SECTION 4. SCOPE

.01 Applicability. Except as provided in section 4.02 of this revenue procedure, the issuer of a contract can use this revenue procedure to remedy the failure of the contract to comply with the requirements of § 7702A.

.02 Inapplicability. The Service may exclude a contract from the correction mechanism provided under this revenue procedure if the contract’s status as a MEC resulted from a failure to comply with the requirements of § 7702A that—

September 4, 2001 214 2001–36 I.R.B.

(1) are attributable to one or more defective interpretations or positions that the Service determines to be a significant feature of a program to sell investment oriented contracts, or

(2) arises where the controlling statutory provision, as supplemented by any legislative history or guidance published by the Service, is clear on its face and the Service determines that failure to follow the provision results in a significant increase in the investment orientation of a contract.

.03 Example. Pursuant to section 4.02, the Service generally will not apply the correction mechanism under this revenue procedure to a MEC if the contract provides for paid-up future benefits after the payment of less than 7 level annual premiums.