Rev. Proc. 77-44

Section 1. Purpose

The purpose of this Revenue Procedure is to provide guidelines concerning the circumstances that will be considered in granting approval for a change in a plan year under section 412(c)(5) of the Internal Revenue Code of 1954, as added by the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 1974-3 C.B. 1. These guidelines will also apply to requests for changing the trust year of a plan.

Sec. 2. Background

.01 Section 3(39) of ERISA states that "plan year" refers to a plan, calendar, policy, or fiscal year on which records of the plan are kept. For purposes of this Revenue Procedure, the term "trust year" refers to any 12 consecutive month period corresponding to the trust's taxable year.

.02 Section 412(c)(5) of the Code provides that if the plan year is changed, the new plan year shall become effective only if the change is approved by the Secretary.

Sec. 3. Scope and Objective

.01 Except as provided in section 4, the following factors will be considered in determining whether to approve a proposed change in plan year and/or trust year:

(1) a substantial business purpose is established for making the change,

(2) there is no evidence that the change is requested solely for obtaining one or more tax advantages, and

(3) as a result of making the change, there will be no plan or trust year exceeding twelve (12) month's duration.

.02 The following factors are among those that will be considered relevant in determining whether a substantial business purpose exists for making a change in plan or trust year:

(1) where the plan and/or trust year is to be changed to conform to the employer's tax year,

(2) where continuing the present plan or trust year would cause a demonstrated administrative burden.

Any single factor may be sufficient, with supporting evidence, to constitute a substantial business purpose.

Sec. 4. Automatic Approval

.01 Notwithstanding section 3, a plan and/or trust year may, subject to the conditions set forth in .02, be changed before January 1, 1979, without obtaining prior approval from the Service if the plan and/or trust year is changed either:

(1) to coincide with the taxable year of the employer,

(2) to coincide with the calendar year if compensation for plan purposes will be based on annual payroll figures as reflected on Form W-2, Wage and Tax Statement, or

(3) in the case of a merger of two or more retirement plans (as the term "retirement plan" is defined in section 7476 of the Code), to coincide with the plan year of any one of the merged plans.

.02 The automatic approval provisions of this section are applicable to any proposed change in plan year and/or trust year, provided the following conditions are met:

(1) the trust, if any, retains its exempt status for the short period required to effect the change as well as for the taxable year immediately preceding the short period; and

(2) the trust, if any, has no unrelated business income taxable under section 511 of the Code for either the short period or the taxable year immediately preceding it.

.03 Applicants who have automatic approval under the provisions of this section should not submit a formal application or any further written correspondence to the Service in this regard.

Sec. 5. Instructions to Applicants

.01 Subject to the conditions contained in section 3 above, an applicant desiring to change the plan year and/or trust year of a plan may do so by filing an application on Form 1128, Application for Change in Accounting Period, with the Commissioner of Internal Revenue, Washington, D.C. 20224, Attention E:EP:T, on or before the 15th day of the second calendar month following the close of the short period required to effect the change in plan/trust year. For purposes of this Revenue Procedure, the term "applicant" means the employer in the case of a single employer plan, and the plan administrator in the case of a multi-employer plan.

.02 Unless otherwise indicated, the request for a change in plan year will automatically apply to the corresponding trust year (if any). If the trust year is not meant to be included in the application, a statement should be attached to Form 1128 indicating how the trust year is to be treated. Except as provided in section 4, it may not be assumed that the change has been approved until the applicant receives a letter of approval from the Internal Revenue Service.

Sec. 6. Effective Date

This Revenue Procedure applies to applications submitted after December 5, 1977.