Remedial Amendment Period

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 1 [TD 8871] RIN 1545-AV22

TITLE: Remedial Amendment Period

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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:....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 F d ral Register (62 FR 41272). A notice of
proposed rulemaking (REG-106043-97), cross-referencing the temporary
regulations, was published in the F d ral 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 �1.401(b)-1(b)(2)(i) and (ii).
Under �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, �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 ��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 �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 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
Am ndm nts to th 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: �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 �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 �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 �601.601(d)(2) of this chapter.

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

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

Deputy Commissioner of Internal Revenue
Approved:
Assistant Secretary of the Treasury

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