IRS MODIFIES PROCEDURES FOR ISSUING PENSION PLAN DETERMINATION LETTERS.

Rev. Proc. 94-37

SECTION 1. PURPOSE

.01 This revenue procedure modifies the Service's procedures, contained in Rev. Proc. 93-39, 1993-31 I.R.B. 7, for issuing determination letters on the qualified status of pension, profit- sharing, and annuity plans under section 401(a) or 403(a) of the Internal Revenue Code.

.02 The three modifications in this revenue procedure are being made in order to simplify the process of obtaining determination letters. The first modification will generally reduce the amount of information that determination letter applicants must provide to the Service for a determination to be made as to whether benefits, rights, and features under a plan satisfy the current availability requirement of section 1.401(a)(4)-4(b) of the Income Tax Regulations. The second modification will limit the circumstances under which applicants must provide information concerning plan provisions and amendments that provide for past service, pre- participation service, and imputed service. The third modification will reduce the information that must be provided by adopters of standardized master or prototype (M&P) or regional prototype plans that are applying for determination letters (e.g., because they maintain another plan or are terminating the standardized plan).

SECTION. 2. MODIFICATION OF REV. PROC. 93-39

.01 DETERMINATION LETTER RELIANCE REGARDING THE CURRENT AVAILABILITY OF BENEFITS, RIGHTS, AND FEATURES.

(1) BACKGROUND. Section 4.04 of Rev. Proc. 93-39 provides that a determination letter may be relied on with respect to whether a plan satisfies the requirements of section 1.401(a)(4)-4(b) of the regulations, relating to the current availability of benefits, rights, and features, only with respect to those specific benefits, rights, and features for which the applicant has provided information relevant to the determination. This provision was designed to allow applicants to ask the Service to determine whether specific benefits, rights, and features satisfy the current availability requirement without being required to provide information relative to such a determination for all benefits, rights, and features under the plan.

(2) MODIFICATION OF REV. PROC. 93-39. Section 4.04 of Rev. Proc. 93-39 is modified to read as follows and the old section 4.041 is renumbered as section 4.042:

".04 Any determination letter that expresses an opinion that the plan satisfies the minimum coverage requirements of section 410(b) of the Code also will express an opinion that the plan satisfies the nondiscriminatory current availability requirements of section 1.401(a)(4)-4(b) of the regulations with respect to those benefits, rights, and features that are currently available within the meaning of section 1.401(a)(4)-4(b)(2) to all employees in the plan's coverage group. The plan's coverage group consists of those employees who are treated as currently benefiting under the plan (within the meaning of section 1.410(b)-3(a)) for purposes of demonstrating that the plan satisfies the minimum coverage requirements of section 410(b).

.041 Applications will not be reviewed for (and determination letters may not be relied on with respect to) whether the plan satisfies the requirements of section 1.401(a)(4)-4(b) of the regulations with respect to any benefit, right, or feature other than those described in section 4.04 above, except those that are specified by the applicant and for which the applicant has provided information relevant to the determination. If the applicant requests a determination regarding other specified benefits, rights, or features, the determination letter also will express an opinion that the specified benefits, rights, or features satisfy the current availability requirements."

The reliance described in this paragraph regarding benefits, rights, and features that are currently available to all employees in the plan's coverage group will apply to determination letters issued under Rev. Proc. 93-39 even if the letter either does not contain the statements described in this paragraph or contains the caveat that was described in section 4.04 of Rev. Proc. 93-39 prior to this modification.

(3) EFFECT. The effect of this modification is that determination letter applicants who demonstrate that their plan satisfies section 410(b) of the Code will not need to provide demonstrations for any benefits, rights, and features that are currently available to all employees in the plan's coverage group for a determination to be made that the plan satisfies the requirements of section 1.401(a)(4)-4(b) with respect to such benefits, rights, and features. If the applicant wishes to obtain reliance that the plan satisfies the requirements of section 1.401(a)(4)-4(b) of the regulations with respect to any benefit, right, or feature that is not currently available to all employees in the plan's coverage group, the applicant will still have to specify the benefit, right, or feature and provide the appropriate demonstration.

.02 INFORMATION REQUIRED REGARDING PAST SERVICE, PRE- PARTICIPATION SERVICE, AND IMPUTED SERVICE.

(1) BACKGROUND. Sections 5.07(8) and 5.07(9) of Rev. Proc. 93-39 generally require determination letter applicants to identify plan provisions that provide for certain past service, pre-participation service, and imputed service. The purpose of these requirements is to identify past service that could discriminate significantly in favor of highly compensated employees and pre-participation and imputed service that could be ineligible to be taken into account in determining whether a plan satisfies section 1.401(a)(4)-1(b)(2) of the regulations or that could otherwise discriminate in favor of highly compensated employees. However, sections 5.07(8) and 5.07(9) of Rev. Proc. 93-39 have also had the effect of requiring applicants to provide information concerning a plan's other service crediting provisions, including provisions that are required to satisfy certain other qualification requirements.

(2) MODIFICATION OF REV. PROC. 93-39. Sections 5.07(8) and 5.07(9) of Rev. Proc. 93-39 are modified to read as follows:

"(8) if any plan amendment, or plan provision in the case of an initial determination letter, provides for a period of past service (other than the minimum service required to satisfy the plan qualification requirements listed in section 1.401(a)(4)-11(d)(3)(v) of the regulations) that exceeds the period set forth in the safe harbor provided in section 1.401(a)(4)-5(a)(3), 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)-11(d)(3)(ii) of the regulations (other than the minimum service required to satisfy the plan qualification requirements listed in section 1.401(a)(4)-11(d)(3)(v)), 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), and the location of the various plan provisions providing for the granting of such service."

(3) EFFECT. The effect of this modification is that sections 5.07(8) and 5.07(9) of Rev. Proc. 93-39 will no longer require determination letter applicants to provide information concerning any provisions that credit service solely to the extent necessary to satisfy certain other qualification requirements.

.03 SPECIAL INSTRUCTIONS FOR ADOPTERS OF STANDARDIZED PLANS.

(1) BACKGROUND. Adopters of standardized M&P and regional prototype plans generally may rely on the sponsoring organization's opinion or notification letter and need not request a determination letter to obtain reliance. However, if the employer maintains another plan, the employer must request a determination letter to have reliance. Under certain other circumstances, for example, when the plan is terminated, the employer that has maintained a standardized plan may request a determination letter. Under section 9 of Rev. Proc. 93-39, M&P and regional prototype plan adopters that are requesting determination letters are generally required to provide the attachment and other information described in section 5 of Rev. Proc. 93-39. (Special instructions apply in the case of nonstandardized safe harbor plans approved under Rev. Proc. 93-10, 1993-1 C.B. 476.) Because standardized plans must benefit all of the employer's nonexcludable employees and must satisfy the design-based nondiscrimination safe harbors in the regulations under section 401(a)(4), the information required by section 5 of Rev. Proc. 93-39 is redundant.

(2) MODIFICATION OF REV. PROC. 93-39. Section 9.01 of Rev. Proc. 93-39 is modified to read as follows:

".01 Procedures Apply to Pre-Approved Plans -- Except as provided in sections 9.02 and 9.03, the instructions in this revenue procedure apply to applications involving adoptions of and amendments to M&P, regional prototype, and volume submitter plans."

The following new section 9.03 is added and the old section 9.03 is renumbered as section 9.04:

".03 Special Instructions for Adopters of Standardized Plans -- Adopters of standardized M&P and regional prototype plans that are applying for determination letters should identify the plan as a standardized plan on the attachment required by section 5.03 by using the model attachment in Appendix A and entering the letter "I" in Part I of the attachment. The applicant should not provide the other information or demonstrations required by sections 5.04 through 5.07. This special instruction also applies to any application for determination on termination of a standardized M&P or regional prototype plan that is filed on Form 5310. Applicants should indicate the reason for filing the determination letter application on the cover letter submitted with the application."

(3) EFFECT. The effect of this modification is that adopters of standardized M&P and regional prototype plans that are requesting determination letters will not be required to submit the other information that is generally required of other applicants.

.04 CONFORMING MODIFICATION OF APPENDIX A.

(1) BACKGROUND. Appendix A of Rev. Proc. 93-39 contains a model attachment that determination letter applicants may use to provide the information required by sections 5.04 through 5.06 of Rev. Proc. 93-39. As a result of the other modifications of Rev. Proc. 93-39 in this section, conforming modifications of Appendix A are required.

(2) MODIFICATION OF REV. PROC. 93-39. Part I of Appendix A of Rev. Proc. 93-39 is modified to read as follows:

"Part I

_______ = Enter the letter (A-I) that describes the plan from the notes following Part IV. Enter one letter only. If you have entered A, B, or I, do not complete the rest of this attachment."

The notes in Appendix A are modified as follows. The notes for Part I are modified by replacing the three sentences following "H = The plan is not described above" with the following:

"I = The plan is a standardized M&P or regional prototype plan.

If the plan is described in A, B, or I, 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."

The notes for Part II are modified by replacing the notes for lines 3 and 10 with the following:

"3. Determination letters generally provide reliance that certain benefits, rights, and features under a plan satisfy the nondiscriminatory current availability requirement of section 1.401(a)(4)-4(b) of the regulations. Refer to section 4.04 of Rev. Proc. 93-39 to identify those benefits, rights, and features for which the determination letter will automatically provide reliance. Answer this question "yes" only if you are requesting a determination that any other specified benefit, right, or feature meets the nondiscriminatory current availability requirement of section 1.401(a)(4)-4(b) of the regulations. Otherwise, answer "no." If you answer "yes," a separate demonstration must generally be provided for each other benefit, right, and feature you wish considered. See Appendix B, Demo 3, for guidelines relating to this demonstration."

"10. Answer this question "yes" if any plan provision provides for pre-participation or imputed service as defined in section 1.401(a)(4)-11(d)(3)(ii) of the regulations. 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)(3). If you answer "yes," you must attach a schedule that includes the following: (1) a description of the nature of the grant of past service or pre-participation or imputed service, (2) the location of the various plan provisions that provide for the granting of the service, and, (3) 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). Do not answer "yes" if past service, pre-participation service, or imputed service is provided under the plan solely to the extent necessary to satisfy one or more of the following: (1) the service crediting rules under section 410(a) (eligibility), 411(a) (vesting), 413 (collectively bargained plans), or 414(a) (service for predecessor employer), (2) the hour of service or elapsed time service-crediting methods under sections 29 CFR section 2530.200b-2 and 1.410(a)-7, respectively, and (3) the limit on double proration of service and compensation in 29 CFR section 2530.204-2(d)."

SECTION. 3. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 93-39 is modified.

SECTION. 4. EFFECTIVE DATE

This revenue procedure is effective on May 23, 1994; however, determination letter applicants may also follow these procedures in preparing applications that are submitted prior to this date.

DRAFTING INFORMATION

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