Common use of Effect on programs Clause in Contracts

Effect on programs. This revenue procedure modifies and supersedes Rev. Proc. 2003-44, 2003-1 C.B. 1051, which was the prior consolidated statement of the correction programs under EPCRS. The modifications to Rev. Proc. 2003-44 that are reflected in this revenue procedure include: • providing that if the Plan Sponsor corrects the failures in accordance with the requirements of this revenue procedure, the plan will be treated as satisfying § 401(a), § 403(b), § 408(k), or § 408(p), as applicable, for purposes of applying § 3121(a)(5) (FICA taxes) and § 3306(b)(5) (FUTA taxes) (section 3.01) • revising the requirements for submitting a determination letter application when correcting certain Qualification Failures by plan amendment (sections 4.06, 10.08, and 11.03(3)) • clarifying that an egregious failure includes providing more favorable benefits to an owner based on a purported collective bargaining agreement where there has in fact been no good faith bargaining (section 4.11) • providing rules relating to the availability of programs under EPCRS in cases where the plan or plan sponsor is a party to an abusive tax avoidance transaction (sections 4.13 and 11.02(11)) • updating the definition of Favorable Letter (section 5.01(4)) • revising provisions affecting 403(b) plans by revising the definition of Excess Amounts (section 5.02(3)) • updating the definition of Under Examination (section 5.03) • expanding VC and Audit CAP to terminating Orphan Plans and, with respect to those plans, providing for a possible exception to the requirement for full correction and a waiver of the VCP fee in appropriate circumstances (sections 5.06, 6.02(5)(f), and 12.02(3)) • adding a correction method for certain plan loan failures (sections 6.02(6) and 6.07), including adding a correction method for a plan that permits plan loans operationally but does not have the appropriate plan loan language (Appendix B 2.07(2)) • revising the correction method for a failure to include an eligible employee in a cash or deferred arrangement under § 401(k) (section 6.02(7), Appendix A .05, and Appendix B 2.02) • adding an alternative correction method for a failure to obtain spousal consent (section 6.04(2)(c)) • revising provisions affecting 403(b) plans by eliminating the term Total Sanction Amount and replacing it with the term “Maximum Payment Amount” and eliminating correction by retention of Excess Amounts (sections 5.02(4) and 6.06(2)) • providing that as part of both VCP and Audit CAP, if the failure involves the failure to satisfy the minimum required distribution requirements of § 401(a)(9), the Service will waive the excise tax requirements of § 4974 in appropriate cases (section 6.09(2)) • expanding excise taxes that the Service may not pursue (section 6.09(3) and (4)) • clarifying the scope of a compliance statement issued with respect to certain nonamender failures • clarifying submission procedures for Anonymous Submissions (section 10.10), and Group Submissions (section 10.11) • revising the acknowledgement procedures of receipt of a submission (section 11.11 and new Appendix E – Acknowledgement Letter) • providing a submission assembly procedure (section 11.14) • reducing the compliance fee for a plan where the sole failure is the failure to satisfy the minimum distribution rules for 50 or fewer employees (section 12.02(2)) • reducing the compliance fee for a plan where the sole failure is the failure to timely adopt certain plan amendments (section 12.03) • reducing the general compliance fee for SEPs and SIMPLE IRAs (section 12.05) • adding a fee schedule for plans in the determination letter process found to be nonamenders of tax law changes (section 14.04) • providing that if a nonamender failure is discovered during an Employee Plans Examination, then it is expected that the applicable sanction will be greater than the applicable fee under section 14.04 (section 14.02) • providing a streamlined submission procedure for certain nonamender failures (Appendix F)

Effect on programs. This revenue procedure modifies and supersedes Rev. Proc. 2003-44, 2003-1 C.B. 1051, which was the prior consolidated statement of the correction programs under EPCRS. The modifications to Rev. Proc. 2003-44 that are reflected in this revenue procedure include: • providing that if the Plan Sponsor corrects the failures in accordance with the requirements of this revenue procedure, the plan will be treated as satisfying § 401(a), § 403(b), § 408(k), or § 408(p), as applicable, for purposes of applying § 3121(a)(5) (FICA taxes) and § 3306(b)(5) (FUTA taxes) (section 3.01) • revising the requirements for submitting a determination letter application when correcting certain Qualification Failures by plan amendment (sections 4.06, 10.08, and 11.03(3)) • clarifying that an egregious failure includes providing more favorable benefits to an owner based on a purported collective bargaining agreement where there has in fact been no good faith bargaining (section 4.11) • providing rules relating to the availability of programs under EPCRS in cases where the plan or plan sponsor is a party to an abusive tax avoidance transaction (sections 4.13 and 11.02(11)) • updating the definition of Favorable Letter (section 5.01(4)) • revising provisions affecting 403(b) plans by revising the definition of Excess Amounts (section 5.02(3)) • updating the definition of Under Examination (section 5.03) • expanding VC and Audit CAP to terminating Orphan Plans and, with respect to those plans, providing for a possible exception to the requirement for full correction and a waiver of the VCP fee in appropriate circumstances (sections 5.06, 6.02(5)(f), and 12.02(3)) • adding a correction method for certain plan loan failures (sections 6.02(6) and 6.07), including adding a correction method for a plan that permits plan loans operationally but does not have the appropriate plan loan language (Appendix B 2.07(2)) • revising the correction method for a failure to include an eligible employee in a cash or deferred arrangement under § 401(k) (section 6.02(7), Appendix A .05, and Appendix B 2.02) • adding an alternative correction method for a failure to obtain spousal consent (section 6.04(2)(c)) • revising provisions affecting 403(b) plans by eliminating the term Total Sanction Amount and replacing it with the term “Maximum Payment Amount” and eliminating correction by retention of Excess Amounts ; (sections 5.02(4) and 6.06(2)) • providing that as part of both VCP and Audit CAP, if the failure involves the failure to satisfy the minimum required distribution requirements of § 401(a)(9), the Service will waive the excise tax requirements of § 4974 in appropriate cases cases. (section 6.09(2)) • expanding excise taxes that the Service may not pursue (section 6.09(3) and (4)) • clarifying the scope of a compliance statement issued with respect to certain nonamender failures • clarifying submission procedures for Anonymous Submissions (section 10.10), and Group Submissions (section 10.11) • revising the acknowledgement procedures of receipt of a submission (section 11.11 and new Appendix E – Acknowledgement Letter) • providing a submission assembly procedure (section 11.14) • reducing the compliance fee for a plan where the sole failure is the failure to satisfy the minimum distribution rules for 50 or fewer employees (section 12.02(2)) • reducing the compliance fee for a plan where the sole failure is the failure to timely adopt certain plan amendments amendments. (section 12.03) • reducing the general compliance fee for SEPs and SIMPLE IRAs (section 12.05) • adding a fee schedule for plans in the determination letter process found to be nonamenders of tax law changes (section 14.04) • providing that if a nonamender failure is discovered during an Employee Plans Examination, then it is expected that the applicable sanction will be greater than the applicable fee under section 14.04 14.04. (section 14.02) • providing a streamlined submission procedure for certain nonamender failures (Appendix F)

Effect on programs. This revenue procedure modifies and supersedes Rev. Proc. 20032006-4427, 20032006-1 C.B. 1051945 (as modified by Rev. Proc. 2007-49, 2007-30 I.R.B. 141), which was the prior consolidated statement of the correction programs under EPCRS. The modifications to Rev. Proc. 20032006-44 27 that are reflected in this revenue procedure include: • providing Expanding the definition of plan loan failure to include violations of § 72(p)(2), regardless of whether the plan contains language relating to § 72(p). (sections 4.01 and 6.07) • Clarifying that if in particular cases the Service may decline to make available one or more correction programs under EPCRS in the interest of sound tax administration. (section 4.01(5)) • Expanding the scope of the SCP by: (i) liberalizing the requirements for determining whether there was substantial completion of correction as of the first date the plan or Plan Sponsor corrects is considered to be Under Examination and (ii) expanding the failures for which sample correction methods are provided. (sections 4.05(2) and 9.04, Appendix A .05, and Appendix B 2.02) • Expanding the correction method with respect to elective deferrals to include catch-up contributions under § 414(v) and plans that provide the opportunity for an employee to designate all or a portion of elective deferrals as designated Xxxx contributions. (Appendix A .05, and Appendix B 2.02) • Expanding the correction method for a failure to include an eligible employee in accordance a § 401(k) plan to include a situation in which elective deferral and after-tax employee contribution elections are not implemented by the employer or are implemented in a manner inconsistent with the requirements of this revenue procedure, the plan will be treated as satisfying § 401(a), § 403(b), § 408(k), or § 408(p), as applicable, for purposes of applying § 3121(a)(5) plan’s terms. (FICA taxes) Appendix A .05 and § 3306(b)(5) (FUTA taxes) (section 3.01Appendix B 2.02) • revising Revising the requirements for submitting a determination letter application when correcting certain Qualification Failures by plan amendment amendment. (sections 4.066.05, 10.08, and 11.03(3)11.01) • clarifying that an egregious failure includes providing more favorable benefits to an owner based on Clarifying the scope of a purported collective bargaining agreement where there has in fact been no good faith bargaining compliance statement issued when correcting certain Qualification Failures by plan amendment. (section 4.11sections 6.05 and 10.08) • Updating the definition of Excess Amounts and providing corrections for Excess Amounts failures, including those resulting from the failure to satisfy the requirements of § 415. This update includes correction rules relating largely similar to the availability corrections that were at § 1.415-6(b)(6)(iii) of programs the Income Tax Regulations (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the recently finalized regulations under EPCRS § 415, but with the amount placed in cases where the plan or plan sponsor is a party an unallocated account to an abusive tax avoidance transaction be reallocated in lieu of employer contributions other than elective deferrals. (sections 4.13 5.01(3) and 11.02(11)6.06, and Appendix A .08) • updating Updating the definition of Favorable Letter Letter. (section 5.01(4)) • revising provisions affecting 403(b) plans Adding a factor to be considered in the determination of whether a correction method is reasonable and appropriate. The factor requires consideration of corrections of violations that are similar to the failure being addressed by revising other government agencies. In appropriate cases, for a failure that results from either the definition employer having ceased to exist, the employer no longer maintaining the plan, or similar reasons, the permitted correction would be to terminate the plan and distribute plan assets to participants and beneficiaries in accordance with standards and procedures substantially similar to those set forth in section 2578.1 of Excess Amounts the Department of Labor Regulations (relating to abandoned plans). (section 5.02(36.02(2)(e)(ii) and Appendix A .09) • Clarifying that the earnings adjustment for corrective contributions or distributions is calculated from the date when the qualification failure occurred without regard to any extensions provided under the Code. (section 6.02(4)(e)) • updating Clarifying that the definition earnings rate derived from the Department of Under Examination Labor’s VFCP Online calculator may be used to determine the earnings adjustment applied to corrective contributions, distributions, allocations, and reallocations if it is not feasible to make a reasonable estimate of what the actual investment results would have been. (section 5.036.02(5)(a)) • expanding VC Providing that if the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and Audit CAP delivering the distribution to terminating Orphan Plans andthe participant or beneficiary would exceed the amount of the distribution. (section 6.02(5)(b)) • Providing that if the Plan Sponsor attempts the IRS’ Letter Forwarding Program to locate participants and the Service declines to implement the letter forwarding request, then the Plan Sponsor will use alternate means to locate missing participants. (section 6.02(5)(d)) • Clarifying that if a Plan Sponsor either (i) wants a participant's deemed distribution to be reported on Form 1099-R for the year of correction (instead of the year of the failure) or (ii) wants relief from reporting a participant’s loan as a deemed distribution on Form 1099-R, then it must specifically request such relief. (sections 6.07(1) and 6.07(2)(a)) • Clarifying the treatment of amounts improperly distributed to participants and beneficiaries under the plan which are rolled over to IRAs, with respect to those plans, providing for a possible exception to the requirement for full correction excise tax under § 4973. (sections 6.03(4) and 6.09(5)) • Clarifying the circumstances under which a waiver of the VCP fee in appropriate circumstances (sections 5.06, 6.02(5)(f), and 12.02(3)) • adding a correction method for certain plan loan failures (sections 6.02(6) and 6.07), including adding a correction method for a plan that permits plan loans operationally but does not have the appropriate plan loan language (Appendix B 2.07(2)) • revising the correction method for a failure to include an eligible employee in a cash or deferred arrangement excise tax under § 401(k) (section 6.02(7), Appendix A .05, and Appendix B 2.02) • adding an alternative correction method for a failure to obtain spousal consent (section 6.04(2)(c)) • revising provisions affecting 403(b) plans by eliminating the term Total Sanction Amount and replacing it with the term “Maximum Payment Amount” and eliminating correction by retention of Excess Amounts (sections 5.02(4) and 6.06(2)) • providing that as part of both VCP and 4974 would be considered under Audit CAP, if the failure involves the failure to satisfy the minimum required distribution requirements of § 401(a)(9), the Service will waive the excise tax requirements of § 4974 in appropriate cases . (section 6.09(2)) • expanding Expanding income and excise taxes that the Service may exercise discretion to not pursue pursue. (section 6.09(3sections 6.09(5) and (46.09(6)) • clarifying Clarifying the scope of a compliance statement issued with respect to certain nonamender failures failures. (sections 6.05 and 10.08) • clarifying submission Providing for new and expanded streamlined application procedures for Anonymous Submissions interim nonamenders and the failure to implement optional law changes timely and other nonamenders, certain SEP, SARSEP and SIMPLE IRA failures, certain plan loan failures, Employer Eligibility Failures, § 402(g) failures, § 401(a)(9) failures, and failures that involve plan amendment in accordance with Appendix B 2.07. (section 10.10)11.02, and Group Submissions (section 10.11Appendix F) • revising the acknowledgement procedures of receipt of a submission (section 11.11 and new Appendix E – Acknowledgement Letter) • providing a submission assembly procedure (section 11.14) • reducing Reducing the compliance fee under certain circumstances for a plan where the sole failure is the failure of participant loans to satisfy comply with the minimum distribution rules for 50 or fewer employees requirements of § 72(p)(2). (section 12.02(212.02(3)) • reducing Clarifying that, in the case of a Qualification Failure that is intentional, the compliance fee for a plan where the sole failure is the failure to timely adopt certain plan amendments under VCP will be determined in accordance with section 12.06. (section 12.0312.06) • reducing Providing that Audit CAP provisions apply if the general compliance fee for SEPs and SIMPLE IRAs Service identifies a participant loan that did not comply with the requirements of § 72(p)(2) (section 12.05other than a loan failure that is corrected in accordance with SCP or VCP) • adding a fee schedule for plans in the determination letter process found to be nonamenders of tax law changes (section 14.04) • providing that if a nonamender failure is discovered during upon an Employee Plans Examination, then it is expected that the applicable sanction will be greater than the applicable fee under section 14.04 or Exempt Organizations examination of a Qualified Plan or 403(b) Plan. (section 14.02sections 13.01 and 14.01) • providing Providing a streamlined submission procedure sample application form for certain nonamender failures VCP filings. (revised Appendix FD)

Effect on programs. This revenue procedure modifies and supersedes Rev. Proc. 20032006-4427, 20032006-1 C.B. 1051945 (as modified by Rev. Proc. 2007-49, 2007-30 I.R.B. 141), which was the prior consolidated statement of the correction programs under EPCRS. The modifications to Rev. Proc. 20032006-44 27 that are reflected in this revenue procedure include: • providing Expanding the definition of plan loan failure to include violations of § 72(p)(2), regardless of whether the plan contains language relating to § 72(p). (sections 4.01 and 6.07) • Clarifying that if in particular cases the Service may decline to make available one or more correction programs under EPCRS in the interest of sound tax administration. (section 4.01(5)) • Expanding the scope of the SCP by: (i) liberalizing the requirements for determining whether there was substantial completion of correction as of the first date the plan or Plan Sponsor corrects is considered to be Under Examination and (ii) expanding the failures for which sample correction methods are provided. (sections 4.05(2) and 9.04, Appendix A .05, and Appendix B 2.02) • Expanding the correction method with respect to elective deferrals to include catch-up contributions under § 414(v) and plans that provide the opportunity for an employee to designate all or a portion of elective deferrals as designated Xxxx contributions. (Appendix A .05, and Appendix B 2.02) • Expanding the correction method for a failure to include an eligible employee in accordance a § 401(k) plan to include a situation in which elective deferral and after-tax employee contribution elections are not implemented by the employer or are implemented in a manner inconsistent with the requirements of this revenue procedure, the plan will be treated as satisfying § 401(a), § 403(b), § 408(k), or § 408(p), as applicable, for purposes of applying § 3121(a)(5) plan’s terms. (FICA taxes) Appendix A .05 and § 3306(b)(5) (FUTA taxes) (section 3.01Appendix B 2.02) • revising Revising the requirements for submitting a determination letter application when correcting certain Qualification Failures by plan amendment amendment. (sections 4.066.05, 10.08, and 11.03(3)11.01) • clarifying that an egregious failure includes providing more favorable benefits to an owner based on Clarifying the scope of a purported collective bargaining agreement where there has in fact been no good faith bargaining compliance statement issued when correcting certain Qualification Failures by plan amendment. (section 4.11sections 6.05 and 10.08) • Updating the definition of Excess Amounts and providing corrections for Excess Amounts failures, including those resulting from the failure to satisfy the requirements of § 415. This update includes correction rules relating largely similar to the availability corrections that were at § 1.415-6(b)(6)(iii) of programs the Income Tax Regulations (as it appeared in the April 1, 2007 edition of 26 CFR part 1) prior to amendments made by the recently finalized regulations under EPCRS § 415, but with the amount placed in cases where the plan or plan sponsor is a party an unallocated account to an abusive tax avoidance transaction be reallocated in lieu of employer contributions other than elective deferrals. (sections 4.13 5.01(3) and 11.02(11)6.06, and Appendix A .08) • updating Updating the definition of Favorable Letter Letter. (section 5.01(4)) • revising provisions affecting 403(b) plans Adding a factor to be considered in the determination of whether a correction method is reasonable and appropriate. The factor requires consideration of corrections of violations that are similar to the failure being addressed by revising other government agencies. In appropriate cases, for a failure that results from either the definition employer having ceased to exist, the employer no longer maintaining the plan, or similar reasons, the permitted correction would be to terminate the plan and distribute plan assets to participants and beneficiaries in accordance with standards and procedures substantially similar to those set forth in section 2578.1 of Excess Amounts the Department of Labor Regulations (relating to abandoned plans). (section 5.02(36.02(2)(e)(ii) and Appendix A .09) • Clarifying that the earnings adjustment for corrective contributions or distributions is calculated from the date when the qualification failure occurred without regard to any extensions provided under the Code. (section 6.02(4)(e)) • updating Clarifying that the definition earnings rate derived from the Department of Under Examination Labor’s VFCP Online calculator may be used to determine the earnings adjustment applied to corrective contributions, distributions, allocations, and reallocations if it is not feasible to make a reasonable estimate of what the actual investment results would have been. (section 5.036.02(5)(a)) • expanding VC Providing that if the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and Audit CAP delivering the distribution to terminating Orphan Plans andthe participant or beneficiary would exceed the amount of the distribution. (section 6.02(5)(b)) • Providing that if the Plan Sponsor attempts the IRS’ Letter Forwarding Program to locate participants and the Service declines to implement the letter forwarding request, then the Plan Sponsor will use alternate means to locate missing participants. (section 6.02(5)(d)) • Clarifying that if a Plan Sponsor either (i) wants a participant's deemed distribution to be reported on Form 1099-R for the year of correction • Clarifying the treatment of amounts improperly distributed to participants and beneficiaries under the plan which are rolled over to IRAs, with respect to those plans, providing for a possible exception to the requirement for full correction excise tax under § 4973. (sections 6.03(4) and 6.09(5)) • Clarifying the circumstances under which a waiver of the VCP fee in appropriate circumstances (sections 5.06, 6.02(5)(f), and 12.02(3)) • adding a correction method for certain plan loan failures (sections 6.02(6) and 6.07), including adding a correction method for a plan that permits plan loans operationally but does not have the appropriate plan loan language (Appendix B 2.07(2)) • revising the correction method for a failure to include an eligible employee in a cash or deferred arrangement excise tax under § 401(k) (section 6.02(7), Appendix A .05, and Appendix B 2.02) • adding an alternative correction method for a failure to obtain spousal consent (section 6.04(2)(c)) • revising provisions affecting 403(b) plans by eliminating the term Total Sanction Amount and replacing it with the term “Maximum Payment Amount” and eliminating correction by retention of Excess Amounts (sections 5.02(4) and 6.06(2)) • providing that as part of both VCP and 4974 would be considered under Audit CAP, if the failure involves the failure to satisfy the minimum required distribution requirements of § 401(a)(9), the Service will waive the excise tax requirements of § 4974 in appropriate cases . (section 6.09(2)) • expanding Expanding income and excise taxes that the Service may exercise discretion to not pursue pursue. (section 6.09(3sections 6.09(5) and (46.09(6)) • clarifying Clarifying the scope of a compliance statement issued with respect to certain nonamender failures failures. (sections 6.05 and 10.08) • clarifying submission Providing for new and expanded streamlined application procedures for Anonymous Submissions interim nonamenders and the failure to implement optional law changes timely and other nonamenders, certain SEP, SARSEP and SIMPLE IRA failures, certain plan loan failures, Employer Eligibility Failures, § 402(g) failures, § 401(a)(9) failures, and failures that involve plan amendment in accordance with Appendix B 2.07. (section 10.10)11.02, and Group Submissions (section 10.11Appendix F) • revising the acknowledgement procedures of receipt of a submission (section 11.11 and new Appendix E – Acknowledgement Letter) • providing a submission assembly procedure (section 11.14) • reducing Reducing the compliance fee under certain circumstances for a plan where the sole failure is the failure of participant loans to satisfy comply with the minimum distribution rules for 50 or fewer employees requirements of § 72(p)(2). (section 12.02(212.02(3)) • reducing Clarifying that, in the case of a Qualification Failure that is intentional, the compliance fee for a plan where the sole failure is the failure to timely adopt certain plan amendments under VCP will be determined in accordance with section 12.06. (section 12.0312.06) • reducing Providing that Audit CAP provisions apply if the general compliance fee for SEPs and SIMPLE IRAs Service identifies a participant loan that did not comply with the requirements of § 72(p)(2) (section 12.05other than a loan failure that is corrected in accordance with SCP or VCP) • adding a fee schedule for plans in the determination letter process found to be nonamenders of tax law changes (section 14.04) • providing that if a nonamender failure is discovered during upon an Employee Plans Examination, then it is expected that the applicable sanction will be greater than the applicable fee under section 14.04 or Exempt Organizations examination of a Qualified Plan or 403(b) Plan. (section 14.02sections 13.01 and 14.01) • providing Providing a streamlined submission procedure sample application form for certain nonamender failures VCP filings. (revised Appendix FD)