SECTION 5. WHAT IS THE

GENERAL SCOPE OF A DETERMINATION LETTER?

Scope .01 This section delineates, generally, the scope of an employee plan determination letter. It identifies certain qualification requirements, relating to nondiscrimination, that are considered by the Service in its review of a plan only at the election of the applicant. This section also identifies certain qualification requirements that are not considered by the Service in its review of a plan and with respect to which determination letters do not provide reliance. This section applies to all determination letters other than letters issued in response to an application filed on Form 6406, Short Form Application for Determination for Minor Amendment of Employee Benefit Plan; letters relating to the qualified status of group trusts; and letters relating solely to the requirements of § 420, regarding the transfer of assets in a defined benefit plan to a health benefit account described in § 401(h). For additional information pertaining to the scope of reliance on a determination letter, see section 22 of this revenue procedure.

All form and certain non-form requirements generally reviewed

Nondiscrimination in amount requirement

Average benefit test requirement

Nondiscriminatory current availability requirement

Effective availability requirement

Other limits on scope of determination letter

.02 In general, employee plans are reviewed by the Service for compliance with the form requirements (that is, those plan provisions that are required as a condition of qualification under § 401(a)). In addition, certain non-form qualification requirements, including, for example, the minimum participation requirements of § 401(a)(26), are considered by the Service in its review of a plan. As described below, certain other nondiscrimination requirements are not considered unless the applicant specifically requests that they be considered.

.03 Unless the applicant elects otherwise, a plan that is not intended to satisfy one of the design-based safe harbors described in §§ 1.401(a)(4)–2(b)(2), 1.401(a)(4)–3(b)(3), 1.401(a)(4)–3(b)(4)(i)(C)(1), 1.401(a)(4)–3(b)(4)(i)(C)(2), 1.401(a)(4)–3(b)(5), 1.401(a)(4)– 8(b)(3), or 1.401(a)(4)–8(c)(3)(iii)(B) of the Income Tax Regulations (herein referred to as the ‘‘design-based safe harbors’’) will not be reviewed for (and a determination letter may not be relied on with respect to) the nondiscrimination in amount of contributions or benefits requirement of § 1.401(a)(4)–1(b)(2).

.04 Unless the applicant elects otherwise, a plan that does not satisfy the ratio percentage test of § 410(b)(1) and the regulations thereunder will not be reviewed for (and determination letters may not be relied on with respect to) the average benefit test of § 410(b)(2) and the regulations thereunder.

.05 Any determination letter that expresses an opinion that the plan satisfies the minimum coverage requirements of § 410(b) also will express an opinion that the plan satisfies the nondiscriminatory current availability requirements of § 1.401(a)(4)–4(b) with respect to those benefits, rights, and features that are currently available (within the meaning of § 1.401(a)(4)–4(b)(2)) to all employees in the plan’s coverage group. The plan’s coverage group consists of those employees who are treated as currently benefiting under the plan (within the meaning of § 1.410(b)–3(a)) for purposes of demonstrating that the plan satisfies the minimum coverage requirements of § 410(b). Applications will not be reviewed for (and determination letters may not be relied on with respect to) whether the plan satisfies the requirements of § 1.401(a)(4)–4(b) with respect to any benefit, right, or feature other than the ones described above, except those that are specified by the applicant and for which the applicant has provided information relevant to the determination.

.06 In no event will any plan be reviewed to determine (and determination letters may not be relied on with respect to) whether any benefit, right, or feature under the plan satisfies the effective availability requirement of § 1.401(a)(4)–4(c).

.07 Determination letters may generally be relied on with respect to whether the timing of a plan amendment (or series of amendments) satisfies the nondiscrimination requirements of § 1.401(a)(4)–5(a) of the regulations, unless the plan amendment is part of a pattern of amendments that significantly discriminates in favor of highly compensated employees. A favorable determination letter does not provide reliance for purposes of § 404 and § 412 with respect to whether an interest rate (or any other actuarial assumption) is reasonable. Furthermore, a favorable determination letter will not constitute a determination with respect to the use of the substantiation guidelines contained in Rev. Proc. 93–42, 1993–2 C.B. 540; e.g., a determination letter will not consider whether data submitted with an application is

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substantiation quality. Lastly, a favorable determination letter will not constitute a determination with respect to whether any requirements of § 414(r), relating to whether an employer is operating qualified separate lines of business, are satisfied. However, if an employer is relying on § 414(r) to satisfy the minimum coverage or minimum participation requirements, a determination letter will take into account whether the plan satisfies the nondiscriminatory classification test of § 410(b)(5)(B), and, if the requirements of § 410(b) or § 401(a)(26) are to be applied on an employer-wide basis under the special rules for employer-wide plans, a determination letter will take into account whether the requirements of the applicable special rule set forth in § 1.414(r)–1(c)(2)(ii) or § 1.414(r)–1(c)(3)(ii) are met.

Good faith .08 Generally, the nondiscrimination regulations under § 401(a)(4) and certain related sections of the Code apply only to plan years beginning on or after January 1, 1994. In the case of plans maintained by tax-exempt organizations (other than nonelecting church plans described in § 410(c)(1)(B)), the regulations apply only to plan years beginning on or after January 1, 1997. In the case of nonelecting church plans, the regulations apply only to plan years beginning on or after January 1, 1999. A special extended effective date also applies to governmental plans. For plan years beginning before the regulations under § 401(a)(4) are effective for the plan, a plan (other than a governmental plan) must be operated in accordance with a reasonable, good faith interpretation of § 401(a)(4) and certain related sections of the Code. A determination letter may not be relied on as to whether a plan has been operated in accordance with a reasonable, good faith interpretation or whether plan provisions constitute such an interpretation unless the plan has been amended to comply with the regulations retroactively to the 1989 plan year (or, if a later effective date under the Tax Reform Act of 1986 (TRA ’86) is applicable, such later year). Furthermore, the issuance of a favorable determination letter will not preclude an adverse effect on the qualification of a plan resulting from a failure to operate the plan in accordance with a reasonable, good faith interpretation of § 401(a)(4) or related sections of the Code.