SERVICE AMENDS PROCEDURES FOR REQUESTING MINIMUM FUNDING STANDARD WAIVER TO CONFORM WITH OBRA CHANGES.

Rev. Proc. 88-29

SECTION 1. PURPOSE

This revenue procedure adds additional language to Rev. Proc. 88-5, 1988-2 I.R.B. 22, to reflect changes made by the Omnibus Budget Reconciliation Act of 1987 (OBRA), Public Law 100-203. OBRA modified certain provisions of the Code with respect to requirements relating to waivers of minimum funding standards. This revenue procedure provides guidance only with respect to changes in the procedures and administrative requirements for requesting waivers which are necessitated by the modifications enacted under OBRA. Further guidance relating to substantive changes to the rules regarding waivers will be issued at a later date.

SEC. 2 BACKGROUND INFORMATION

OBRA (1) added a new paragraph to subsection (d) of section 412 of the 1986 Internal Revenue Code which requires that an employer (other than an employer maintaining a multiemployer plan) seeking a waiver of the minimum funding standard submit a request within 2 1/2 months following the close of the plan year for which the waiver is requested; (2) amended section 412(f)(4)(A) of the Code to require that notice of application for funding waivers also be given to each participant, beneficiary, and alternate payee; (3) amended subparagraph (C) of section 412(f)(3) by striking out "$2,000,000" and inserting in lieu thereof "$1,000,000"; and (4) added section 412(d)(5), which requires that business hardship be evidenced not only by the individual employer seeking the waiver but also by the controlled group of which such employer is a member.

Revenue Procedure 83-41, 1983-1 C.B. 775, describes the procedure for requesting a waiver of the minimum funding standard under section 412(d) of the Code. Revenue Procedure 88-5 modified certain provisions of Rev. Proc. 83-41 to reflect changes made by the Single Employer Pension Plan Amendments Act (SEPPAA), Public Law 99- 272. The changes made by OBRA require certain additional changes.

SEC. 3 CHANGES TO REV. PROC. 88-5

01 The second sentence of Section 1 of Rev. Proc. 88-5 is changed by adding the following phrase after the words "1986-2 C.B. 298."

"and the changes made by the Pension Protection Act, Part II of subtitle D of title IX of the Omnibus Budget Reconciliation Act of 1987 (OBRA), Public Law 100-203, 1988-2 I.R.B. 22."

02 Section 2.02 of Rev. Proc. 88-5 is changed by inserting the following sentences after the second sentence of that section.

"OBRA modified section 412(f)(3) of the Code by striking out "$200,000,000" and inserting in lieu thereof "$1,000,000". In addition, OBRA amended section 412(f)(4)(A) of the Code to require that notice of application of a funding waiver also be given to each participant, beneficiary and alternate payee (within the meaning of section 414(p)(8))."

03 Section 3.01 of Rev. Proc. 88-5 is modified by adding the following sentence to the end of the section.

"This $2,000,000 threshold was reduced to $1,000,000 by OBRA."

04 Section 3.03 of Rev. Proc. 88-5 is changed by striking out "$2,000,000" and inserting in its place "$1,000,000".

05 Section 4 of Rev. Proc. 88-5 is changed by deleting the phrase "To Employee Organizations" from the title.

06 All of the sentences of the inset paragraph of section 4 of Rev. Proc. 88-5 are replaced by the following sentences.

"(3) The taxpayer must provide as part of the application a copy of a written notification signed by an appropriate officer of the taxpayer to each employee organization (union) representing employees covered by the affected plan and each participant, beneficiary, and alternate payee (within the meaning of section 414(p)(8) of the Code) 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 individual notice to participants, beneficiaries, and alternate payees may be in the form of a copy of a general notice which was signed by an appropriate officer of the company. The applicant must state that such notice was hand delivered or mailed to the last known address of the appropriate employee organization, participant, beneficiary, and alternate payee. 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. The notice must state that, under section 412(f)(4)(B) of the Code, the Service will consider any relevant information submitted. Further, the notice must specify the address to which information may be sent to the Service and state that because of the disclosure restrictions of section 6103 of the Code, the Service will not provide any information with respect to the waiver. The notice must also state that in accordance with section 104 of ERISA and section 2520.104b-10 of the Department of Labor regulations (29 CFR Part 2520) annual financial report for the plan which include employer contributions made to the plan and the accumulated funding deficiency for the plan for any year are available for inspection at the U.S. Department of Labor in Washington, D.C., and that copies of such reports may be obtained upon request from the Public Disclosure Room, Room N-5507, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210, upon payment of copying costs. In addition, the notice must state that copies of the latest annual report are available for inspection at the principal office of the plan administrator and any other location as required under section 104(b)(2) of the Employee Retirement Security Act of 1974 and the street address of such location. The notice must also state that copies of the annual report may be obtained from the plan administrator at a reasonable charge. The address to which requests for such copies may be sent and the amount of the charge must be stated. In addition, the notice must include a description of the extent to which the plan is funded for benefits which are guaranteed under Title IV of ERISA and the extent to which the plan is funded for benefit liabilities. Generally, this is satisfied if the notice includes the present value of the vested benefits, the present value of benefits determined as though the plan terminated, and the fair market value of plan assets, using the interest rate for calculating current liability. No additional information is required by the Service to be furnished to plan participants, beneficiaries, alternate payees or employee organizations as part of the waiver application process. Additional information may, of course, be provided by the employer pursuant to the collective bargaining process or otherwise.

07 Section 5 of Rev. Proc. 88-5 is changed by retitling such section as follows.

"SEC. 5. SUBMISSION OF COMMENTS"

08 Sec. 5.02 of Rev. Proc. 88-5 is changed by deleting the phrase "on behalf of an employee organization" from the first sentence.

09 Sec. 5.03 of Rev. Proc. 88-5 is changed by deleting the phrase "by an employee organization" from the second sentence.

10 Rev. Proc. 88-5 is changed to insert a new section immediately after section 5, which reads as follows.

"SEC. 6. TIME WHEN APPROPRIATE TO REQUEST A WAIVER

Section 414(d), as amended by OBRA, requires that an employer (other than an employer maintaining a multiemployer plan) seeking a minimum funding waiver for a plan year beginning after December 31, 1987, must submit the request on or before the 15th day of the 3rd month following the close of the plan year for which the waiver is requested. However, there is a transitional rule for plan years beginning in calendar year 1988, that permits requests to be filed on or before the 15th day of the 6th month following the close of the plan year for which the waiver is requested. Accordingly, the first sentence of the first paragraph of section 4 of Rev. Proc. 83-41 is replaced by the following sentences:

"A waiver request for a plan year beginning on or before December 31, 1987, must be submitted no later than the close of the plan year following the plan year for which the waiver is requested. A waiver request for a plan year beginning after December 31, 1987, and before January 1, 1989, must be submitted no later than the 15th day of the 6th month following the close of the plan year. All other waiver requests 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."

11 Rev. Proc. 88-5 is changed to insert a new section immediately after the new section 6, which reads as follows.

"SEC. 7. TEMPORARY HARDSHIP AT THE CONTROLLED GROUP LEVEL

Sec. 2.03 of Rev. Proc. 83-41 is changed by inserting after the term "employer" where it first appears in the first sentence the phrase:

`and all other entities included within the controlled group of which the employer is a member'.

Sec. 2.03(b) of Rev. Proc. 83-41 is changed by inserting after the term employer in the first sentence the phrase:

`and all other entities included within the controlled group of which the employer is a member.'"

12 Section 5 of Rev. Proc. 88-5 is renumbered to be section 8 and the following sentences are added to that renumbered section.

"The provision in section 4 requiring that participants, beneficiaries and alternate payees be notified of waiver requests and the provisions in section 4 requiring that such notification include a description of the extent to which guaranteed benefits and benefit liabilities are funded are applicable to requests submitted on or after March 22, 1988. The effective date of the provisions in section 6 with respect to timely filing of waiver requests is based on the plan year for which the waiver is requested as stated in that section."

13 Section 7 of Rev. Proc. 88-5 is renumbered to be section 9.

SEC. 4 DRAFTING INFORMATION

The principal author of this revenue procedure is Paul Nassal of the Employee Plans Technical and Actuarial Division. For further information regarding this revenue procedure contact the Employee Plans Technical Assistance Number on (202) 566-6783 between 2:00 and 4:00 p.m. Eastern time (NOT a toll-free call). Mr. Nassal's telephone number is (202) 566-3149 (also not a toll-free call).

SEC. 5 EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 88-5 is modified as indicated above and will appear as so modified in Cumulative Bulletin 1988-1. Attached below is the complete text of Rev. Proc. 88-5 as modified:

SECTION 1. PURPOSE

The purpose of this revenue procedure is to modify the procedures for applications for waivers of the minimum funding standard under section 412(d) of the Internal Revenue Code and section 303 of the Employee Retirement Income Security Act of 1974 (ERISA), Public Law 93-406, 1974-3 C.B. 1, 41. The modifications will reflect changes made by the Single-Employer Pension Plan Amendments Acts (SEPPAA), Title XI of the Consolidated Omnibus Budget Reconciliation Act of 1985, Public Law 99-272, 1986-2 C.B. 298, and the changes made by the Pension Protection Act, Part II of subtitle D of title IX of the Omnibus Budget Reconciliation Act of 1987 (OBRA), Public Law 100-203, 1988-2 I.R.B. 22.

SEC. 2. BACKGROUND INFORMATION

01 Revenue Procedure 83-41, 1983-1 C.B. 725, describes the procedure for requesting a waiver of the minimum funding standard under section 412(d) of the Code. Section 2.02 of the Revenue Procedure states that a request will not be considered unless certain specific documents described therein are included in the waiver application. Section 2.03 of the Revenue Procedure describes the necessary information that must be furnished by the applicant for the waiver.

02 SEPPAA modified the provisions of the Code with respect to requirements relating to waivers. In particular, SEPPAA (1) added section 412(f)(3)(B) and (C) to require that the Service consult with the Pension Benefit Guaranty Corporation (PBGC) before granting or modifying a waiver under subsection 412(d) where the cumulative outstanding balance of the amount of waived funding deficiencies for a plan plus the amount of the waiver currently requested equals or exceeds $2,000,000 and (2) added section 412(f)(4), which provides that the Secretary, before granting a waiver under subsection 412(d) shall require each applicant to provide evidence satisfactory to the Secretary that the applicant has provided notice of the filing of the application for such waiver to each employee organization representing employees covered by the affected plan. OBRA modified section 412(f)(3) of the Code by striking out "$2,000,000" and inserting in lieu thereof "$1,000,000". In addition, OBRA amended section 412(f)(4)(A) of the Code to require that notice of application for a funding waiver also be given to each participant, beneficiary and alternate payee (within the meaning of section 414(p)(8)). Section 412(f)(4) also provides that the Secretary shall consider any relevant information provided by a person to whom such notice was given.

SEC. 3. CONSULTATION WITH PBGC

01 Section 412(f)(3)(B) and (C) of the Code, as added by SEPPAA, requires that the Service provide the PBGC with notice of the completed application for any waiver and an opportunity to comment on such application within 30 days after receipt of such notice. Any information provided to the PBGC as a result of this provision shall be considered tax return information and is subject to the safeguards and reporting requirements of section 6103(p). The Service is not required to notify PBGC regarding applications where the outstanding balance of the amount of waived funding deficiencies for prior plan years plus the amount for which a waiver is currently requested is less than $2,000,000. This $2,000,000 threshold was reduced to $1,000,000 by OBRA.

02 To expedite the procedures necessary to satisfy this requirement, section 2.03(d)(15) of Revenue Procedure 83-41 is modified to read as follows:

"(15) A list of each of the prior 15 years for which a waiver was granted, the amount waived for such plan year, the outstanding balance of the amortization base established for the waiver, and the conditions, if any, placed upon the waiver. A copy of each waiver ruling letter must be submitted with the waiver request. 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."

03 In addition, the first paragraph of section 2.03 of Revenue Procedure 83-41 is modified to add at the end thereof the following new sentence:

"If the sum of the outstanding balances of any amoritization 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, the applicant must furnish two copies of the necessary waiver information described in this section 2.03."

SEC. 4 PROCEDURES FOR NOTICE AND SUBMISSION OF RELEVANT INFORMATION

Section 412(f)(4) states that the Secretary shall require each applicant for a waiver to demonstrate that the applicant has notified each employee organization representing employees covered by the affected plan that a waiver application has been filed. Accordingly, section 2.02 of Revenue Procedure 83-41 is modified to substitute a comma for the word "and" between "(1) and (2)" in the first sentence, insert after "(2)" the words "and (3)," and to add the following paragraph (3):

"(3) The taxpayer must provide as part of the application a copy of a written notification signed by an appropriate officer of the taxpayer to each employee organization (union) representing employees covered by the affected plan and each participant, beneficiary, and alternate payee (within the meaning of section 414(p)(8) of the Code) 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 individual notice to participants, beneficiaries, and alternate payees may be in the form of a copy of a general notice which was signed by an appropriate officer of the company. The applicant must state that such notice was hand delivered or mailed to the last known address of the appropriate employee organization, participant, beneficiary, and alternate payee. 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. The notice must state that, under section 412(f)(4)(B) of the Code, the Service will consider any relevant information submitted. Further, the notice must specify the address to which information may be sent to the Service and state that because of the disclosure restrictions of section 6103 of the Code, the Service will not provide any information with respect to the waiver. The notice must also state that in accordance with section 104 of ERISA and section 2520.104b-10 of the Department of Labor regulations (29 CFR Part 2520) annual financial reports for the plan which include employer contributions made to the plan and the accumulated funding deficiency for the plan for any year are available for inspection at the U.S. Department of Labor in Washington, D.C., and that copies of such reports may be obtained upon request from the Public Disclosure Room, Room N-5507, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210, upon payment of copying costs. In addition, the notice must state that copies of the latest annual report are available for inspection at the principal office of the plan administrator and any other location as required under section 104(b)(2) of the Employee Retirement Security Act of 1974 and the street address of such location. The notice must also state that copies of the annual report may be obtained from the plan administrator at a reasonable charge. The address to which requests for such copies may be sent and the amount of the charge must be stated. In addition, the notice must include a description of the extent to which the plan is funded for benefits which are guaranteed under Title IV of ERISA and the extent to which the plan is funded for benefit liabilities. Generally, this is satisfied if the notice include the present value of the vested benefits, the present value of benefits determined as though the plan terminated, and the fair market value of plan assets, using the interest rate for calculating current liability. No additional information is required by the Service to be furnished to plan participants, beneficiaries, alternate payees or employee organizations as part of the waiver application process. Additional information may, of course, be provided by the employer pursuant to the collective bargaining process or otherwise.

SEC. 5. SUBMISSION OF COMMENTS

01 Section 412(f)(4)(B), as added by SEPPAA, provides that the Secretary shall consider any relevant information provided by a person to whom notice was given as described in section 4 above. Section 6103 of the Internal Revenue Code prohibits the Service from disclosing return information with respect to any taxpayer. Accordingly, absent a disclosure waiver the Service may not reveal any part of the contents of any waiver application to any individual who wishes to submit relevant information concerning a waiver application. Moreover, the Service can neither confirm nor deny that a request for a waiver of the minimum funding requirement with respect to any particular pension plan has or has not been received.

02 All relevant information submitted should be submitted in writing to the Commissioner of Internal Revenue, Attention: E:EP:PA; 1111 Constitution Avenue, N.W., Washington, D.C. 20224. Although no specific time period is provided within which the information is to be submitted, such information should be submitted as soon as possible after notice is received that a waiver application has been filed.

03 The Service will not suspend action on a waiver request in order to wait for information from employee organizations. If, however, a ruling letter has been issued to the applicant and information is later submitted, the Service will review the information so submitted and revoke or modify the ruling letter if it is deemed appropriate to do so. Generally, information submitted will not cause a revocation or modification of the ruling letter unless the information indicates that there was a material omission or misstatement of facts.

SEC. 6. TIME WHEN APPROPRIATE TO REQUEST A WAIVER

Section 414(d), as amended by OBRA, requires that an employer (other than an employer maintaining a multiemployer plan) seeking a minimum funding waiver for a plan year beginning after December 31, 1987, must submit the request on or before the 15th day of the 3rd month following the close of the plan year for which the waiver is requested. However, there is a transitional rule for plan years beginning in calendar year 1988, that permits requests to be filed on or before the 15th day of the 6th month following the close of the plan year for which the waiver is requested. Accordingly, the first sentence of the first paragraph of section 4 of Rev. Proc. 83-41 is replaced by the following sentences:

"A waiver request for a plan year beginning on or before December 31, 1987, must be submitted no later than the close of the plan year following the plan year for which the waiver is requested. A waiver request for a plan year beginning after December 31, 1987, and before January 1, 1989, must be submitted no later than the 15th day of the 6th month following the close of the plan year. All other waiver requests 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."

SEC. 7. TEMPORARY HARDSHIP AT THE CONTROLLED GROUP LEVEL

Sec. 2.03 of Rev. Proc. 83-41 is changed by inserting after the term "employer" where it first appears in the first sentence the phrase:

"and all other entities included within the controlled group of which the employer is a member".

Sec. 2.03(b) of Rev. Proc. 83-41 is changed by inserting after the term employer in the first sentence the phrase:

"and all other entities included within the controlled group of which the employer is a member."

SEC. 8. EFFECTIVE DATE

This revenue procedure is effective for all ruling requests received after the date of its publication in the Internal Revenue Bulletin. The provision is section 4 requiring that participants, beneficiaries and alternate payees be notified of waiver request and the provision in section 4 requiring that such notification include a description of the extent to which guaranteed benefits and benefit liabilities are funded are applicable to requests submitted on or after March 22, 1988. The effective date of the provisions in section 6 with respect to timely filing of waiver requests is based on the plan year for which the waiver is requested as stated in that section.

SEC. 9. EFFECT ON OTHER REVENUE PROCEDURES

Revenue Procedure 83-41 is modified.