[Federal Register Volume 67, Number 139 (Friday, July 19, 2002)]
[Rules and Regulations]
[Pages 47454-47457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18020]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 601

[TD 9006]
RIN 1545-AY68


Notice to Interested Parties

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
notice to interested parties requirement. Before the IRS can issue an 
advance determination regarding the qualification of a retirement plan, 
a plan sponsor must provide evidence that it has notified all persons 
who qualify as interested parties that an application for an advance 
determination will be filed with the IRS. These regulations set forth 
standards by which a plan sponsor may satisfy the notice to interested 
parties requirement. The final regulations affect retirement plan 
sponsors, plan participants and other interested parties with respect 
to a determination letter application, and certain representatives of 
interested parties.

DATES: Effective Date: These regulations are effective on July 19, 
2002.
    Applicability Date: These regulations apply to applications made on 
or after January 1, 2003.

FOR FURTHER INFORMATION CONTACT: Pamela R. Kinard, (202) 622-6060 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to 26 CFR parts 1 and 601 under 
section 7476 of the Internal Revenue Code of 1986 (Code). On May 21, 
1976, final regulations (TD 7421) under section 7476 were published in 
the Federal Register (41 FR 20874). These final regulations provide 
guidance on the nature and method of giving notice to interested 
parties. On January 17, 2001, a notice of proposed rulemaking (REG-
129608-00) was published in the Federal Register (66 FR 3954), setting 
forth the proposed new standards for delivery of the notice to 
interested

[[Page 47455]]

parties. No public hearing was requested or held. Written comments 
responding to the notice of proposed rulemaking were received. After 
consideration of all the comments, the proposed regulations are adopted 
as amended by this Treasury decision. The revisions are discussed 
below.

Explanation of Provisions and Summary of Comments

A. Overview

    Section 7476(b)(2) provides that, with respect to a pleading filed 
by a petitioner for a request for a determination on the qualified 
status of a retirement plan under section 7476(a), the United States 
Tax Court may find the pleading to be premature unless the petitioner 
establishes to the satisfaction of the Court that he has complied with 
the requirements prescribed by the regulations of the Secretary 
regarding the notice to interested parties of the filing of the request 
for a determination. Section 3001(a) of the Employee Retirement Income 
Security Act of 1974 (ERISA) provides that before issuing an advance 
determination regarding the qualification of a retirement plan, the 
Secretary of Treasury shall require that an applicant provide evidence 
satisfactory to the Secretary that the applicant has notified each 
employee who qualifies as an interested party of the application for a 
determination. The final regulations amend Secs. 1.7476-2 and 601.201 
regarding the nature and method of giving notices to interested 
parties. The final regulations generally adopt the standards in the 
proposed regulations. These final regulations provide that the notice 
may be provided by any method reasonably calculated to ensure that each 
interested party is notified of the application for determination. 
Whether a particular method of delivery satisfies this standard is 
determined on the basis of all the facts and circumstances. The final 
regulations retain the safe harbor provided in the proposed regulations 
for plans using an electronic medium to deliver the notice to 
interested parties. Under that safe harbor, a plan sponsor will be 
treated as satisfying the requirements under Sec. 1.7476-2(c)(1) if the 
plan sponsor delivers the notice using an electronic medium under a 
system that satisfies the requirements of Sec. 1.402(f)-1 Q&A-5.

B. Application of the Notification Requirement to Governmental Plans

    Section 1.7476-1(b)(7) provides that Sec. 1.7476-1(b), relating to 
the definition of interested parties, applies only to retirement plans 
filing an application for advance determination with the IRS that are 
subject to the requirements under section 410. Section 1.7476-1(c)(5) 
provides that in the case of an organization described in section 
410(c)(1), which includes governmental plans within the meaning of 
section 414(d), section 410 will be considered to apply to a plan year 
of such organization for any plan year in which section 410(c)(2) 
applies to the plan.
    Section 410(c)(1)(A) provides that the provisions of section 410 
(other than section 410(c)(2)) do not apply to governmental plans 
within the meaning of section 414(d). Section 410(c)(2) provides that a 
governmental plan will be treated as meeting the requirements under 
section 410 for purposes of section 401(a). Prior to 1997, section 
410(c)(2) provided that, in order to be treated as satisfying the 
requirements of section 410, a governmental plan must meet the 
requirements under section 401(a)(3) as in effect on September 1, 1974, 
relating to minimum participation standards. Section 1505(a)(1) of the 
Taxpayer Relief Act of 1997 (TRA `97) (Public Law 105-34, 111 Stat. 
788) added section 401(a)(5)(G), which provides that the 
nondiscrimination and minimum participation requirements under section 
401(a)(3) and (4) do not apply to a governmental plan (within the 
meaning of section 414(d)) maintained by a State or local government or 
political subdivision thereof (or agency or instrumentality thereof). 
Thus, section 410 no longer applies to such governmental plans.
    One commentator requested clarification that the notice to 
interested parties requirement under section 7476 no longer applies to 
governmental plans after TRA ``97. Section 1.7476-1(b)(7) of the 
regulations limits the applicability of the notice to interested 
parties requirement to retirement plans that are subject to section 410 
of the Code. Because a governmental plan established and maintained by 
a State or local government or political subdivision thereof (or agency 
or instrumentality thereof) is not subject to section 410 of the Code, 
it is also not subject to the notice to interested parties requirement.

C. Miscellaneous Comments

    Proposed regulations under Sec. 601.201(o)(3)(xv) provide that when 
the notice is given other than by mailing, it should be given not less 
than 7 days nor more than 21 days prior to the date that the 
application for a determination is made. When the notice is provided by 
mailing, prior final regulations under Sec. 601.201(o)(3)(xv) provide 
that the notice be given not less than 10 days nor more than 24 days 
prior to the date that the application for a determination is made. One 
commentator requested clarification on whether the time period for 
providing notice by electronic mail is the same time period for when 
notice is given by a means other than postal mailing. In the interest 
of simplification, the final regulations provide a single time period 
for providing the notice. Under these final regulations, the notice 
must be given not less than 10 days nor more than 24 days prior to the 
date that the application for a determination is made. This time period 
applies to all methods of delivering the notice to interested parties. 
Taxpayers may continue to rely on the prior time periods until the 
applicability date of this Treasury decision.
    Section 601.201(o)(3)(xvii) describes the procedures for providing 
additional informational material required by 
Sec. 601.201(o)(3)(xviii), (xix), and (xx), to the extent that such 
information is not provided in the notice to interested parties. Such 
materials may include an updated copy of the plan and related trust 
agreement or the determination letter application. One commentator 
suggested that Sec. 601.201(o)(3)(xvii) be revised to provide that any 
reasonable delivery method should be available for providing additional 
information to interested parties. The final regulations amend 
Sec. 601.201(o)(3)(xvii) to clarify that the procedure for making 
materials related to an application for determination available to 
interested parties may include any delivery method or a combination 
thereof that reasonably ensures accessibility to all interested 
parties.
    Section 601.201(o)(3)(xxi) provides that the notice to interested 
parties will be deemed given when it is given in person, posted as 
prescribed in the regulations under section 7476, or received through 
the mail. One commentator suggested that Sec. 601.201(o)(3)(xxi) be 
revised to reflect the new standards by which a plan sponsor may 
satisfy the notice to interested parties requirement. The final 
regulations amend Sec. 601.201(o)(3)(xxi) to clarify that the notice to 
interested parties required by Sec. 601.201(o)(3)(xiv) shall be deemed 
given when the notice is posted or sent to the person in the manner 
prescribed in the regulations under section 7476.

Effective Date

    These regulations apply to applications made on or after January 1, 
2003. For applications made prior to that date, taxpayers may continue 
to rely on the standards set forth in the

[[Page 47456]]

prior final regulations or the proposed regulations published in the 
Federal Register on January 17, 2001 (66 FR 3954).

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 
these regulations do 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 Code, the notice of proposed 
rulemaking preceding these regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these regulations is Pamela R. Kinard, 
Office of Division Counsel/Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the IRS and 
Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 601

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 601 are 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 1.7476-1 is amended by adding paragraph (e) to read 
as follows:


Sec. 1.7476-1  Interested parties.

* * * * *
    (e) Effective date. The provisions of this section apply to 
applications referred to in paragraph (a) of this section made on or 
after June 21, 1976.

    Par. 3. Section 1.7476-2 is amended as follows:
    1. Paragraphs (b), (c), and (d) are revised.
    2. Paragraph (e) is added.
    The revisions and addition read as follows:


Sec. 1.7476-2  Notice to interested parties.

* * * * *
    (b) Nature of notice. The notice required by this section shall--
    (1) Contain the information and be given within the time period 
prescribed in Sec. 601.201(o)(3) of this chapter; and
    (2) Be given in a manner prescribed in paragraph (c) of this 
section.
    (c) Method of giving notice. (1) In the case of a present employee, 
former employee, or beneficiary who is an interested party, the notice 
may be provided by any method reasonably calculated to ensure that each 
interested party is notified of the application for a determination. If 
an interested party who is a present employee is in a unit of employees 
covered by a collective-bargaining agreement between employee 
representatives and one or more employers, notice shall also be given 
to the collective-bargaining representative of such interested party by 
any method that satisfies this paragraph. Whether the notice is 
provided in a manner that satisfies the requirements of this paragraph 
is determined on the basis of all the relevant facts and circumstances. 
Because the facts and circumstances differ depending on the interested 
party, it may be necessary to use more than one method of delivery in 
order to ensure timely and adequate notice to all interested parties.
    (2) If the notice to interested parties is delivered using an 
electronic medium under a system that satisfies the requirements of 
Sec. 1.402(f)-1 Q&A-5, the notice is deemed to be provided in a manner 
that satisfies the requirements of paragraph (c)(1).
    (d) Examples. The principles of this section are illustrated by the 
following examples:
    Example 1.  (i) Employer A is amending Plan C and applying for a 
determination letter. Plan C is not maintained pursuant to one or 
more collective bargaining agreements and is not being terminated. 
As part of the determination letter application process, Employer A 
provides the notice required under this section to interested 
parties. For present employees, Employer A provides the notice by 
posting the notice at those locations within the principal places of 
employment of the interested parties which are customarily used for 
employer notices to employees with regard to employment and employee 
benefit matters.
    (ii) In this Example 1, Employer A satisfies the notice to 
interested parties requirement described in this section.
    Example 2.  (i) Employer B is amending Plan D and applying for a 
determination letter. As part of the determination letter 
application process, Employer B provides the notice required under 
this section to interested parties.
    (ii) Employer B has multiple worksites. Employer B's employees 
located at worksites 1 through 4 have reasonable access to computers 
at their workplace. However, Employer B's employees located at 
worksite 5 do not have access to computers.
    (iii) For present employees with reasonable access to computers 
(worksites 1 through 4), Employer B provides the notice by posting 
the notice on Employer B's web site (Internet or intranet). 
Employees at worksites 1 through 4 customarily receive employer 
notification with regard to employment and employee benefit matters 
from the Employer B's web site. For present employees without access 
to computers (worksite 5), Employer B provides the notice by posting 
the notice at worksite 5 in a location that is customarily used for 
employer notices to employees with regard to employment and employee 
benefit matters.
    (iv) Employer B also sends the notice by e-mail to each 
collective-bargaining representative of interested parties who are 
present employees of Employer B covered by a collective-bargaining 
agreement between employee representatives and Employer B, using the 
e-mail address previously provided to Employer B by such collective-
bargaining representative.
    (v) In this Example 2, Employer B satisfies the notice to 
interested parties requirement described in this section.
    Example 3.  (i) Employer C is terminating Plan E and applying 
for a determination letter as to whether the plan termination 
affects the continuing qualification of Plan E. As part of the 
determination letter application process, Employer C provides the 
notice required under this section to interested parties.
    (ii) All of Employer C's employees have reasonable access to 
computers. Each employee has an e-mail address where he or she can 
receive messages from Employer C. Employees of Employer C 
customarily receive employer notices regarding employment and 
employee benefit matters by e-mail.
    (iii) For present employees, Employer C provides the notice by 
sending the notice by e-mail.
    (iv) Employer C also sends the notice by e-mail to each 
collective-bargaining representative of interested parties who are 
present employees of Employer C covered by a collective-bargaining 
agreement between employee representatives and Employer C, using the 
e-mail address previously provided to Employer C by such collective-
bargaining representative.
    (v) In addition, Employer C sends the notice by e-mail to each 
interested party who is a former employee or beneficiary, using the 
e-mail address previously provided to Employer C by such interested 
party. For any former employee or beneficiary who did not provide an 
e-mail address, Employer C sends the notice by regular mail to the 
last known address of such former employee or beneficiary.
    (vi) In this Example 3, Employer C satisfies the notice to 
interested parties requirement described in this section.


[[Page 47457]]


    (e) Effective date. (1) The provisions of this section shall apply 
to applications referred to in Sec. 1.7476-1(a) made on or after 
January 1, 2003.
    (2) For applications made on or after June 21, 1976 and before 
January 1, 2003, Sec. 1.7476-2 (as it appeared in the April 1, 2002 
edition of 26 CFR part 1) applies.

PART 601--STATEMENT OF PROCEDURAL RULES

    Par. 4. The authority citation for part 601 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


    Par. 5. Section 601.201 is amended as follows:
    1. In paragraph (o)(3)(xv), the first two sentences are removed and 
a new sentence is added in their place.
    2. In paragraph (o)(3)(xvi), the introductory text is revised.
    3. Paragraph (o)(3)(xvii) is revised.
    4. In paragraph (o)(3)(xxi), the second sentence is revised.
    The revisions and addition read as follows:


Sec. 601.201  Rulings and determination letters.

* * * * *
    (o) * * *
    (3) * * *
    (xv) When the notice referred to in paragraph (o)(3)(xiv) of this 
section is given in the manner set forth in Sec. 1.7476-2(c) of this 
chapter, such notice must be given not less than 10 days nor more than 
24 days prior to the date the application for a determination is made. 
* * *
    (xvi) The notice referred to in paragraph (o)(3)(xiv) of this 
section shall be given in the manner prescribed in Sec. 1.7476-2 of 
this chapter and shall contain the following information:
* * * * *
    (xvii) The procedure referred to in paragraph (o)(3)(xvi)(i) of 
this section whereby the additional informational material required by 
paragraphs (o)(3)(xviii), (xix), and (xx) of this section will (to the 
extent not included in this notice) be made available to interested 
parties, may consist of making such material available for inspection 
and copying by interested parties at a place or places reasonably 
accessible to such parties, or supplying such material by using a 
method of delivery or a combination thereof that is reasonably 
calculated to ensure that all interested parties will have access to 
the materials. The procedure referred to in paragraph (o)(3)(xvi)(i) of 
this section must be immediately available to all interested parties 
and must be designed to supply them with such additional informational 
material in time for them to pursue their rights within the time period 
prescribed, and must be available until the earlier of the filing of a 
pleading commencing a declaratory judgment action under section 7476 
with respect to the qualification of the plan or the ninety-second day 
after the day the notice of final determination is mailed to the 
applicant.
* * * * *
    (xxi) * * * The notice to interested parties required by paragraph 
(o)(3)(xiv) of this section shall be deemed given when the notice is 
posted or sent to the person in the manner prescribed in Sec. 1.7476-2 
of this chapter. * * *
* * * * *

David A. Mader,
Acting Deputy Commissioner of Internal Revenue.
    Approved: July 10, 2002.
Pamela F. Olson,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 02-18020 Filed 7-18-02; 8:45 am]
BILLING CODE 4830-01-P