SECTION 6. PENDING REQUESTS

FOR CLOSING AGREEMENTS

The Service will continue to process closing agreements under §§ 72, 817(h), 7702 and 7702A under existing procedures until those procedures are modified

(2) Rev. Proc. 92–25, 1992–1 C.B. 741, provides a procedure by which an issuer of a variable contract seeking relief under § 1.817–5(a)(2) of the regulations may request to enter into a closing agreement with the Service. Under the procedure, an issuer of the failed contracts may remedy the failure by paying an amount based on the tax and interest that the policyholder would be required to pay. A model closing agreement was provided.

(3) Rev. Proc. 2001–42, 2001–2 C.B. 212, modified and amplified by Rev. Proc. 2007–19, page 515, this Bulletin, provides the procedure by which an issuer may remedy an inadvertent non-egregious failure to comply with the MEC rules under § 7702A. Under this procedure, an issuer may remedy such a failure by paying an amount based on the overages on the unintended MECs and the tax and interest that the policyholder would be required to pay on those overages, based on proxy earnings and tax rates. A model closing agreement was provided. Rev. Proc. 2007–19 simplified Rev. Proc. 2001–42 by making it easier for issuers to locate indices used to compute proxy earnings rates, and by permitting electronic filing of templates that are required under the procedure.

(4) Rev. Rul. 2005–6, 2005–1 C.B. 471, provides that for purposes of determining whether a contract qualifies as a life insurance contract under § 7702 or as a MEC under § 7702A, charges for QABs are taken into account under the expense charge rule of § 7702(c)(3)(B)(ii). The revenue ruling provides three alternatives for issuers of life insurance contracts that do not account for QABs under the expense charge rule. Alternative C, which applies after February 7, 2006, provides that an issuer whose compliance system does not properly account for charges for QABs may request a closing agreement under certain terms. Under this alternative, the amount required to be paid is based on the number of contracts for which relief is requested.