Section 4. Clarification and

Modification of Rev. Proc. 95–51

.01 Section 4.05(5) of Rev. Proc. 95–51 (Approval for Change in Valuation Software) is modified to read as follows:

(5) The net charge to the funding standard account for the year (or for the prior year) determined using the new software does not differ from the net charge to the funding standard determined using the old soft

.07 Approval for Mergers Other Than

De Minimis Mergers (1) Approval is granted for a change in method that results from a merger of one plan with another plan in a given plan year where all the conditions set forth in paragraphs (2) through (6) are satisfied, and the procedures set forth in paragraphs (7) through (13) are followed. (2) The merger is not a de minimis merger within the meaning of § 1.414(l)–(h). (3) The funding method (without regard to the asset valuation method) used for each of the plans is a method described in section 3. (4) Both plans have the same plan year and a valuation date that is either the first or last day of the plan year. (5) The date of the merger is either the first day of the plan year or the last day of the plan year of the two plans. (6) In a case in which the date of the merger is the first day of the plan year, neither plan has a funding deficiency for the prior plan year. In a case in which the date of the merger is the last day of the plan year, neither plan has a funding deficiency for the plan year of the merger (after taking into account contributions made after the date of the merger as provided in paragraph (13) below). (7) If the date of the merger is the first day of the plan year, the minimum funding standard of § 412 and the deductible limit of § 404 are determined for the merged plan for the entire plan year in which the merger occurs in the manner provided in paragraphs (8), (9), (10), (11), and (12) below. Consequently, for the plan year in which the merger occurs, only one Schedule B of Form 5500 is filed for the merged plan in such a case. (8) If the same asset valuation method (in all respects) is used for

each of the two plans, the asset valuation method of the merged plan is that method. If the same asset valuation method (in all respects) is not used for each of the two plans (for example, the smoothing period is three years for one of the plans, and five years for the other plan), the asset valuation method used for the merged plan must be an asset valuation method described in section 3. (9) If the funding method (without regard to the asset valuation method) used for each of the two plans is the same, that funding method is continued for the plan after the merger. If the funding method (without regard to the asset valuation method) used for each of the two plans is not the same, then the funding method used for the ongoing plan is continued after the merger. For this purpose, the ongoing plan is the plan as designated by the plan administrator (within the meaning of § 414(g)), whose name and plan number will continue to be reported on Schedule B of Form 5500 for years after the merger. The funding method used for the plan which is not the ongoing plan is disregarded. (10) An experience gain or loss is determined separately for each of the two plans, for the period prior to the date of the merger, without regard to the merger and any associated change in funding method. The preceding sentence applies only to the extent that an experience gain or loss would have been determined under the methods used for the plans prior to the merger. (11) All amortization bases that were maintained for the two plans continue to be maintained for the merged plan to the extent they would be maintained under the funding method used for the merged plan. The credit balances, if any, of each of the two plans from the prior year are carried forward to the current plan year, and combined. (12) If an unfunded liability is determined under the funding method used for the ongoing plan, it must be determined after any change in actuarial assumptions and methods (including a change in asset valuation

December 6, 1999 604 1999–49 I.R.B.

ware (all other factors being held constant) by more than two percent (2%). .02 Section 6.01(2) of Rev. Proc. 95–51 is modified to read as follows:

(2) This revenue procedure does not apply unless the plan administrator (within the meaning of § 414(g)) or an authorized representative of the plan sponsor indicates as part of the series Form 5500 for the plan year for which the change is effective that the plan administrator or plan sponsor agrees to the change in funding method. In the case of a special approval for a change in funding method described in § 4, other than the approval described in § 4.03 (Approval for Change in Funding Method for Fully Funded Terminated Plans), the requirement that the plan administrator or authorized representative of the plan sponsor agree to the change will be satisfied if the plan administrator or an authorized representative of the plan sponsor is made aware of the change before the Schedule B is filed.

.03 Section 6.02(6) of Rev. Proc. 95–51 (Non-Applicability if Negative Normal Cost or Negative Unfunded Liability Results From the Change) is modified to read as follows:

Approval to change to a method described in section 3 does not apply if, after the change in method, a negative normal cost exists. Also, approval to change to a method described in section 3 does not apply if, after the change in method, a negative unfunded liability exists, and the method (a) is a spread gain method, and (b) uses an unfunded liability in determining the normal cost. For purposes of the preceding sentence, a spread gain method is any method that does not directly calculate an accrued liability. See Rev. Rul. 81-13 for whether a funding method directly calculates an accrued liability. .04 Section 6.02(7) of Rev. Proc. 95–51 (Non-Applicability if Change in Method is Being Made Pursuant to a Spin-off or Merger) is modified to read as follows:

Approval to change to a method described in section 3 does not apply if

the funding method for a plan year is being changed in connection with a plan spin-off or merger, unless the change is made as provided in § 4.06 or § 4.07.