IRS ISSUES NEW PROCEDURES FOR REQUESTING WAIVERS OF MINIMUM FUNDING STANDARD.

Rev. Proc. 94-41

SECTION 1. PURPOSE

The purpose of this revenue procedure is to outline the procedures of the Internal Revenue Service with respect to applications for waivers of the minimum funding standard under either section 412(d) of the Internal Revenue Code or section 303 of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93- 406, 1974-3 C.B. 1, 41.

SECTION. 2. REQUESTS FOR WAIVERS OF THE MINIMUM FUNDING STANDARD FOR DEFINED BENEFIT PLANS

.01 Submission. -- Requests for waivers of the minimum funding standard for defined benefit plans must be submitted to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: CP:E:EP:R, P.O. Box 14073, Ben Franklin Station, Washington, D.C. 20044. The user fee required by Rev. Proc. 94-8, 1994-1 I.R.B. 176, or its successors, must be sent with such requests.

.02 Necessary Procedural Documents. -- A request will not be considered unless it complies with (1), (2) and (3) below.

(1) The request must be signed by the taxpayer maintaining the plan (hereinafter referred to as "applicant") or an authorized representative of the applicant who either must be identified in (a), (b), or (c) of subsection 9.02(11) of Rev. Proc. 94-4, 1994-1 I.R.B. 90, 104, or must be an enrolled actuary within the meaning of section 7701(a)(35) of the Code. Where an authorized representative signs the request or will appear before the Service in connection with the request, a Form 2848, Power of Attorney and Declaration of Representative, must be submitted with the request. For multiemployer plans, the request must be made by the Board of Trustees (which shall be deemed to be the applicant) or by an authorized representative of the Board of Trustees. An individual is not an authorized representative of the applicant merely on account of being the administrator or trustee of the plan.

(2) The request also must contain a declaration in the following form: "Under the penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the request are true, correct, and complete." This declaration must be signed by the applicant (e.g., an authorized officer of a corporation). The signature of an individual with a power of attorney will not suffice for the declaration. See section 9.02(13) of Rev. Proc. 94-4, supra, p. 105.

(3) Because a request for a waiver constitutes a request for a ruling, compliance with section 6110 of the Code is also required. Section 601.201 of the sets forth the requirements applicable to requests for rulings and determination letters which are subject to section 6110. Section 601.210(e) furnishes specific instructions to applicants. The applicant must also pay the user fee required by Rev. Proc. 94-8, 1994-1 I.R.B. 176, or its successors.

The applicant must provide with the request either a statement of proposed deletions and the statutory basis for each proposed deletion, or a statement that no information other than names, addresses, and taxpayer identifying numbers need be deleted.

(4) The applicant must provide a copy of a written notification that an application for a waiver of the minimum funding standard under section 412(d) of the Code has been submitted to the Service. The original of the written notification must bear a signature by an appropriate officer of the applicant and must be in substantially the form set forth in the Model Notice found in the Appendix to this Revenue Procedure. The Service does not require the applicant to furnish any information in addition to that required by the Model Notice in the Appendix to plan participants, beneficiaries, alternate payees, or employee organizations as part of the waiver application process, but additional information may, of course, be provided by the applicant pursuant to the collective bargaining process or otherwise.

(5) The application must state that such notice was hand delivered or mailed to the last known address of each employee organization, participant, beneficiary, and alternate payee (within the meaning of section 414(p)(8) of the Code) within 14 days prior to the date of the application. If the applicant makes a reasonable effort to carry out the provisions of this paragraph, failure of an employee organization, participant, beneficiary, or alternate payee to receive the notice will not cause the applicant to fail the notice requirement. However, merely posting the notice on a bulletin board is not sufficient to satisfy this requirement.

.03 Necessary Waiver Information. -- The applicant must furnish appropriate evidence that the employer and all other entities included within the controlled group of which the employer is a member are unable to satisfy the minimum funding standard for a plan year without temporary substantial business hardship and that application of the standard would be adverse to the interest of plan participants in the aggregate. In the case of a multiemployer plan, the applicant must furnish appropriate evidence that 10 percent or more of the number of employers contributing to or under the plan are unable to satisfy the minimum funding standard for a plan year without substantial business hardship and that application of the standard would be adverse to the interest of plan participants in the aggregate. What constitutes appropriate evidence will depend on the facts and circumstances of each case. A response must be furnished for each of the subsections (a) through (f) below. In certain cases some of the material described in subsections (a) through (f) may be inapplicable, unavailable, inappropriate or burdensome to furnish. In such cases, the applicant should furnish a statement indicating why the material for a particular subsection is either inapplicable, unavailable, inappropriate or burdensome.

(a) General facts concerning the employer.

A brief statement should be submitted concerning: (1) the history of the employer and its primary business; (2) the ownership of the employer and any recent or contemplated changes (such as acquisitions, mergers, discontinuances of operations) which might have a bearing on the employer's organization or financial condition; (3) whether the employer is aggregated with any other entity for purposes of sections 414(b), (c) or (m) of the Code; and (4) whether the plan is also maintained by employers described in (3) above or any other employers.

(b) The financial condition of the employer.

The annual financial report of the employer and all other entities included within the controlled group of which the employer is a member for each of the two fiscal years that commenced prior to any plan year for which a waiver is requested and the annual financial report for each fiscal year that commenced with or within each plan year for which a waiver is requested must be submitted. This submission must include at least the balance sheet, profit and loss statement, and notes to the financial statement. Recent interim financial reports, if available, should also be submitted along with an interim financial report covering the corresponding period for the previous year. If the employer submits financial reports to the Securities and Exchange Commission, these reports should be submitted for the same periods as the annual financial reports. Preferably, the financial report should include certified financial statements. If certified financial statements have not been prepared, an uncertified report is acceptable. If neither certified nor uncertified reports are available, copies of the company's federal income tax returns, including all of the supporting schedules, must be submitted. (See also section 5.)

(c) Nature and extent of the business hardship. An explanation of the nature and extent of the business hardship should include the following.

(1) A discussion of the underlying reasons which have led to the current situation (such as declining sales, unexpected losses, labor disputes, etc.).

(2) A statement concerning the prospects for recovery, including reasons why such recovery is likely.

(3) A statement describing the actions taken or planned to effect recovery.

(4) A statement as to when and to what extent it is anticipated that required contributions to the plan can reasonably be expected to resume.

The Service may request additional information, including items listed in section 412(d)(2) of the Code.

(d) Facts concerning the pension plan. For each pension plan for which a waiver is requested, the following information should be supplied.

(1) The name of the plan, the plan's identification number, and file folder number (if any).

(2) The date the plan was adopted.

(3) The effective date of the plan.

(4) The classes of employees covered. If the only participants are owners of the employer or relatives of owners, so state.

(5) The number of employees covered.

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

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

(8) The most recent actuarial report plus any available actuarial reports for the preceding two plan years. Also, if not shown in that report, the present value of accrued benefits, present value of vested benefits, and fair market value of assets (excluding contributions not yet paid).

(9) How the plan is funded (i.e., trust fund, individual insurance policies, etc.).

(10) A list of the contributions actually paid in each month, from the twenty-fourth month prior to the beginning of the plan year for which the waiver is requested through the date of the request and the plan year to which the contributions were applied, with the employee contributions and the employer contributions listed separately.

(11) The plan year for which the waiver is requested (e.g., 1/1/93-12/31/93).

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

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

(14) Whether the plan is subject to Title IV of ERISA.

(15) A copy of each ruling letter that waived the minimum funding standard during the last 15 plan years, a statement of the amount waived for each plan year, and a statement of the outstanding balance of the amortization base for each waived funding deficiency. The outstanding balance of the amortization base for each waiver is to be calculated as of the first day of the plan year for which a waiver is being requested.

(e) Other pension, profit-sharing, or stock bonus plans. If the employer maintains more than one plan, an outline of the essential facts for each such plan should be submitted. This should include:

(1) A brief description of the plan, including the name of the plan and its plan year.

(2) The number of employees covered.

(3) The classes of employees covered.

(4) The approximate annual contribution required.

(5) The amount of contributions that have been made, or are intended to be made, for any plan year of such other plan commencing in, or ending in, the plan year for which the waiver is requested.

(6) A statement as to whether a waiver request is contemplated for the plan.

(f) Other information.

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

(2) Furnish details of any existing arbitration, litigation, or court procedure which involves the plan.

(3) Also state which Service District Office maintains files concerning the plan.

(g) Although it is not required, a digest of certain information from the financial statements described in this section will facilitate the processing of a waiver request. For example, a digest could show for the applicable years:

(1) current assets;

(2) inventory included in current assets;

(3) fixed assets;

(4) other assets;

(5) total assets;

(6) current liabilities;

(7) long-term liabilities;

(8) other liabilities;

(9) total liabilities;

(10) working capital;

(11) equity;

(12) sales;

(13) cost of sales;

(14) gross profit;

(15) other income and expense;

(16) net profit before taxes;

(17) income taxes;

(18) net profit after taxes; and

(19) for plans for which waivers are requested, pension costs expensed in determining (16).

.04 Number of Copies Required. -- The applicant must furnish two copies of the necessary waiver information described in section 2.03, if the sum of the outstanding balances of any amortization bases established under section 412(b)(2)(C) of the Code for waivers granted to the plan for any prior plan years (calculated as of the first day of the plan year for which a new waiver is being requested) when added to the amount for which a waiver is currently being requested, equals or exceeds $1,000,000.

SECTION. 3. REQUEST FOR WAIVERS FOR DEFINED CONTRIBUTION PENSION PLANS

.01 Background Information. -- Section 3 of Rev. Rul. 78-223, 1978-1 C.B. 125, requires that a defined contribution pension plan contain certain provisions in order for a waiver to be granted. Where the applicant does not want to draft individually designed provisions to satisfy the requirements of section 3 of Rev. Rul. 78-223, the Service will provide sample plan amendment language that complies with such requirements. See subsection .02. However, a provision that satisfies section 3 of Rev. Rul. 78-223 does not necessarily satisfy the requirements of section 401(a) of the Code. In order to provide maximum flexibility in obtaining a waiver for a defined contribution pension plan, three alternative procedures are provided in subsections .02, .03, and .04, in which a single request may cover either a waiver ruling only or a waiver ruling and a determination letter as to the status under section 401(a) of the Code.

.02 Waiver Ruling Only/Without Submission of Plan Amendment. -- Under this procedure, requests for waivers must be submitted to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: CP:E:EP:R, P.O. Box 14073, Ben Franklin Station, Washington, D.C. 20044. The applicant must satisfy the requirements of section 2 of this revenue procedure except those applicable only to defined benefit plans, e.g. section 2.03(d)(8). Any waiver ruling granted under this procedure will be accompanied by a plan amendment supplied by the Service which will, if adopted, satisfy section 3 of Rev. Rul. 78-223. The waiver will be conditioned upon the plan being amended by adoption of that amendment, within a reasonable period of time, and will contain a caveat stating that the ruling is not a ruling as to the effect the plan provision may have on the qualified status of the plan. Upon receipt of that amendment, the applicant may (within 60 days of date of the letter) request reconsideration of this waiver condition if the amendment is inappropriate. Reconsideration may be requested by submitting a letter from the applicant (or authorized representative) to the above address.

.03 Waiver Ruling Only/With Submission of Plan Amendment. -- Under this procedure, requests for waivers must be submitted to the Assistant Commissioner (Employee Plans and Exempt Organizations), Attention: CP:E:EP:R, P.O. Box 14073, Ben Franklin Station, Washington, D.C. 20044. The applicant must satisfy the requirements of section 2 of this revenue procedure, except those applicable only to defined benefit plans, e.g. section 2.03(d)(8), and must include the plan provisions necessary to satisfy section 3 of Rev. Rul. 78- 223. All waivers issued pursuant to this subsection will contain a caveat indicating that the ruling is not a ruling as to the effect any plan provision, submitted pursuant to the previous sentence, may have on the qualified status of the plan.

.04 Waiver Ruling and Determination Letter Request. -- Under this procedure both the request for a waiver ruling and the request for a determination letter on the effect of any amendment necessary to satisfy section 3 of Rev. Rul. 78-223 must be submitted by the applicant to the National Office where it will be treated as if it had been submitted as a request for technical advice from the Key District Director.

(a) The request that is submitted to the National Office must include the following:

(1) The combined request must satisfy all the procedural requirements described in section 3.03 of this revenue procedure;

(2) The submission must include a completed Form 5300 and all necessary documents, plan amendments, and information required by the Form 5300 and by this revenue procedure for approval of the plan amendments;

(3) The request must indicate which Key District Office has audit jurisdiction over the return; and

(4) The user fee for both the waiver request and the determination letter request must be contained in the submission to the National Office.

(b) The procedures for notice and comment by interested parties, which are contained in sections 17, 18, and 19, of Rev. Proc. 94-6, 1994-1 I.R.B. 142, 161-166, or its successors, as well as the notice and comment procedures provided in section 2.02 of this Revenue Procedure must be satisfied. Comments are to be forwarded to the Key District Office that is considering the determination letter request for the plan amendments.

(c) The waiver request will be handled by the National Office as follows:

(1) The waiver request and supporting documents will be forwarded to the Actuarial Branch, CP:E:EP:A, which will treat the request as a technical advice on the qualification issue with respect to the plan provisions necessary to satisfy section 3 of Rev. Rul. 78-223.

(2) The appropriate Key District Office will be notified of the request. In order not to delay the processing of the request, all materials relating to the determination letter request will be sent by the National Office to the Key District Director for consideration while the technical advice request is completed.

(3) The National Office will consider both issues. If a waiver is to be granted and if the National Office believes that qualification of the plan is not adversely affected by the plan amendment, a technical advice memorandum will be issued to the Key District Director. The Key District Director must decide within 10 working days from the date of the technical advice memorandum either to furnish the applicant with the technical advice memorandum and with a favorable advance determination letter, or to ask for reconsideration of the technical advice memorandum. This request must be in writing. An initial written notice of an intent to make this request may be submitted within 10 working days of the date of the technical advice memorandum and followed by a written request within 30 working days from the date of such written notice. If the Key District Director does not ask for reconsideration of the technical advice memorandum within 10 working days, the Actuarial Branch will issue the waiver ruling. This ruling will not contain the caveat described in section 3.02.

SECTION. 4. TIME WHEN APPROPRIATE TO REQUEST A WAIVER

All waiver requests (for plans other than multiemployer plans) must be submitted no later than the 15th day of the 3rd month following the close of the plan year for which the waiver is requested. The Service can not extend this deadline. A request for a waiver with respect to a multiemployer plan generally must be submitted no later than the close of the plan year following the plan year for which the waiver is requested.

In seeking a waiver with respect to a plan year which has not yet ended, the applicant may have difficulty in furnishing sufficient current evidence in support of the request. For this reason it is generally advised that a request not be submitted earlier than 180 days prior to the end of the plan year for which the waiver is requested.

SECTION. 5. GENERAL

Employers who have difficulty in furnishing the information specified in this Revenue Procedure may call the Employee Plans taxpayer assistance number at (202) 622-6076 (not a toll-free number), or write the Actuarial Branch, CP:E:EP:A, Internal Revenue Service, 1111 Constitution Ave. N.W., Washington, D.C. 20224, for guidance. Additional information sent after the initial request should be sent to the Actuarial Branch. In appropriate instances, preliminary conferences may be afforded in addition to conferences available under Rev. Proc. 94-4, 1994-1 I.R.B. 90, 110.

SECTION. 6. EFFECTIVE DATE

This revenue procedure is effective for all ruling requests received after June 27, 1994, the date of its publication in the Internal Revenue Bulletin.

SECTION. 7. EFFECT ON OTHER REVENUE PROCEDURES.

Rev. Proc. 94-4, 1994-1 I.R.B. 90, is modified to the extent that this revenue procedure provides special procedures for issuing rulings with respect to requests for waivers of the minimum funding standard.

Rev. Proc. 94-5, 1994-1 I.R.B. 122, is modified to the extent that this revenue procedure provides special procedures for furnishing technical advice to Key District Directors when both a request for a waiver of the minimum funding standard and a request for a determination letter have been submitted for a defined contribution plan.

Rev. Proc. 94-6, 1994-1 I.R.B. 142, is modified to the extent that this revenue procedure provides special procedures to follow in issuing a determination letter for a defined contribution plan if a waiver of the minimum funding standard has been requested.

Rev. Proc. 83-41, 1983-1 C.B. 775, Rev. Proc. 88-5, 1988-1 C.B. 587, and Rev. Proc. 88-29, 1988-1 C.B. 828, are superseded.

DRAFTING INFORMATION

The principal author of this Revenue Procedure is Ann Trichilo of the Employee Plans Technical and Actuarial Division. For further information regarding this Revenue Procedure, contact the Employee Plans Technical and Actuarial Division's taxpayer assistance number at (202) 622-6076 (not a toll-free number) between the hours of 2:30 p.m. and 4:00 p.m., Eastern Time, Monday through Thursday. Ms. Trichilo's telephone number is (202) 622-7151 (also not a toll-free number).

APPENDIX

             MODEL NOTICE OF FUNDING WAIVER APPLICATION

Under section 412(f)(4)(B) of the Code and section 303(e)(2) of ERISA, the Service will consider any relevant information submitted concerning this application for a waiver of the minimum funding standard. You may send this information to the following address:

     Commissioner of Internal Revenue

In accordance with section 104 of ERISA and section 2520.104b-10 of the Department of Labor Regulations (29 C.F.R. Part 2520), annual financial reports for this plan, which include employer contributions made to the plan and the accumulated funding deficiency for the plan for any plan year, are available for inspection at the Department of Labor in Washington, D.C. Copies of such reports may be obtained upon request and upon payment of copying costs from the following address:

     Public Disclosure Room

The following information is provided pursuant to section 412(f)(4)(A) of the Code and section 303(e)(1) of ERISA:

 Present Value of Vested Benefits                       $__________