[Federal Register Volume 65, Number 24 (Friday, February 4, 2000)]
[Rules and Regulations]
[Pages 5432-5433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1893]



[[Page 5432]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8871]
RIN 1545-AV22


Remedial Amendment Period

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains regulations relating to the remedial 
amendment period, during which a sponsor of a qualified retirement plan 
or an employer that maintains a qualified retirement plan can make 
retroactive amendments to the plan to eliminate certain qualification 
defects for the entire period. These final regulations clarify the 
scope of the Commissioner's authority to provide relief from plan 
disqualification under the regulations. These clarifications confirm 
the Commissioner's authority to provide appropriate relief for plan 
amendments relating to changes to the plan qualification rules made in 
recent legislation. These final regulations affect sponsors of 
qualified retirement plans, employers that maintain qualified 
retirement plans, and qualified retirement plan participants.

EFFECTIVE DATES: These regulations are effective February 4, 2000.

FOR FURTHER INFORMATION CONTACT: Linda S.F. Marshall at (202) 622-6030 
or Lisa A. Tavares at (202) 622-6090 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under section 401(b). These regulations provide guidance to 
clarify the scope of the Commissioner's authority to provide relief 
from plan disqualification under section 401(b) and the regulations. On 
August 1, 1997, temporary regulations (TD 8727) under section 401(b) 
were published in the Federal Register (62 FR 41272). A notice of 
proposed rulemaking (REG-106043-97), cross-referencing the temporary 
regulations, was published in the Federal Register (62 FR 41322) on the 
same day. The temporary regulations enabled the Commissioner to provide 
appropriate relief concerning the timing of plan amendments relating to 
changes to the plan qualification rules made in recent legislation, as 
well as for other plan amendments that may be needed as a result of 
future changes to the Internal Revenue Code (Code).
    No written comments responding to the notice of proposed rulemaking 
were received. No public hearing was requested or held. The proposed 
regulations under section 401(b) are adopted by this Treasury decision, 
and the corresponding temporary regulations are removed.

Explanation of Provisions

    Section 401(b) provides that a plan is considered to satisfy the 
qualification requirements of section 401(a) for the period beginning 
with the date on which it was put into effect, or for the period 
beginning with the earlier of the date on which any amendment that 
caused the plan to fail to satisfy those requirements was adopted or 
put into effect, and ending with the time prescribed by law for filing 
the employer's return for the taxable year in which that plan or 
amendment was adopted (including extensions) or such later time as the 
Secretary may designate, if all provisions of the plan needed to 
satisfy the qualification requirements are in effect by the end of the 
specified period and have been made effective for all purposes for the 
entire period.
    Section 1.401(b)-1(b) lists the plan provisions that may be amended 
retroactively pursuant to the rules of section 401(b). These plan 
provisions, termed disqualifying provisions, include the plan 
provisions described in section 401(b), as well as plan provisions that 
result in failure of a plan to satisfy the qualification requirements 
of the Code by reason of a change in those requirements effected by the 
legislation listed in Sec. 1.401(b)-1(b)(2)(i) and (ii). Under 
Sec. 1.401(b)-1(b)(2)(ii), a disqualifying provision also includes a 
plan provision that is integral to a qualification requirement changed 
by specified legislation. As in effect prior to the previously issued 
final and temporary regulations, Sec. 1.401(b)-1(b)(2)(iii) provided 
that a disqualifying provision includes a plan provision that results 
in failure of the plan to satisfy the Code's qualification requirements 
by reason of a change in those requirements effected by amendments to 
the Code, that is designated by the Commissioner, at the Commissioner's 
discretion, as a disqualifying provision.
    Section 1.401(b)-1(d) provides rules for determining the period for 
which the relief provided under section 401(b) applies (the ``remedial 
amendment period'').
    Section 1.401(b)-1(d)(1) defines the beginning of the remedial 
amendment period for the disqualifying provisions listed in 
Secs. 1.401(b)-(1)(b)(1) and 1.401(b)-1(b)(2)(i) and (ii).
    The final regulations retain the rules set forth in the temporary 
regulations to clarify the scope of the Commissioner's authority to 
provide relief from plan disqualification under section 401(b). These 
changes are needed to clarify the rules relating to the plan provisions 
that may be designated by the Commissioner as disqualifying provisions 
based on amendments to the plan qualification requirements of the 
Internal Revenue Code. Section 1.401(b)-1(b)(3) retains the rule set 
forth in the temporary regulations to provide that a disqualifying 
provision includes a plan provision designated by the Commissioner, at 
the Commissioner's discretion, as a disqualifying provision that either 
(1) results in the failure of the plan to satisfy the qualification 
requirements of the Code by reason of a change in those requirements; 
or (2) is integral to a qualification requirement of the Code that has 
been changed. Section 1.401(b)-1(c)(2) retains the rule set forth in 
the temporary regulations to provide the Commissioner with explicit 
authority to impose limits and provide additional rules regarding the 
amendments that may be made with respect to disqualifying provisions 
during the remedial amendment period. Section 1.401(b)-1(d)(1)(iv) and 
(v) provide conforming rules, as previously provided in the temporary 
regulations, regarding the beginning of the remedial amendment period 
for disqualifying provisions described in Sec. 1.401(b)-1(b)(3).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations, and because the 
regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Small Business Administration for comment on its impact on small 
businesses.

Drafting Information

    The principal authors of these regulations are Linda S. F. Marshall 
and Lisa A. Tavares, Office of the Associate Chief Counsel (Employee 
Benefits and Exempt Organizations). However, other

[[Page 5433]]

personnel from the IRS and Treasury Department participated in their 
development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

    Par. 2. Section 1.401(b)-1 is amended by:
    1. Revising paragraphs (b)(3), (c), and (d)(1)(iv).
    2. Adding paragraph (d)(1)(v).
    The addition and revisions read as follows:


Sec. 1.401(b)-1  Certain retroactive changes in plan.

* * * * *
    (b) * * *
    (3) A plan provision designated by the Commissioner, at the 
Commissioner's discretion, as a disqualifying provision that either--
    (i) Results in the failure of the plan to satisfy the qualification 
requirements of the Internal Revenue Code by reason of a change in 
those requirements; or
    (ii) Is integral to a qualification requirement of the Internal 
Revenue Code that has been changed.
    (c) Special rules applicable to disqualifying provisions--(1) 
Absence of plan provision. For purposes of paragraphs (b)(2) and (3) of 
this section, a disqualifying provision includes the absence from a 
plan of a provision required by, or, if applicable, integral to the 
applicable change to the qualification requirements of the Internal 
Revenue Code, if the plan was in effect on the date the change became 
effective with respect to the plan.
    (2) Method of designating disqualifying provisions. The 
Commissioner may designate a plan provision as a disqualifying 
provision pursuant to paragraph (b)(3) of this section only in revenue 
rulings, notices, and other guidance published in the Internal Revenue 
Bulletin. See Sec. 601.601(d)(2) of this chapter.
    (3) Authority to impose limitations. In the case of a provision 
that has been designated as a disqualifying provision by the 
Commissioner pursuant to paragraph (b)(3) of this section, the 
Commissioner may impose limits and provide additional rules regarding 
the amendments that may be made with respect to that disqualifying 
provision during the remedial amendment period. The Commissioner may 
provide guidance in revenue rulings, notices, and other guidance 
published in the Internal Revenue Bulletin. See Sec. 601.601(d)(2) of 
this chapter.
    (d) * * *
    (1) * * *
    (iv) In the case of a disqualifying provision described in 
paragraph (b)(3)(i) of this section, the date on which the change 
effected by an amendment to the Internal Revenue Code became effective 
with respect to the plan; or
    (v) In the case of a disqualifying provision described in paragraph 
(b)(3)(ii) of this section, the first day on which the plan was 
operated in accordance with such provision, as amended, unless another 
time is specified by the Commissioner in revenue rulings, notices, and 
other guidance published in the Internal Revenue Bulletin. See 
Sec. 601.601(d)(2) of this chapter.


Sec. 1.401(b)-1T  [Removed]

    Par. 3. Section 1.401(b)-1T is removed.

John M. Dalrymple,
Acting Deputy Commissioner of Internal Revenue.

    Approved: January 19, 2000.
Jonathan Talisman,
Acting Assistant Secretary of the Treasury.
[FR Doc. 00-1893 Filed 2-3-00; 8:45 am]
BILLING CODE 4830-01-4