SECTION 4. SPECIAL APPROVALS

.01 Approval to Anticipate Sched- uled Benefit Increases. Approval is granted to change the funding method currently used for a collectively bargained plan described in § 413(a) to a method which is the same as the old method except that the new method will anticipate benefit increases scheduled to take effect during the term of the collective-bargaining agreement currently applicable to the plan.

.02 Approvals to Remedy Unreason- able Allocation of Costs.

(1) If a plan uses an individual aggregate funding method and an individual normal cost becomes negative for a participant, approval is granted to re-allocate excess assets in proportion to the present value of accrued benefits, or in proportion to the accrued liability determined under the immediate gain funding method described in section 3.01, section 3.08 (only if the normal cost for a participant is determined as a level percent of compensation under plan’s method), or section 3.09 (only if the normal cost for a participant is determined as a level dollar amount under the plan’s method). For this purpose, excess assets are defined as the excess of the assets currently allocated for the participant over the present value of the participant’s future benefits.

(2) If a plan uses a spread gain funding method which establishes an initial unfunded liability using an immediate gain funding method (e.g., frozen initial liability or attained age normal), and the normal cost and/or unfunded liability become(s) negative, then, in the case where the normal cost under the plan’s method is determined as a level percentage of compensation, approval is granted to reestablish the unfunded liability under the funding method described in section 3.01 if the unfunded liability was originally established under the unit credit method, or under the funding method described in section 3.08 if the unfunded liability was originally established under the entry age normal method. See Rev. Rul. 81–213, 1981–2 C.B. 101, regarding whether a funding method is a spread gain funding method or an immediate gain funding method. In the case where the normal cost under the plan’s method is determined as a level dollar amount, approval is granted to reestablish the

unfunded liability under the funding method described in section 3.01 if the unfunded liability was originally established under the unit credit method, or under the funding method described in section 3.09 if the unfunded liability was originally established under the entry age normal method. If the reestablished unfunded liability is less than zero, approval is granted to change to the aggregate funding method described in section 3.02 (if the normal cost under the plan’s method is determined as a level percent of compensation), or section 3.03 (if the normal cost under the plan’s method is determined as a level dollar amount).

(3) If a plan that uses a spread gain funding method which establishes an initial unfunded liability using an immediate gain funding method (e.g., frozen initial liability or attained age normal), becomes fully funded within the meaning of § 412(c)(6) (without taking into account § 412(c)(7)(A)(i)(I)), approval is granted to change to the aggregate funding method described in section 3.02 (if the normal cost under the plan’s method is determined as a level percent of compensation), or section 3.03 (if the normal cost under the plan’s method is determined as a level dollar amount).

(4) If a plan uses an individual aggregate funding method and the actuarial value of plan assets is less than the present value of benefits for inactive participants and beneficiaries, or if the actuarial value of the assets, plus the sum of the outstanding balances of the amortization bases established on account of the current liability full funding limitation, if any, funding waivers under § 412(b)(2)(C), switchback to the regular funding standard under § 412(b)(2)(D), use of the shortfall method under § 1.412(c)(1)–2 of the regulations, and the transition under § 1.412(c)(3)–2(d), minus the credit balance (or plus the funding deficiency), if any, in the funding standard account, minus any liabilities retained by the plan for any inactive participant or beneficiary is less than zero, approval is granted to change to the aggregate funding method described in section 3.02 (if the normal cost under the plan’s method is determined as a level percent of compensation), or section 3.03 (if the normal cost under the plan’s method is determined as a level dollar amount).

(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.

(3) This revenue procedure does not apply if, for the plan year of the change, a minimum funding waiver under § 412(d) has been requested for the plan or is being amortized, or if an extension of an amortization period under § 412(e) has been requested or is currently applicable for computing minimum funding requirements, for the plan.

(4) This revenue procedure does not apply if the plan is under an Employee Plans examination for any plan year, or if the plan sponsor, or a representative, has received verbal or written notification from the EP/EO Division of an impending Employee Plans examination, or of an impending referral from another part of the Service for an Employee Plans examination, or if the plan has been under such an examination and is in Appeals or in litigation for issues raised in an Employee Plans examination.

(5) Except as provided in section 4.03, this revenue procedure does not apply to a change which is made for a plan year in which the plan is terminated.

(6) Non-Applicability if Shortfall Method is Discontinued. If the current method makes use of the shortfall method, approval to change to another funding method under this revenue procedure will apply only if the new funding method continues to make use of the shortfall method. For example, approval is not granted to change from the entry age normal method (which uses the shortfall method) to the unit credit method under section 3.01 unless the unit credit method makes use of the shortfall method.

.02 Additional Restrictions For Ap- provals in Section 3.

(1) Non-Applicability for Reversion Cases. This revenue procedure does not apply to changes in funding method required by Treasury Release R–2697 dated May 24, 1984, concerning the reversion of assets from a terminated plan. Furthermore, approval under section 3 does not apply if, in the 15 years preceding the date of change, such plan was involved in a transaction described in such Treasury Release subsequent to May 24, 1984.

(4) The change in costs due to the change in method is treated in the same manner as an experience gain or loss, unless the actuarial assumptions are being changed, in which case the change in method is treated as part of the change in assumptions.