SECTION 1. PURPOSE AND SCOPE

.01 This revenue procedure provides approval to change the funding method used to determine the minimum funding standard for defined benefit plans

as further described below. The approval under this revenue procedure is granted in accordance with § 412(c)(5) of the Internal Revenue Code and § 302(c)(5) of the Employee Retirement Income Security Act of 1974

(ERISA). Section 3 provides approval to change the funding method of the plan to one of fourteen methods, including a change in the asset valuation method to one of three asset valuation methods, a change in the valuation date to the first day of the plan year, and a change in the method for valuing ancillary benefits to the method used to value retirement benefits. Section 4 provides approvals for certain changes that become necessary or expedient under special circumtances.

.02 Any changes in funding method under this revenue procedure must satisfy the rules of Section 5 concerning the continued maintenance of certain amortization bases, the creation of an amortization base resulting from the change in method (method change base), and the amortization period for the method change base. Taxpayers, plan administrators, and enrolled actuaries are cautioned to consider the overall restrictions for use of this procedure (see section 6.01), the additional restrictions for approval of any of the changes listed in section 3 (see section 6.02), and specific restrictions described under each of the approvals. Approval for changes not provided by this revenue procedure may be requested from the Internal Revenue Service.

.03 The funding method changes approved in this revenue procedure also apply for purposes of § 404. However, calculations under the funding method for purposes of § 404 may require certain modifications to elements in the calculations. For example, for purposes of § 412, the value of assets used in the determination of the normal cost under an aggregate funding method is adjusted for any credit balance or funding deficiency in the funding standard account. The value of assets is not adjusted in that manner for purposes of § 404 but is, instead, adjusted for any undeducted contributions (see § 1.404(a)–14(d)(2) of the Income Tax Regulations).

.04 The application of a funding method must conform to all of the requirements of the regulations under § 412. Thus, for example, in a method which allocates liabilities among different elements of past and future service, the allocation of liabilities must be reasonable as required under § 1.412(c)(3)–1(c)(5).