IRS ESTABLISHES VOLUNTARY COMPLIANCE PROGRAM FOR CORRECTION OF DEFECTS IN 403(b) PLANS.

Rev. Proc. 95-24

INDEX

SECTION 1. PURPOSE

.01 TVC PROGRAM. This revenue procedure establishes the Tax Sheltered Annuity Voluntary Correction Program (TVC program). The TVC program permits an employer that offers a tax sheltered annuity plan under section 403(b) of the Internal Revenue Code (403(b) plan) to voluntarily identify and correct defects in the 403(b) plan. Employers that request consideration under the TVC program, agree to correct the identified defects, and pay the negotiated sanction, will receive written assurance that the corrections are acceptable and that the Internal Revenue Service will not pursue revocation of the income tax exclusion with respect to the violations identified and corrected.

.02 NO WAIVER OF EXCISE TAX OR FICA/FUTA OBLIGATIONS. The TVC program will not be available to waive or reduce any applicable excise taxes and does not alter an employer's obligations to satisfy any applicable Federal Insurance Compensation Act (FICA) and Federal Unemployment Tax Act (FUTA) requirements (employment tax obligations).

.03 REQUEST FOR COMMENTS. Like the Service's prior compliance programs for tax-qualified plans, the TVC program initially is an experimental program of limited scope. It is expected that the TVC program will evolve over time, building upon the Service's experience with the program and upon comments and suggestions from employers and practitioners. The Service welcomes comments with respect to the format and operation of this program, including suggestions with respect to any additional types of defects that could be appropriately addressed under the TVC program, and with respect to possible standardized correction methods for specified defects.

SECTION 2. BACKGROUND

.01 DEVELOPMENT OF EMPLOYEE PLANS COMPLIANCE PROGRAMS. In dealing with retirement plans, the Service is charged with two responsibilities, enforcing the plan qualification requirements of the Code and encouraging continued plan qualification. In carrying out this dual role, the Service has developed a number of compliance programs for qualified plans over the past several years. Under each of these programs, the employer corrects qualified plan defects for all years and the Service treats the plan as a qualified plan with respect to those defects, thus preserving retirement benefits. These programs have evolved over time, using the experience gained in the earlier years to respond to the needs of examination agents, employers, practitioners and participants.

.02 EXAMINATION COMPLIANCE PROGRAMS FOR SECTION 401(a) PLANS. On December 21, 1990, the Service established a pilot closing agreement program permitting correction of four specified qualification violations. Under this pilot program, an employer with a plan under an Employee Plans examination could enter into a closing agreement with the Service, agreeing to correct the defects and pay a monetary sanction, in lieu of disqualification. Once the closing agreement was signed, the plan was treated as a qualified plan with respect to the defects corrected. Based upon the experience gained in the pilot program, the Service expanded the examination closing agreement program in 1991 to permit correction of most qualification defects, and established an Administrative Policy Regarding Sanctions to permit the correction of a de minimis defect, occurring in a single year in an otherwise well-run plan, without the imposition of a monetary sanction.

.03 VOLUNTARY COMPLIANCE PROGRAMS FOR SECTION 401(a) PLANS. Using the experience gained in the examination closing agreement program, the Service introduced two voluntary compliance programs for qualified plans (discussed below). In the two voluntary programs, an employer discovering a disqualifying defect in a plan intended to qualify under section 401(a) may work with the Service to correct the defect before the plan is examined. Once the defect has been corrected under one of the programs, the plan will be treated as qualified with respect to the defects resolved.

(1) On November 16, 1992, the Service established the Voluntary Compliance Resolution (VCR) Program as a temporary, experimental program that was expected to available until the end of 1993. The VCR program permits plan sponsors to pay a fixed compliance fee and correct operational qualification defects. The VCR program was extended in 1993 for an additional year and was expanded to permit correction of certain specified defects under a standardized VCR procedure (SVP). Under SVP, an employer pays a smaller fixed fee and uses the correction method set forth in the revenue procedure. In 1994, with the publication of Revenue Procedure 94-62, 1994-39 I.R.B. 11, the VCR program was extended indefinitely and the number of defects eligible for SVP was increased.

(2) On January 31, 1994, the Service established the Walk-in Closing Agreement Program (Walk-in CAP) in Revenue Procedure 94-16, 1994-1 C.B. 576. Walk-in CAP permits plan sponsors whose plans are not eligible for the VCR program to pay a limited monetary sanction and correct form and operational qualification defects.

.04 NEED FOR COMPLIANCE PROGRAM FOR 403(b) PLANS. 403(b) plans are not intended to satisfy the qualification requirements of section 401(a) and thus are not eligible for either the VCR program or Walk- in CAP. The Service believes these voluntary compliance programs are effective tools in administering the retirement plans under its jurisdiction, and believes that a voluntary compliance program for 403(b) plans would enhance the administration of 403(b) plans. In addition, employers who offer 403(b) plans have requested an opportunity to voluntarily correct defects in these arrangements under a program similar to the VCR program or Walk-in CAP.

SECTION 3. DESCRIPTION OF THE TVC PROGRAM

.01 BRIEF DESCRIPTION OF TVC. Effective [INSERT DATE OF PUBLICATION], the Service will begin the TVC program as an experimental, temporary program with the objective of enhancing voluntary compliance in 403(b) plans. The TVC program will be established at the Headquarters Office of the Service. The TVC program permits an eligible employer to correct defects that it has identified in its 403(b) plan. Under the TVC program, the employer voluntarily requests consideration with respect to a specific defect (or defects), proposes correction of the defect and describes any needed improvements to the plan's administration. At the end of the TVC process, the employer will receive a correction statement setting forth the applicable corrections and conditions as provided in section 4 of this revenue procedure. This program is experimental. Furthermore, the Service reserves the right to broaden or narrow the scope of the program.

.02 TVC SUNSET DATE. The TVC program will be available until October 31, 1996. To be eligible for the program, an employer must have requested consideration under the TVC program, using the procedures set forth in section 10, on or before that date.

.03 COOPERATION FROM OTHER ENTITIES. When it is likely that correction of a defect will require the cooperation of other entities involved in the 403(b) plan, the employer must generally contact the other entities involved and obtain assurance that those entities are willing to cooperate in correcting defects before TVC consideration may be requested. For example, if an employer discovers a failure to pay the minimum required distribution under section 403(b)(10), the correction will require payment of the delinquent required minimum distribution under an annuity contract. In this case, the custodian of the accounts, or the insurance company issuing the annuity contracts, must have agreed to distribute the required amount (with the applicable gains or losses) before the request for TVC consideration is submitted.

.04 CORRECTION FEE AND SANCTION. Under the TVC program, the employer will pay the correction fee stated in section 8 when requesting consideration under the TVC program. The employer will also pay a negotiated sanction determined in accordance with section 9 of this revenue procedure. The sanction will be offset by the correction fee already paid, but in no case will the sanction be reduced below the applicable correction fee. The sanction must be paid with the acknowledgement letter (described in section 4.03, below), and the correction statement will not be valid without payment of the sanction amount.

.05 EMPLOYER MUST IDENTIFY DEFECTS. The Service will not make any finding under the TVC program concerning the existence of defects. Thus, each item to be considered under the program must be identified by the employer as a defect. However, the employer's statements describing violations are for purposes of the TVC program only. Therefore, these statements will not be regarded by the Service as an admission of a violation for any other purpose.

.06 TVC LIMITED TO DEFECTS RAISED. The TVC program is a compliance program, but is not based upon an examination of the plan by the Service. Therefore, the Service will generally rely upon the statements of the employer in identifying the plan's defects. Only the defects raised by the employer, related issues, and other issues presented by the employer in written or oral statements are addressed under the program, and only those issues will be covered in the correction statement.

.07 FULL CORRECTION REQUIRED. Under the TVC program, the employer must correct the identified defects for all years for which the defects exist, even closed tax years. The Service will consider the suggestions of the employer with respect to the method of correction, but will not be bound by those suggestions. The corrections determined to be necessary by the Service will be set forth in the correction statement.

.08 APPROPRIATE ADMINISTRATIVE PROCEDURES REQUIRED. The Service must also be assured that the employer has initiated or will initiate administrative procedures for operating the plan so that the operational defects will not recur and the plan will be properly administered. Under the program, the Service reserves the right to prescribe appropriate administrative procedures, but will first discuss the appropriateness of existing procedures with the employer. Where the current procedures are inadequate for operating the plan in conformance with the requirements of the Code, the correction statement will be conditioned upon the implementation of stated procedures within the stated time period.

.09 EMPLOYMENT TAX OBLIGATIONS FULFILLED. Under the TVC program, the Service must be assured that the employer has initiated or will initiate procedures for paying the appropriate employment tax obligations. For example, amounts that are contributed in excess of the section 415 limitations or the exclusion allowance set forth in section 403(b)(2) should have been included in wages for purposes of determining the amount of employment taxes paid. Likewise, amounts that were subject to an agreement that was intended to be a "one-time irrevocable" agreement to have contributions made on the employee's behalf but that was actually revocable are elective deferrals and should have been included in wages for purposes of determining the amount of employment taxes paid. In appropriate circumstances, the correction statement will be conditioned upon the implementation of stated procedures within the stated time period.

.10 UNRELATED DEFECTS. If the Service discovers an unrelated plan defect while considering the voluntary request, that violation may be outside the scope of the voluntary request for consideration because it was not voluntarily brought forward by the employer. In most cases, the defect will be added to the correction statement. However, if the additional defect is significant, all aspects of the plan may be forwarded to the appropriate EP/EO Key District Office (KDO) for consideration for an examination. Forwarding to the KDO will only occur in unusual circumstances.

.11 FAILURE TO REACH RESOLUTION. If resolution cannot be reached because the requested information is not timely provided to the Service or because agreement cannot be reached on correction, administrative procedures or the sanction amount, the case may be referred to the appropriate KDO for consideration for an examination.

.12 VERIFICATION. Once the correction statement acknowledgement letter has been signed and received, the Service reserves the right to verify that the corrections have been made, and that any administrative procedures required by the correction statement have been implemented. Verification that the required changes set forth in the correction statement have been made does not constitute an examination of the books and records of the employer or the plan. If the Service determines that the employer did not implement the stated corrections and procedures within the stated time period, the case may be considered for an examination.

.13 USE OF INFORMATION. If the Service issues a correction statement and the employer implements the corrections and administrative changes required in the correction statement, the submission by the employer to the Service under the TVC program will not be used as the basis of an Employee Plans or Exempt Organizations examination of the 403(b) plan at issue.

.14 APPLICABILITY OF SECTIONS 6103 AND 6110. Because the TVC program is a compliance program, relating directly to the enforcement of specific Code and regulations requirements, the information received or generated by the Service under the program is subject to the confidentiality requirements of section 6103 of the Code and is not a written determination letter within the meaning of section 6110.

.15 EFFECT OF TVC RESOLUTION ON OTHER LAW. The TVC program constitutes a resolution under the Code of the specific defects identified by the employer. This resolution shall have no effect on the rights of any party under any law, including Title I of the Employee Retirement Income Security Act of 1974.

SECTION 4. CORRECTION STATEMENT

.01 CORRECTION STATEMENT DESCRIPTION. At the favorable completion of the TVC process, the employer will receive a correction statement from the Service. The correction statement will state the defects identified, the required corrections, the sanction amount, and any revision to administrative procedures or employment tax procedures upon which the statement is conditioned. The statement will also state the time frame in which the corrections and procedures must be implemented.

.02 EFFECT OF CORRECTION STATEMENT ON INCOME TAX EXCLUSION. If the correction statement is properly implemented, and all conditions satisfied, the Service will not pursue revocation of the income tax exclusion or the inclusion in income because the amount was contributed to a 403(b) plan or an annuity contract (or portion thereof) that does not satisfy the requirements for a 403(b) exclusion, with respect to the defects covered in the statement (such as, amounts above the section 415 limitation or above the exclusion allowance). The Service will, however, require the satisfaction of employment tax obligations on amounts that should have been included in income.

.03 ACKNOWLEDGEMENT LETTER. With the correction statement, the employer will receive an acknowledgement letter. Within 25 calendar days after the correction statement is issued, the employer must sign and send the acknowledgement letter to the Service, agreeing to the terms of the correction statement and paying the sanction amount. If the Service does not receive a signed acknowledgement letter and the sanction amount, the case may be referred to the appropriate KDO for consideration for examination. Once the correction statement has been issued (based on the information provided), the employer cannot request a modification of the correction terms except by a new request for a correction statement. However, if the requested modification is minor and is postmarked no later than 25 days after the correction statement is issued, the correction fee for the modification will be the lesser of the original correction fee or $1,250.

.04 TVC DOES NOT PRECLUDE EXAMINATION OF MATTERS OUTSIDE OF THE REQUEST. Since the TVC program does not arise out of an examination, consideration under the TVC program does not preclude or impede an examination of the employer, the employee or the plan by the Service with respect to the taxable year (or years) involved with respect to matters that are outside the correction statement.

SECTION 5. SCOPE

.01 GENERAL SCOPE. The Service intends to give taxpayers broad access to the TVC program, but as a preliminary matter, the TVC program will only be available for the defects listed in section 7, and is specifically not available for 403(b) plans or defects listed in 5.02, 5.03 or 5.04, below. The Service welcomes suggestions with respect to additional defects that might be addressed effectively under this program, but will identify additional defects only by publication in revenue procedures, notices or other guidance published in the Internal Revenue Bulletin.

.02 TVC NOT AVAILABLE TO INELIGIBLE EMPLOYERS. The TVC program is not available to employers that are ineligible to offer 403(b) plans to their employees.

.03 TVC NOT AVAILABLE FOR CERTAIN DEFECTS. Certain defects and plans cannot be corrected in the TVC program.

(1) The Service deems the plans and defects listed below as being inappropriate for the TVC program at this time.

(i) Plans in which there are defects relating to the misuse or diversion of plan assets (cases in which the Department of Labor may also have jurisdiction);

(ii) Plans for which a custodial account, although required, was not created or was not maintained;

(iii) Plans for which the employer does not have sufficient information to determine the nature or extent of the defect or does not have sufficient information to effect reasonable correction;

(iv) Plans in which annuity contracts were purchased from an entity other than an insurance company (if the purchase was not grandfathered under Rev. Rul. 82-102, 1982-1 C.B. 62);

(v) Plans in which there is no initial purchase of annuity contracts (and the contributions were not made to a custodial account) or the contributions are not invested in a proper custodial account (or a retirement income account in a church plan);

(vi) Annuity contracts purchased or custodial accounts established on behalf of ineligible employees or independent contractors; and

(vii) Plans in which the defects are egregious.

(2) In addition, the TVC program is not available for operational defects that are subject to an excise tax, a penalty or additional income tax under section 72(t) or section 72(p) rather than loss of 403(b) status or other related tax consequences, because the statute already provides specific tailored sanctions for those defects. For example, failure to file the Form 5500 cannot be corrected in the TVC program. However, if a defect results in both loss of the 403(b) status (or other loss of the income tax exclusion) and the imposition of an excise tax or an additional income tax, the TVC program will be available to correct the defect. For example, if the 403(b) plan fails to satisfy the nondiscrimination requirements with respect to matching contributions, the failure can be addressed in the TVC program. In such cases, the excise or additional income taxes will generally still apply. However, if the defect is a failure to satisfy the minimum distribution requirements of section 403(b)(10), the Service may enter into a closing agreement, as part of the TVC program, with respect to the excise tax under section 4974 applicable to the participants.

.04 PLANS UNDER EXAMINATION. A 403(b) plan that is under an Employee Plans or Exempt Organizations examination (that is, an examination of a Form 5500 series, a Form 990 series or other Employee Plans or Exempt Organizations examination) is not eligible for the program. This includes any plan for which the employer, or a representative, has received verbal or written notification from the EP/EO Division of an impending Employee Plans or Exempt Organizations examination or of an impending referral for Employee Plans or Exempt Organizations examination, and also includes any plan that has been under Employee Plans or Exempt Organizations examination and is now in Appeals or in litigation for issues raised in the Employee Plans or Exempt Organizations examination.

SECTION 6. TVC PROGRAM CORRECTION PRINCIPLES

In the request for a correction statement, the employer must give a description of the method for correcting the defect that the employer has implemented or proposes to implement. The following general principles should be used in suggesting acceptable corrections:

(1) The correction method should restore both active and former employees to the benefit levels they would have had if the defect had not occurred. Action must be taken to find former participants who are due additional benefits. Appropriate actions depend on the facts and circumstances of the case. Such actions might include, for example, a mailing to the last known address, notification in the largest local newspaper, and the use of the IRS Letter Forwarding Service (see Rev. Proc. 94-22, 1994-1 C.B. 608) if the participants have not been found.

(2) The correction method should restore the 403(b) plan to the position it would have been in had the defect not occurred. In general, the correction will conform the operation of the plan to the provisions set forth in the plan document (to the extent there is a plan document). If the existing plan document is defective, an amendment will be suggested, and the operation would then conform with the amendment.

(3) The correction method should generally keep the assets in the 403(b) plan.

(4) Corrective allocations must be adjusted for earnings and forfeitures that would have been allocated during the applicable period. In addition, increases in allocations that would have occurred due to changes in compensation must be taken into account.

(5) Corrective contributions should come only from employer contributions.

(6) A corrective contribution on behalf of a participant because of a failure to allocate the contribution in a prior year will generally be subject to the exclusion allowance as a contribution for the year in which the corrective contribution is made and a contribution amount (for purposes of the section 415 limitations) for the year to which it relates.

(7) The correction method should not, in general, reduce the benefit to which the participant is entitled.

(8) Any plan corrections should be properly reported on Form 1099-R or Form W-2, as appropriate.

SECTION 7. ELIGIBLE DEFECTS

The defects for which the employer may request a correction statement under TVC are:

(1) failure to satisfy the nondiscrimination requirements under section 403(b)(12), including a failure to satisfy the nondiscrimination requirements for matching contributions and the failure to offer the opportunity to make salary reduction contributions universally;

(2) failure to comply with the distribution restrictions set forth in section 403(b)(7) and (11), such as improper hardship distributions, distributions on termination of the 403(b) plan, or improper withdrawal of salary reduction amounts contributed after January 1, 1988 or of post-1988 earnings;

(3) failure to satisfy the incidental death benefit rules of section 403(b)(10);

(4) failure to pay minimum required distributions under section 403(b)(10);

(5) failure to give employees the right to elect a direct rollover, as required by section 403(b)(10) and section 1.403(b)-2T (including the failure to give an information notice to employees);

(6) Failure to satisfy section 403(b)(1)(E) (relating to section 402(g) or section 401(a)(30)), such as treatment of amounts as being subject to a one-time irrevocable election (under section 402(g)(3)) when the election is revocable;

(7) Contributions in excess of the exclusion allowance set forth in section 403(b)(2) to a plan that satisfies the requirements of section 403(b);

(8) A failure to satisfy the non-transferability requirements of section 401(g), to the extent applicable;

(9) A failure to satisfy the salary reduction agreements requirements set forth in section 1.403(b)-1(b)(3); and

(10) A failure to satisfy the section 415 limitations.

SECTION 8. VOLUNTARY CORRECTION FEE

.01 REV. PROC. 95-8 MODIFIED. The voluntary correction fee is processed under the user fee program. The procedures set forth in Rev. Proc. 95-8, 1995-1 I.R.B. 187, as modified by this section, apply to the voluntary correction fee. A 403(b) plan that requests a TVC correction statement shall pay the applicable voluntary correction fee described in section 8.02, below.

.02 AMOUNT OF CORRECTION FEE. The voluntary correction fee depends on the number of employees of the employer.

(1) The fee for an employer with fewer than 25 employees is $500.

(2) The fee for an employer with at least 25 and no more than 1,000 employees is $1,250.

(3) The fee for an employer with more than 1,000 employees but less than 10,000 employees is $5,000.

(4) The fee for an employer with 10,000 or more employees is $10,000.

SECTION 9. SANCTION LIMITATIONS

.01 GENERAL RULES. In addition to the voluntary correction fee, the employer will pay a sanction with respect to the corrected defects. The sanction will be limited to a significantly reduced percentage of the Total Sanction Amount using the information described in 9.02 or 9.03, below, and will be determined using the facts and circumstances in the case. The sanction will be offset by the correction fee paid in accordance with section 8 of this revenue procedure, but will not be less than the applicable correction fee.

.02 DETERMINATION OF TOTAL SANCTION AMOUNT -- DEFECTS THAT CAUSE THE 403(b) PLAN TO LOSE 403(b) STATUS. The Total Sanction Amount for a 403(b) plan for the defects that affect the entire 403(b) plan (generally defects 1 and 6) is approximately equal to the tax the Service could apply to the defects. It is the sum of:

(1) the tax on the earnings on amounts in the custodial accounts for all open years;

(2) the amount that should have been included in income by the highly compensated employees covered under the plan, calculated at the 28% rate, for all open years; and

(3) the income tax required, under section 3402, to have been collected at the source on amounts contributed to the 403(b) plan, calculated at the 20% rate, on behalf of the nonhighly compensated employees for all open years.

.03 DETERMINATION OF TOTAL SANCTION AMOUNT -- DEFECTS THAT CAUSE CONTRIBUTIONS TO CERTAIN 403(b) ANNUITY CONTRACTS TO LOSE 403(b) STATUS. The Total Sanction Amount for a 403(b) plan for the defects that cause amounts contributed to the affected annuity contracts (or a portion thereof) to lose 403(b) status is approximately equal to the tax the Service could apply to those defects. It is the sum of

(1) the amount that should have been included in income by the highly compensated employees covered by the affected annuity contracts, calculated at the 28% rate, to the extent that the contributions fail to satisfy the requirements of section 403(b), applicable for all open years; and

(2) the income tax required, under section 3402, to have been collected at the source on amounts contributed to the 403(b) plan on behalf of the nonhighly compensated employees covered by the affected annuity contracts, calculated at the 20% rate, to the extent that contributions fail to satisfy the requirements of section 403(b), for all open years.

.04 LIMIT ON SANCTION. The highest percentage of the Total Sanction Amount that may be applied as a monetary sanction for defects for which the employer voluntarily requested consideration under the TVC program is 40%.

.05 SIZE OF SANCTION AND FACTORS CONSIDERED. Depending on the factors, the actual monetary sanction may range from 40% of the Total Sanction Amount to as little as the applicable correction fee paid in accordance with section 8 of this revenue procedure. Factors considered in determining the actual sanction include (but are not limited to) the severity of the defect, the number and type of employees affected by the defect, the number of rank and file employees that would be hurt if the income tax exclusion were lost, the extent to which the employer's own procedures found the error, and the cost of correction. Cases with less severe defects may be subject to small monetary sanctions. For example, a 403(b) plan with a very small defect affecting only an insignificant percentage of the eligible workforce might pay a sanction that is equal to or just greater than the applicable correction fee. The hazards that the Service or the employer may face if the case is litigated are not factors considered in determining the sanction.

.06 SANCTION NOT A TAX. The applicable sanction is not a tax. Thus, no interest or penalties apply in determining the Total Sanction Amount. In addition, neither employment tax obligations nor excise tax obligations are satisfied by the payment of the sanction. The sanction is not deductible.

SECTION 10. SUBMISSION REQUIREMENTS

.01 GENERAL RULES. This section sets forth the procedures for requesting a 403(b) correction statement under the TVC program. In general, a request for a correction statement consists of a letter from the employer or the employer's representative to the Service that contains a description of the defect(s), a description of the proposed method(s) of correction, and other procedural items, and includes supporting information and documentation as described below.

.02 INFORMATION TO BE PROVIDED. A request for consideration under the TVC program must contain the specific information needed to support the suggested correction method. All such relevant information must be supplied. The Service reserves the right to return an application if the request for consideration under the TVC program is lacking relevant information concerning the plan (see section 11 for processing information).

(1) This includes, for example, the number of employees affected (and how this number was determined), the number of contracts held by employees of the employer, the number of related organizations affected by the defect(s);

(2) This also includes the applicable earnings (and the method of determining the earnings) that will apply to any corrective contributions to the plan, the years involved, and any calculations or assumptions the employer used to determine the amounts needed for correction. The submission must state the earnings (and the method of determining the earnings) that will apply to any corrective distributions. As a general rule, the interest rate (or rates) earned by the plan during the applicable period(s) should be used in determining the earnings for corrective contributions or distributions. For administrative convenience, if the plan permitted directed investments for the years at issue and thus had a number of funds, the plan is permitted (but not required) to use the highest rate earned in the plan for a particular year as the correction rate for that year, provided, in general, that most of the employees receiving the corrective allocations or distributions are nonhighly compensated employees. Where applicable, the request should also provide the proposed method of locating and notifying former participants who may be entitled to an additional benefit.

.03 SUBMISSION REQUIREMENTS. The request for consideration under the TVC program from the employer or the employer's representative must contain the following:

(1) A complete description of the defects and the years in which the defects occurred, including closed years (that is, years for which the statutory period has elapsed).

(2) A description of the current administrative procedures for the plan.

(3) An explanation of how and why the defects arose.

(4) A detailed description of the methods for correcting the defects that the employer has implemented or proposes to implement, including specific calculations for each affected employee, where applicable.

(5) A calculation of the Total Sanction Amount.

(6) A description of the measures that have been or will be implemented to ensure that the same defect will not recur.

(7) A list of any other 403(b) plans, qualified plans or SEPs maintained by the employer.

(8) A statement that, to the best of the employer's knowledge, the plan is not currently under an Employee Plans or Exempt Organizations examination (as defined in section 5.04 of this revenue procedure).

(9) The location of the KDO that has jurisdiction over the employer offering the 403(b) plan.

(10) A statement that the employer has contacted all other entities involved in the plan and has been assured of cooperation, to the extent necessary.

.04 REQUIRED DOCUMENTS. The submission must be accompanied by the following documentation:

(1) A copy of the first two pages of the most recently filed Form 5500 series return (if applicable). If a Form 5500 is not applicable, the employer must furnish the name of the plan, the Employer Identification Number, and the other information generally required of tax exempt organizations filing the Form 5500.

(2) A copy of the pertinent portion of any relevant 403(b) documents, including plan documents, written descriptions of the 403(b) plan, and salary reduction agreements.

(3) A statement that the employer is eligible to offer a 403(b) plan (e.g., because it is a tax exempt organization described in section 501(c)(3) or it is a public educational institution).

.05 SIGNED SUBMISSION. The submission must be signed by the employer or the employer's representative.

.06 POWER OF ATTORNEY REQUIREMENTS. To sign the submission or to appear before the Service in connection with the submission, the representative must comply with the requirements of section 9.02 of Rev. Proc. 95-4, 1995-1 I.R.B. 187.

.07 PENALTY OF PERJURY STATEMENT. The following declaration must accompany a TVC program submission and any factual information submitted after the original submission or any change in the submission at a later time: "Under penalties of perjury, I declare that I have examined this submission, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the TVC request are true, correct, and complete." The declaration must be signed by the employer, not the employer's representative.

.08 FEE. The submission must include the appropriate voluntary correction fee described in section 8 of this revenue procedure.

.09 MARKED LETTER. The letter to the Service should be marked "TVC PROGRAM" in the upper right hand corner of the letter.

.10 MAILING ADDRESS. The submission should be mailed to:

               Internal Revenue Service

.01 HANDLING OF INELIGIBLE PLANS OR DEFECTS. If a plan sponsor requests a correction statement under the TVC program but is an ineligible employer or submits an ineligible defect, the submission and the correction fee will be returned to the employer without review.

.02 INADEQUATE OR INCOMPLETE SUBMISSION. If the submission fails to comply with the provisions of this revenue procedure or additional information is required, the Service representative assigned to the case will generally contact the employer or the employer's representative and explain what is needed to complete the submission. The employer will have 21 calendar days from the date of this contact to provide the requested information. If the requested information is not received within 21 days, the matter will be closed, any correction fee will not be returned, and the case will be referred to the appropriate KDO in accordance with section 3.11 of this revenue procedure. Any request for an extension of the 21-day time period must be made in advance, in writing, and must be approved by the Chief of the TVC program.

.03 SERIOUSLY DEFICIENT SUBMISSIONS. If a submission is seriously deficient, the Service reserves the right to return the submission and the correction fee without processing the case or contacting the employer.

.04 PROCESSING OF SUBMISSIONS. Once the Service determines that the request for consideration under the TVC program is acceptable, the Service will consult the employer or the employer's representative to discuss proposed corrections, any necessary changes to the administrative procedures, and the sanction amount. If agreement is reached, the Service will issue a correction statement with an enclosed acknowledgment letter. The case will not be closed until the signed acknowledgement letter and the accompanying sanction payment are received from the employer by the Service.

.05 CONFERENCE OF RIGHT. If the Service initially determines that it cannot issue a correction statement because the parties cannot agree upon some correction, administration issue or sanction amount, the employer or the employer's representative will be contacted by the Service representative and offered a conference with the Service. The conference can be held either in person or by telephone. The conference must be held within 21 calendar days of the date of contact. The employer or the employer's representative will have 21 calendar days after the date of the conference to submit additional information in support of the submission. Any request for an extension of the 21-day time period must be made in advance, in writing, and be approved by the Chief of the TVC program. Additional conferences may be held at the discretion of the Service.

SECTION 12. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 95-8 is modified as provided in section 8 of this revenue procedure.

SECTION 13. EFFECTIVE DATE

This revenue procedure is effective on April 14, 1995.

DRAFTING INFORMATION

The principal authors of this revenue procedure are Karen Field and Roz Ferber of the Employee Plans Division. For more information concerning this revenue procedure, call the Employee Plans Division Employee Plans TVC Telephone Number, (202) 622-6233 (not a toll-free number) between the hours of 1:30 and 4:00 pm, Monday through Thursday. Mrs. Field and Ms. Ferber may be reached at (202) 622-6214 (also not a toll-free number).