Section 3. Scope and Definition

.01 This revenue procedure applies to any defined benefit plan that is subject to § 412 of the Code or § 302 of ERISA.

.02 Any change in a plan’s current method of computing the minimum funding requirement under § 412 of the Code or § 302 of ERISA is a change in funding method (see § 1.412(c)(1)–1(b) of the Income Tax Regulations). The following are examples of a change in funding method:

Example 1 – The minimum funding requirement is computed using the entry age normal method. Changing the method to the unit credit method is a change in funding method.

Example 2 – The minimum funding requirement is computed using the aggregate method under which the normal cost is level as a percentage of compensation. Changing the method to the aggregate method under which the normal cost is level as a dollar amount is a change in funding method.

Example 3 – The method of valuing liabilities is unchanged, but the method of valuing assets is changed from one method to another method. This is a change in funding method.

Example 4 – The valuation date for the plan is the date that is the first day of the plan year. Changing the valuation date to the date that is the last day of the plan year is a change in funding method.

Example 5 – The valuation date for the plan is the date that is the first day of the plan year. The plan year is changed, and the valuation date is changed to the date that is the first day of the new plan year. This is a change in funding method.

Example 6 – The plan’s enrolled actuary uses Vendor A’s software to determine the plan’s minimum funding requirement. If the enrolled actuary changes to Vendor B’s software and the results of each specific computation are not the same after the change in valuation software, this is a change in funding method.

Example 7 – The method for determining the cost of ancillary benefits is changed from one method to another method. This is a change in funding method.

.03 This revenue procedure applies to any change in funding method for any plan year after the first plan year in which a plan is subject to § 412 of the Code or § 302 of ERISA. A funding method adopted for a newly established plan is not a change in funding method. A plan established as a result of a spin-off within the meaning of § 1.414(l)–1(b)(4), other than a plan established as a result of a de minimis spin-off, is not a newly established plan for this purpose.

.04 Approval will be given to a change in funding method only if the proposed method is acceptable and the transition to the proposed method is acceptable. In addition, a change in funding method that has a significant effect on a plan’s minimum funding requirement or full funding limitation in the year of change may be reviewed to assess the appropriateness of the change in light of that effect.