Rev. Proc. 78-14

Section 1. Purpose.

The purpose of this Revenue Procedure is to outline the procedures of the Internal Revenue Service with respect to applications for waivers of the minimum funding standard under either section 412(d) of the Internal Revenue Code of 1954 or section 303 of the Employee Retirement Income Security Act of 1974. This Revenue Procedure does not apply to waivers requested for multiemployer plans within the meaning of section 414(f) of the Code.

Sec. 2. Requests for Waivers of the Minimum Funding Standard for Defined Benefit Plans.

.01 Submission. -- Requests for waivers of the minimum funding standard for defined benefit plans shall be submitted to the Commissioner of Internal Revenue, Attention: E:A, 1111 Constitution Avenue, N.W., Washington, D.C. 20224.

.02 Procedural Rules. -- Any such request must be signed by the taxpayer or his authorized representative in accordance with section 6.06 of Rev. Proc. 72-3, 1972-1 C.B. 698. Since a request for a waiver constitutes a request for a ruling, and both the request and the ruling are subject to section 6110 of the Code, compliance with section 6110 of the Code is also required.

Section 601.201 of the Statement of Procedural Rules sets forth the requirements applicable to requests for rulings and determination letters which are subject to section 6110. Section 601.201(e) furnishes specific instructions to taxpayers.

Accordingly, any such request must include both a properly signed declaration and a statement of the deletions proposed by the person requesting the ruling.

.03 Information Required. -- The applicant must furnish appropriate evidence that the employer is unable to satisfy the minimum funding standard for a plan year without substantial business hardship and that application of the standard would be adverse to the interest of plan participants in the aggregate. What constitutes appropriate evidence will depend on the facts and circumstances of each case. Generally, such evidence should include the following:

(a) General facts concerning the employer.

A brief statement concerning the history of the company, its primary business, the ownership of the company, and any recent or contemplated changes (such as acquisition, mergers, discontinuances of operations) which might have a bearing on the company's organization or financial condition. The term "employer" includes any related corporation, or other trade or business, described in section 414(b) or (c) of the Code, that also maintains the plan.

(b) The financial condition of the employer.

The annual financial report of the company for each of the last five years should be submitted. This submission should include at least the balance sheet and profit and loss statement for each year. Recent interim financial reports, if available, should also be submitted. If the employer submits 10K reports to the Securities and Exchange Commission, a copy of the most recent report should be included. Preferably, the financial report should be a certified financial report. If a certified financial report has not been prepared, an uncertified report is acceptable. If neither of these reports is available, copies of the company's Federal income tax returns, including all of the supporting schedules, may be submitted.

(c) Nature and extent of the business hardship.

A discussion of the underlying reasons which have led to the current situation (such as declining sales, unexpected losses, labor disputes, etc.) and a statement concerning the prospects for recovery, including reasons why such recovery is likely.

In addition, this discussion should include a statement as to when and to what extent it is anticipated that required contributions to the plan can reasonably be expected to resume.

The Service may request additional information, including items listed in section 412(d)(2) of the Code.

(d) Facts concerning the pension plan.

For each pension plan for which a waiver is requested, the following information should be supplied:

(1) The name of the plan and the plan's identification number.

(2) The date the plan was adopted.

(3) The effective date of the plan.

(4) The classes of employees covered.

(5) The number of employees covered.

(6) A copy of the current plan document and a copy of the most recent summary plan description.

(7) A brief description of any plan amendments during the last five years which affected plan costs, including the approximate effect of each amendment on such costs.

(8) The most recent actuarial valuation report, plus any available actuarial reports for the preceding four plan years.

(9) How the plan is funded (i.e., trust fund, individual insurance policies, etc.).

(10) A history of the contributions made to the plan for each of the last five plan years with the employee contributions and the employer contributions listed separately.

(11) The plan year for which the waiver is requested (e.g., 1/1/78-12/31/78).

(12) The approximate contribution required to meet the minimum funding standard. For defined benefit plans, this amount should be as determined by the plan's enrolled actuary.

(13) A copy of the most recently completed Annual Return/Report of Employee Benefit Plan (Form 5500, Form 5500C, or Form 5500K, as applicable) and in the case of a defined benefit plan, a copy of the corresponding Actuarial Information schedule (Schedule B of Form 5500).

(14) List each of the prior 15 plan years for which a waiver was granted and describe the special conditions under which each waiver was granted, if any. A copy of each waiver ruling letter may be submitted to satisfy this requirement.

(e) Other pension, profit-sharing, or stock bonus plans.

If the employer maintains more than one plan, an outline of the essential facts for each such plan should be submitted. This should include:

(1) A brief description of the plan, including the name of the plan and its plan year.

(2) The number of employees covered.

(3) The classes of employees covered.

(4) The approximate annual contribution required.

(5) The amount of contributions that have been made, or are intended to be made, for any plan year of such other plan commencing in, or ending in, the plan year for which the waiver is requested.

(6) A statement as to whether a waiver request is contemplated for the plan.

(f) Other information.

Describe the nature of any matters pertaining to the plan which are currently pending or about to be submitted to the IRS, Department of Labor or the Pension Benefit Guaranty Corporation.

Furnish details of any existing litigation or court procedure which involves the plan.

Also state which IRS District Office maintains files concerning the plan.

(g) In certain cases some of the material described in subsections (a) through (f) may be inappropriate or burdensome to furnish. In such cases, the applicant should furnish a statement indicating why such material is either inappropriate or burdensome.

Sec. 3. Request for Waivers for Defined Contribution Pension Plans.

.01 Background Information.--Section 3 of Rev. Rul. 78-223, 1978-1 C.B. 125, requires that a defined contribution pension plan must contain certain provisions in order for a waiver to be granted. A provision that satisfies section 3 of Rev. Rul. 78-223 does not necessarily satisfy section 401(a) of the Code. In order to provide maximum flexibility in obtaining a waiver for a defined contribution pension plan, two alternative procedures are provided in subsections .02 and .03 in which a single request may cover either a waiver ruling only or a waiver ruling and a determination letter as to the status under section 401(a) of the Code.

.02 Waiver Ruling Only. -- Under this procedure, requests for waivers shall be submitted to the Commissioner of Internal Revenue, attention E:A, 1111 Constitution Ave., Washington, D.C. 20224. The applicant must satisfy the requirements of section 2 of this Revenue Procedure, except those applicable only to defined benefit plans. In addition to furnishing the material described in section 2.03 the applicant must include the plan provisions necessary to satisfy section 3 of Rev. Rul. 78-223. All waivers issued pursuant to this subsection will contain a caveat indicating that the ruling is not a ruling as to the effect any plan provision, submitted pursuant to the previous sentence, may have on the qualified status of the plan.

.03 Waiver Ruling and Determination Letter Request. -- (1) Under this procedure both the request for a waiver ruling and the request for a determination letter on the effect of any amendment necessary to satisfy section 3 of Rev. Rul. 78-223 shall be submitted to the District Director to whom such request for a determination letter would normally be made. Such combined request must satisfy all the procedural requirements described in section 2.02 of this Revenue Procedure. Such request must also include the information described in section 2.03 of this Revenue Procedure and the plan provisions necessary to satisfy section 3 of Rev. Rul. 78-223.

(2) The District Director described in paragraph (1) shall (a) forward the waiver request and the supporting documents to the Actuarial Division, E:A, and (b) ask the National Office for technical advice on the qualification issue with respect to the plan provisions necessary to satisfy section 3 of Rev. Rul. 78-223.

(3) The National Office will consider both issues. If a waiver is to be granted and if the National Office believes that qualification of the plan is not adversely affected by the plan amendment, the technical advice memorandum shall be issued to the District Director. The District Director must decide within 10 working days from the date of the technical advice memorandum either to furnish the applicant with the technical advice memorandum and with a favorable advance determination letter, or to ask for reconsideration of the technical advice memorandum. Such a request must be in writing. An initial written notice of an intent to make such a request may be submitted within 10 working days of the date of the technical advice and followed by a written request within 30 working days from the date of such written notice. If the District Director does not ask for reconsideration of the technical advice memorandum within 10 working days, the Actuarial Division shall issue the waiver ruling in writing. Such ruling will not contain a caveat described in section 3.02.

Sec. 4. Time When Appropriate to Request a Waiver.

In seeking a waiver with respect to a plan year which has not yet commenced, the applicant may have difficulty in furnishing sufficient current evidence in support of the request. For this reason it is generally advisable that such advance request be submitted no earlier than 180 days prior to the beginning of the plan year for which the waiver is requested.

Otherwise, the request should be made as promptly as possible before the end of the time period within which a contribution may be made for the plan year for which the waiver is being requested.

The Service may defer action on a request if, for example, facts concerning the business hardship cannot be ascertained without information which is not yet available.

Sec. 5. General.

Employers who may have difficulty in furnishing the information specified in this Revenue Procedure may call or write the Actuarial Division, E:A, for guidance. In some instances, preliminary conferences will be afforded in addition to conferences available under Rev. Proc. 72-3. In any event the material described in section 2.03(g) shall be furnished.

Sec. 6. Effect on Other Documents.

Rev. Proc. 72-3, 1972-1 C.B. 698, is modified to the extent that this Revenue Procedure provides special procedures for issuing rulings with respect to requests for waiver of the minimum funding standard.

Rev. Proc. 73-8, 1973-1 C.B. 754 is modified to the extent that this Revenue Procedure provides special procedures for furnishing technical advice to District Directors when both a request for a waiver of the minimum funding standard and a request for a determination letter have been submitted for a defined contribution plan.

Rev. Proc. 75-47, 1975-2 C.B. 581 is modified to the extent that this Revenue Procedure provides special procedures to follow in issuing a determination letter for a defined contribution plan if a waiver of the minimum funding standard has been requested.