to this question unless a favorable determination letter that considered such test or safe harbor was issued for the plan during the preceding three years and there has been no change in material facts on which that determination was based.

10. Answer this question "yes" if any plan provision provides for pre-participation or imputed service as defined in section 1.401(a)(4)-9(d)(3)(ii). Also answer "yes" if a plan amendment or, in the case of an initial determination, a plan provision provides for a period of past service that exceeds the period set forth in the safe harbor in section 1.401(a)(4)-5(a)(5) of the regulations. If you answer "yes," you must attach a schedule that includes a description of the nature of the grant of past service or pre- participation or imputed service, the location of the various plan provisions that provide for the granting of the service, and, in the case of pre-participation or imputed service, whether the service is being taken into account in determining whether the plan satisfies section 1.401(a)(4)-1(b)(2).

11. If the answer to this question is "yes," attach a schedule giving the name, file folder number (if available), and plan type (e.g., defined benefit or profit sharing) of the other plan that is part of the arrangement. Also indicate whether the other plan has received a favorable determination letter or is being submitted for a determination letter simultaneously with this application.

Also answer this question "yes" if any separate disaggregated or restructured component plan is part of a floor offset arrangement.

PART III

12. Answer this question "yes" if:

a. the plan bases contributions or benefits on a definition of compensation that does not satisfy the requirements of section 1.414(s)-1(c)(2) or section 1.414(s)-1(c)(3) of the regulations; or

b. the plan is a section 401(k) or section 401(m) plan that incorporates an actual deferral percentage or actual contribution percentage test using a definition of compensation that does not satisfy the requirements of section 1.414(s)-1(c)(2) or section 1.414(s)-1(c)(3).

If you answered "yes" to question 4 and this plan has been disaggregated into separate disaggregated plans or restructured into component plans, answer this question "yes" if any of the separate disaggregated plans or restructured component plans are described in a. or b. Also indicate on Demo 4 each disaggregated plan or component plan to which a. or b. apply. (Note that section 401(k) and section 401(m) plans may not be restructured.)

See Appendix B, Demo 9, for guidelines in preparing the required demonstration that the definition of compensation in a. or b. satisfies section 1.414(s)-1(d) of the regulations.

13. Also answer this question "yes" if any separate disaggregated plan or restructured component plan provides for employee contributions not allocated to separate accounts.

14. Enter on line 14 the letter that describes the method that is being used to determine the employer-provided benefit for purposes of section 401(a)(4):

a. Composition-of-workforce method (1.401(a)(4)-6(b)(2))

b. Minimum benefit method (1.401(a)(4)-6(b)(3)) (Note that the methods in a. and b. may only be used with plans that satisfy the unit credit safe harbor in section 1.401(a)(4)- 3(b)(3).)

c. Grandfather rule (1.401(a)(4)-6(b)(4))

d. Government plan method (1.401(a)(4)-6(b)(5))

e. Cessation of employee contributions method (1.401(a)(4)- 6(b)(6))

If you enter "b," also indicate the resulting plan factor (.4 or .6).

If you enter "a", attach a demonstration that the eligibility requirements of section 1.401(a)(4)-6(b)(2)(ii) are satisfied.

15. Enter on line 15 the letter that describes the method that is being used to show that the employee-provided benefit is nondiscriminatory in amount:

a. Same rate of contributions (1.401(a)(4)-6(c)(2))

b. Total benefits method (1.401(a)(4)-6(c)(3))

c. Grandfather rule (1.401(a)(4)-6(c)(4))

If you enter "c," attach a demonstration, if applicable, that the benefits provided on account of employee contributions at lower levels of compensation are comparable to those provided on account of employee contributions at higher levels of compensation, as required by 1.401(a)(4)-6(c)(4)(iv).

PART IV

Show in Part IV the demonstrations attached to your application.

APPENDIX B

GUIDELINES FOR CERTAIN DEMONSTRATIONS

This appendix describes elements that should be included in demonstrations required by sections 5.07(1), (2), and (5) through (7) of Rev. Proc. 93-39. These demonstrations relate to the following: the minimum participation requirements of section 401(a)(26); the current availability of benefits, rights and features; the average benefit test; the general tests for nondiscrimination in amount of contributions or benefits; the safe harbor for plans with uniform points allocation formulas; the safe harbor for plans using the fractional accrual rule; and the nondiscrimination test for compensation under section 1.414(s)-1(d) of the regulations.

The title of each of the following sets of guidelines identifies the demonstration referred to in Appendix A to which the guidelines relate.

SECTION 401(a)(26) REQUIREMENTS - DEMO 2

A demonstration that a plan satisfies the minimum participation requirements of section 401(a)(26) with respect to current employees should include the following information:

1. If the applicant believes the plan satisfies section 401(a)(26) because it meets one of the exceptions in section 1.401(a)(26)-1(b) of the regulations, the demonstration should specify the particular exception that is met and describe how the plan meets the requirements of the exception. If the plan is a frozen plan and thus satisfies section 401(a)(26) with respect to current employees, this should be stated in the demonstration.

2. If the employer is required, or elects, to disaggregate the plan under any of the rules in section 1.401(a)(26)-2(d) of the regulations, the demonstration should describe how the plan is being disaggregated. In this case, the applicant should demonstrate that each separate disaggregated plan satisfies section 401(a)(26).

3. The demonstration should show how the plan meets the requirement that it benefit at least the lesser of 50 employees or 40% of the employer's employees. Specifically, the demonstration should include the following:

a. the date for which the demonstration data is being given, and a statement as to whether the data is reasonably representative of the employer's workforce and plan coverage;

b. if the plan benefits fewer than 50 employees, the total number of the employer's employees and, if the plan benefits fewer than 40% of total employees, the number of employees who are excludable under each of the categories in section 1.401(a)(26)-6(b) of the regulations.

NONDISCRIMINATORY CURRENT AVAILABILITY OF BENEFITS, RIGHTS AND FEATURES - DEMO 3

An applicant that is requesting a determination that a plan satisfies the nondiscriminatory current availability requirement of section 1.401(a)(4)-4(b) of the regulations with respect to any benefit, right, or feature ("BRF") specified by the applicant should ordinarily demonstrate the following for BRF that the applicant wants considered.

1.a. Identify the specific BRF, including terms pertaining to the BRF, such as eligibility conditions, timing, election rights, etc.

b. Cite the plan provisions that describe the BRF and all terms pertaining to the BRF.

c. Describe any conditions on the availability of the BRF that were disregarded in determining current availability.

d. If the BRF is contingent on an unpredictable event, describe the contingency and indicate whether current availability was determined as if the event had occurred.

e. If applicable, describe how the special rule in section 1.401(a)(4)-4(d)(3), relating to early retirement window benefits, has been applied.

2. If the BRF is an optional form of benefit, ancillary benefit, or other right or feature that has been aggregated, for testing purposes, with another optional form of benefit, ancillary benefit, or other right or feature, respectively, show how the requirements of sections 1.401(a)(4)-4(d)(4)(A) and (B) are satisfied.

3. Describe the group of employees to whom the BRF is available and indicate whether this group includes any nonexcludable employees with accrued benefits who are not currently benefiting ("frozen participants").

4. Give a demonstration or show one of the following with respect to the specified BRF:

a. The group of employees to whom the benefit is currently available satisfies section 410(b).

b. The BRF has been prospectively eliminated and satisfies section 410(b) as of the elimination date.

c. The BRF is available only to an acquired group of employees and the requirements of sections 1.401(a)(4)-4(d)(1)(i)(A) and (B) are satisfied.

d. The plan is a permissively aggregated plan and the BRF is a spousal benefit described in section 1.401(a)(4)-4(d)(5) of the regulations.

e. The plan is an ESOP and the BRF is an investment diversification right or feature or distribution option available only to all qualified participants (within the meaning of section 401(a)(28)(B)(11)) or the failure of the BRF to satisfy current availability results from the restrictions of section 409(n).

f. The plan is a permissively aggregated DB/DC plan; the BRF is not a single sum benefit, loan, ancillary benefit, or benefit commencement date (including the availability of in-service withdrawals); the BRF is provided under only one type of plan; and the BRF is currently available to all NHCEs in all plans of the same type as the plan under which it is provided.

5. If the BRF is available to frozen participants, show how one of the requirements in sections 1.401(a)(4)-4(d)(2)(i) through (iv) is satisfied.

AVERAGE BENEFIT TEST - DEMO 5

1. A plan that benefits both collectively bargained employees and noncollectively bargained employees and that is deemed to satisfy the average benefit test under the special rule in section 1.410(b)-5(f) of the regulations should submit a demonstration that the plan would satisfy the ratio percentage test, if the excludable employee and mandatory disaggregation rules for collectively bargained and noncollectively bargained employees did not apply, and need not submit a demonstration of the average benefit test.

2. The demonstration for the average benefit test should provide the average benefit percentage for highly compensated employees and nonhighly compensated employees (see line 9i of Form 5300 and line 10i of Form 5307).

3. Applicants must also demonstrate compliance with the nondiscriminatory classification test of section 1.410(b)-4 of the regulations, including, if applicable, the facts and circumstances determination under section 1.410(b)-4(c)(3).

4. In addition to the above information, the average benefit percentage demonstration should identify and describe the method used for determining employee benefit percentages (see sections 1.410(b)- 5(d) and 1.410(b)-5(e) of the regulations), and include the information listed below. However, if the Service determines that additional information is necessary, it will request that additional information be submitted. Applicants are encouraged to submit examples clarifying the analysis of the average benefit percentage test in a particular plan with respect to representative sample employees. Issues where this might be particularly appropriate are marked by an asterisk.

I. ALL PLANS:

a. the testing period (see section 1.410(b)-5(e)(5) of the regulations for an optional averaging rule)

b. the definition of testing service (including imputed and pre-participation service)

c. a description of the testing group (see section 1.410(b)-7(e) of the regulations)

d. whether the employee benefit percentages are determined on a contributions or benefits basis

e. whether permitted disparity under section 1.401(a)(4)-7 of the regulations is imputed in determining employee benefit percentages *

f. a demonstration of how allocation or accrual rates are grouped

g. a description of how contributions or benefits are normalized, including actuarial assumptions used *

h. the definition of section 414(s) compensation used in determining plan year compensation or average annual compensation and a demonstration showing the definition as nondiscriminatory (the demonstration for nondiscriminatory compensation is not needed if the plan bases contributions or benefits on a definition of compensation that satisfies section 1.414(s)-1(c)(2) or section 1.414(s)-1(c)(3) of the regulations) (See the guidelines earlier in this Appendix B pertaining to nondiscriminatory compensation for guidance pertaining to this demonstration.)

i. the method of determining compensation used in determining employee benefit percentages

j. the testing age of employees (not applicable to defined contribution plans testing on a contributions basis)

II. PLANS WITH DEFINED BENEFIT PLANS IN THE TESTING GROUP:

k. whether accruals after normal retirement age are taken into account, and if such accruals are disregarded as provided in section 1.401(a)(4)-3(f)(3) of the regulations, the basis upon which they are disregarded

l. whether early retirement window benefits are taken into account in determining accrual rates and, if such benefits are being disregarded under section 1.401(a)(4)-3(f)(4)(ii) of the regulations, the basis upon which they are disregarded (testing on benefits basis only)

m. whether any unpredictable contingent event benefits were taken into account in determining accrual rates and, if such benefits are being disregarded under section 1.401(a)(4)-3(f)(5) of the regulations, the basis upon which they are disregarded (testing on benefits basis only)

n. if a defined benefit plan disregards offsets described in section 1.401(a)(4)-3(f)(9), a description of such offsets, and how they satisfy section 1.401(a)(4)-3(f)(9)

o. whether any disability benefits are taken into account in determining employees' accrued benefits, and if so, the plan provisions that permit these disability benefits to be taken into account

p. whether any other special rules in testing a plan for nondiscrimination in amounts are applied, e.g., the rules applicable to the determination of benefits on other than a plan- year basis described in section 1.401(a)(4)-3(f)(6), the adjustments for certain plan distributions provided in section 1.401(a)(4)-3(f)(7), and the adjustment for certain qualified preretirement survivor annuity charges as provided in section 1.401(a)(4)-3(f)(8)

q. plans with employee contributions not allocated to separate accounts: a description of the method for determining whether employer-provided accrued benefits are nondiscriminatory under 1.401(a)(4)-6(b) of the regulations, the method for determining the employee-provided accrued benefits under section 1.401(a)(4)- 6(c), and the location of plan provisions providing these methods. If the method for determining the employer-provided accrued benefit is the composition-of-workforce method, the demonstration must show that the eligibility requirements of section 1.401(a)(4)- 6(b)(2)(ii) are satisfied; if the grandfather rule of section 1.401(a)(4)-6(b)(4) is used, the demonstration must show, if applicable, that the benefits provided on account of employee contributions at lower levels of compensation are comparable to those provided on account of employee contributions at higher levels of compensation

III. EMPLOYEE BENEFIT PERCENTAGES DETERMINED USING CROSS-TESTING:

r. a description of the method used to determine equivalent allocations and benefits *

GENERAL TEST - DEMO 6

An applicant that is submitting a plan that uses any of the general tests in sections 1.401(a)(4)-2(c), 1.401(a)(4)-3(c), 1.401(a)(4)- 8(b)(2), 1.401(a)(4)-8(c)(2), and 1.401(a)(4)- 8(c)(3)(iii)(C) of the regulations must submit a demonstration that shows that the plan passes the relevant general test and should ordinarily provide the following information, as applicable. However, if the Service determines that additional information is necessary, it will request that additional information be submitted. Applicants are encouraged to submit examples clarifying the analysis of the general test in a particular plan with respect to representative sample employees. Issues where this might be particularly appropriate are marked by an asterisk.

I. ALL PLANS (UNLESS OTHERWISE NOTED):

a. The identification of each rate group under the plan and a demonstration of how each rate group satisfies section 410(b). (If the plan is a defined benefit plan that is being tested on the basis of the amount of benefits, rate groups must be determined on the basis of both normal and most valuable accrual rates which are expressed as a dollar amount or a percentage of compensation. If the most valuable accrual rate is determined in accordance with the special rule in section 1.401(a)(4)- 3(d)(3)(iv) of the regulations (floor on most valuable accrual rate), this must be indicated.)

b. whether the plan is being tested on a contributions or benefits basis

c. the plan year being tested

d. the description of the method of determining allocation or accrual rates, and if the plan is tested on a benefits basis, the measurement period and definition of testing service (including imputed and pre-participation service); see sections 1.401(a)(4)- 2(c), 1.401(a)(4)-3(d) and 1.401(a)(4)-9(b) of the regulations *

e. whether the plan is imputing permitted disparity under section 1.401(a)(4)-7 of the regulations *

f. a demonstration of how allocation or accrual rates are grouped

g. a description of how benefits are normalized, including actuarial assumptions used (not applicable to defined contribution plans testing on a contributions basis) *

h. the definition of section 414(s) compensation used in determining plan year compensation or average annual compensation and a demonstration showing the definition as nondiscriminatory (the demonstration for nondiscriminatory compensation is not needed if the plan bases contributions or benefits on a definition of compensation that satisfies section 1.414(s)-1(c)(2) or section 1.414(s)-1(c)(3) of the regulations) (See the guidelines earlier in this Appendix B pertaining to nondiscriminatory compensation for guidance pertaining to this demonstration.)

i. the method of determining average annual compensation used in testing the plan for nondiscrimination as defined in section 1.401(a)(4)-3(e)(2) or a description of the period used in determining plan year compensation

j. the testing age of employees (not applicable to defined contribution plans testing on a contributions basis)

II. DEFINED BENEFIT PLANS ONLY:

k. whether accruals after normal retirement age are taken into account, and if such accruals are disregarded as provided in section 1.401(a)(4)-3(f)(3) of the regulations, the basis upon which they are disregarded

l. whether early retirement window benefits are taken into account in determining accrual rates and, if such benefits are being disregarded under section 1.401(a)(4)-3(f)(4)(ii) of the regulations, the basis upon which they are disregarded

m. whether any unpredictable contingent event benefits were taken into account in determining accrual rates and, if such benefits are being disregarded under section 1.401(a)(4)-3(f)(5) of the regulations, the basis upon which they are disregarded

n. if the plan disregards offsets described in section 1.401(a)(4)- 3(f)(9), a description of such offsets, and how they satisfy section 1.401(a)(4)-3(f)(9)

o. whether any disability benefits are taken into account in determining employees' accrued benefits, and if so, the plan provisions that permit these disability benefits to be taken into account

p. whether any other special rules in section 1.401(a)(4)-3(f) of the regulations are applied in testing a plan for nondiscrimination in amount, e.g., the rules applicable to the determination of benefits on other than a plan-year basis described in section 1.401(a)(4)-3(f)(6), the adjustments for certain plan distributions provided in section 1.401(a)(4)-3(f)(7), and the adjustment for certain qualified preretirement survivor annuity charges as provided in section 1.401(a)(4)-3(f)(8)

q. plans with employee contributions not allocated to separate accounts: a description of the method for determining whether employer-provided accrued benefits are nondiscriminatory under 1.401(a)(4)-6(b) of the regulations, the method for determining the employee-provided accrued benefits under section 1.401(a)(4)- 6(c), and the location of relevant plan provisions. If the method for determining the employer-provided accrued benefit is the composition-of- workforce method, the demonstration must show that the eligibility requirements of section 1.401(a)(4)-6(b)(2)(ii) are satisfied; if the grandfather rule of section 1.401(a)(4)- 6(b)(4) is used, the demonstration must show, if applicable, that the benefits provided on account of employee contributions at lower levels of compensation are comparable to those provided on account of employee contributions at higher levels of compensation

r. if the plan would otherwise fail to satisfy the general test in section 1.401(a)(4)-3(c)(1) of the regulations, and a determination is being sought that the failure may be disregarded as permitted by the special rule in section 1.401(a)(4)-3(c)(3), describe the relevant facts and circumstances that support the use of this rule

III. CROSS-TESTED PLANS ONLY:

s. a description of the method used to determine equivalent allocations and benefits *

SAFE HARBOR FOR PLANS WITH UNIFORM POINTS ALLOCATION FORMULAS - DEMO 6

Each demonstration of the safe harbor for plans with uniform points allocation formulas in section 1.401(a)(4)-2(b)(3) should include the following information:

a. a description of the plan's allocation formula and the location of relevant plan provisions

b. the definition of section 414(s) compensation used in determining plan year compensation and a demonstration showing the definition as nondiscriminatory (the demonstration for nondiscriminatory compensation is not needed if the plan bases contributions or benefits on a definition of compensation that satisfies section 1.414(s)-1(c)(2) or section 1.414(s)-1(c)(3) of the regulations) (See the guidelines earlier in this Appendix B pertaining to nondiscriminatory compensation for guidance pertaining to this demonstration.)

c. the average of the allocation rates (determined without imputing permitted disparity) for the highly compensated and for the nonhighly compensated employees benefiting under the plan.

ALTERNATIVE SAFE HARBOR FOR FLAT BENEFIT PLANS - DEMO 6

Each demonstration of the alternative safe harbor for flat benefit plans in section 1.401(a)(4)-3(b)(4)(i)(C)(3) of the regulations must set forth the average of the normal accrual rates for all nonhighly compensated nonexcludable employees and the average of the normal accrual rates for all highly compensated nonexcludable employees. In addition, the demonstration should provide the additional information described in "General Test", relating to the determination of normal accrual rates, except for the information described in "a", "b", "f", "r", and "s".

NONDISCRIMINATORY COMPENSATION - DEMO 9

A demonstration that a definition of compensation is nondiscriminatory under the test in section 1.414(s)-1(d) of the regulations should include the following information:

1. It should state whether the demonstration relates to a definition used to determine contributions or benefits, or a definition used in a section 401(k) or section 401(m) plan's ADP or ACP test. (If the demonstration is being submitted to support a determination that a plan satisfies a general test, a nondesign based safe harbor, or the average benefit test, the demonstration should instead identify the test or nondesign based safe harbor to which it relates.)

2. It should state the definition of compensation being tested (and include the plan cite where applicable), and indicate whether the definition uses rate of compensation or includes prior-employer compensation or imputed compensation.

3. It should identify the period for which compensation data is given.

4. It should state whether the test is based on the compensation of all employees benefiting under the plan or all employees benefiting under all plans of the employer for which the same alternative definition of compensation is used to determine that the plan satisfies section 401(a)(4). It should also state whether all employees with zero total compensation have been excluded from the test. The demonstration should state the numbers of highly compensated and nonhighly compensated employees whose compensation is taken into account in the demonstration.

5. For each of the highly compensated and nonhighly compensated groups of employees, it should state whether the test uses an aggregate, individual, or other reasonable method to calculate inclusion percentages. If an "other" method is used, this should be described.

6. With regard to the determination of total compensation and compensation included under the definition being tested, the demonstration should:

a. specify the section 415(c)(3) definition of compensation used in determining total compensation;

b. indicate whether total compensation includes elective contributions and deferred compensation and, if applicable, whether and how the adjustment required by section 1.414(s)- 1(d)(3)(ii)(B) has been made; and

c. state whether, for purposes of the test, compensation included under the definition being tested is limited to total compensation and whether both total compensation and compensation included under the definition being tested are limited to amounts not in excess of the limit in section 401(a)(17).

7. The demonstration should show, for both groups of employees, the respective inclusion percentages for the two groups, and should describe the manner in which such inclusion percentages are determined.

8. Finally, if the highly compensated employees' inclusion percentage is greater than the nonhighly compensated employees' inclusion percentage, the demonstration should set forth any facts relevant to whether the difference is de minimis.