Rev. Proc. 75-5

Section 1. Purpose

This Revenue Procedure provides supplemental and revised procedures of the Internal Revenue Service for issuing determination letters relating to the qualification of certain individually designed pension, annuity, profit-sharing, bond purchase, and stock bonus plans under sections 401 and 405 of the Internal Revenue Code of 1954, as amended by the Employee Retirement Income Security Act of 1974 (Public Law 93-406), [1974-3 C.B. 1], approved September 2, 1974 (hereinafter referred to as "the Act").

Sec. 2. Background and General Information

The general procedures of the Service relating to the issuance of rulings, determination letters, and opinion letters are set forth in Rev. Proc. 72-3, 1972-1 C.B. 698. Rev. Proc. 72-6, 1972-1 C.B. 710, provides the detailed procedures relating to the issuance of determination letters as to qualification of employees' plans under sections 401 and 405 of the Code and to the exempt status of related trusts or custodial accounts, if any, under section 501(a). Rev. Proc. 74-38, 1974-2 C.B. 492, temporarily limited the issuance of determination letters on the qualification of plans to those that can qualify under the provisions of section 401 or 405 as in effect prior to September 2, 1974. The purpose of that limitation was to enable the Service to develop guidelines for determining whether plans meet the provisions of the Act. Guidelines have now been developed for making this determination with respect to certain types of defined contribution plans and this Revenue Procedure sets forth the procedures to be followed in connection with requests for determination letters with respect to those plans. For purposes of this Revenue Procedure, the term "defined contribution" plan has the meaning given in section 414(i). Generally, profit-sharing plans, money purchase pension plans (including target benefit plans), and stock bonus plans are considered defined contribution plans.

Sec. 3. Determination Letters

.01 Except for the plans described in subsection .02 below, District Directors are authorized to issue determination letters with respect to the qualification of defined contribution plans under which the plan year begins after September 2, 1974, and with respect to the effect of an amendment on a plan's qualification, where the plan is subject to the new participation and vesting provisions of the Code (e.g. the plan has come under the new law provisions pursuant to an election made under section 1017(d) of the Act).

.02 Subsection .01 above does not permit the issuance of determination letters with respect to the following:

(1) A money purchase pension plan (including a target benefit plan) that provides for excluding employees from participation on the basis of maximum age pursuant to section 410(a)(2) of the Code.

(2) A plan that provides for determining whether an employee has a year of service, for purposes of section 410(a)(3)(A) relating to minimum participation standards, on any basis other than a 12-month period beginning with the commencement of employment or an anniversary date thereof.

(3) A plan that includes a provision permitted under section 410(a)(5)(C) or section 411(a)(6)(B) with respect to the effect of a one-year break in service on the aggregation of years of service.

(4) A plan (including a target benefit plan) under which the test for prohibited discrimination under section 401(a)(4) is to be made by reference to benefits rather than contributions.

(5) A plan involving the question of credit for service with a predecessor employer or under a predecessor plan.

(6) A plan of an employer that is part of a controlled group within the meaning of section 414(b) of the Code or under common control with another trade or business within the meaning of section 414(c).

(7) A multiemployer plan within the meaning of section 414(f).

(8) A plan that permits the return of employer contributions for any reason other than because of the plan's initial failure to qualify or because of an excess remaining after its termination and the satisfaction of all plan liabilities.

(9) A plan that provides for forfeitures in the event of withdrawals of employee contributions or increments.

(10) A plan under which employees would be eligible to participate if they had one year of service within the meaning of section 410(a)(3), if any such employees are (1) engaged in the operation of vessels on bodies of water including the high seas, coastal waters and inland waterways and (2) are compensated, pursuant to articles or other similar contracts or agreements, on a basis (either expressly set forth in the governing documents or by practice) of basic pay rates computed in units no smaller than one day.

(11) A plan that permits any forfeiture of an employee's accrued benefits for cause.

(12) A plan that permits the forfeiture of a terminated employee's non-vested interest prior to the time he has a break in service.

(13) A plan involved in a merger or consolidation of plans or in the transfer of assets or liabilities from one plan to another.

(14) A plan under which seasonal employees would be considered to be eligible to participate if they had at least one year of service within the meaning of section 410(a)(3), unless the customary period of employment for all such employees is more than 1,000 hours during a calendar year. (Until regulations defining seasonal employee are issued by the Department of Labor, a seasonal employee is an employee who customarily works less than one-third of his total hours for the calendar year in the six months, whether or not consecutive, in which he works the least number of hours.)

(15) A plan that does not contain provisions, with respect to credit for hours of service or breaks in service, consistent with those authorized in guidelines published by the Service or the Department of Labor at the time the determination letter is to be issued.

(16) A plan under which it is possible for the 12-consecutive-month period used to determine whether an employee has completed a year of service for purposes of section 410(a)(3) or section 411(a)(5) not to coincide with the 12-consecutive-month period used to determine whether the employee has had a break in service for purposes of section 410(a)(5) and section 411(a)(6).

.03 In view of the provisions of section 3001(a) of the Act, determination letters authorized by this procedure will not be issued until at least 45 days after the application therefor has been filed with the Service.

.04 A determination letter issued pursuant to subsection .01 above will not constitute a determination as to whether plan provisions meet requirements of the Act which are not applicable to the plan for the plan year in which the determination letter is issued. Specifically, such determination letters will not constitute determinations with respect to section 401(a)(11) of the Code, relating to plan provisions with respect to qualified joint and survivor annuities, section 401(a)(12), relating to plan provisions on mergers, consolidations, etc. of plans, section 401(a)(13), relating to plan provisions restricting assignment or alienation of plan benefits, or section 415, relating to limitations on benefits and contributions under qualified plans.

.05 Plans with respect to which determination letters are issued pursuant to subsection .01 may have to be amended subsequently to include or revise the provisions relating to matters described in subsection .04. Such plans will also have to be amended if any provisions therein fail to meet the requirements of regulations adopted subsequent to the time the determination letters are issued. Plans with respect to which favorable determination letters have been issued under this Revenue Procedure may be amended, without adverse effect, to meet the requirements of such regulations.

Sec. 4. Instructions to taxpayers

.01 All the provisions of Rev. Proc. 72-3 and Rev. Proc. 72-6 are applicable to the requests for determination letters authorized by this Revenue Procedure except to the extent otherwise provided herein.

.02 Instead of the application required by section 4 of Rev. Proc. 72-6, an employer requesting a determination letter authorized by this Revenue Procedure, other than a letter on the qualification of a bond purchase plan, shall file Form 5301, Application for Determination of Defined Contribution Plan, and Form 5302, Employee Census. Those forms are to be filed in accordance with the instructions therefor and accompanied by any schedules or additional material prescribed in those instructions.

.03 Requests relating to the qualification of a bond purchase plan will, as before, be filed on Form 4578, Application for Approval of Bond Purchase Plan that Includes Self-Employed Individuals.

Sec. 5. Effect On Other Documents

.01 Rev. Proc. 74-38 is hereby modified to permit the issuance of determination letters on the qualification of plans under the Code as amended by the Act, to the extent authorized by this Revenue Procedure.

.02 The general procedures of Rev. Proc. 72-3 and Rev. Proc. 72-6 continue to apply except to the extent they are inconsistent with this Revenue Procedure or with Rev. Proc. 74-38. Rev. Proc. 72-6 is hereby amplified.

Sec. 6. Effective Date

This Revenue Procedure is effective January 13, 1975.

¹ Also released as TIR-1336, dated January 13, 1975.