[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]
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