PLR 200328038: Return of certain pension contributions approved

Plain-English summary

An employer asked to recover contributions to its defined benefit pension plan for the 2002 plan year. The IRS determined that a redacted amount could be treated as disallowed solely for Rev. Rul. 91-4, allowing its return without harming the plan's qualified status if the return occurred within one year. The letter says the § 4972 excise tax would apply if the amount was not returned by the employer's tax filing date, including approved extensions. It also says some contributions would remain subject to that tax after the return. The IRS did not verify the calculations submitted with the request.

Ruling snapshot

• Question: Could the employer recover certain plan contributions without losing the plan's qualified status?
• Outcome: Approved for the redacted amount, subject to a one-year return deadline.
• Key authorities: Rev. Proc. 90-49; Rev. Rul. 91-4; IRC § 4972.

Full text (IRS public release)

Significant Index No. 0404.00-00
200328038

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

APR 16 2003
T:EP:RA:T:A2

Re:

Dear

This letter is in response to the request, dated [redacted], with respect to the above-referenced defined benefit pension plan pursuant to Rev. Proc. 90-49, 1990-2 C.B. 620, for the plan year commencing [redacted].

Rev. Proc. 90-49 sets forth the procedure whereby, under certain circumstances, a disallowance of the deduction of employer contributions to a qualified defined benefit pension plan may be obtained, thereby fulfilling a condition under which such contributions could revert to the employer. This ruling is directed only to the organization that requested it. Section 6110(k)(3) of the Internal Revenue Code provides that it may not be used or cited by others as precedent.

Based upon the information submitted, and in accordance with your request, we have determined that contributions amounting to [redacted], which were made for the plan year commencing January 1, 2002, may be considered as disallowed solely for the purpose of applying Rev. Rul. 91-4, 1991-1 C.B. 57. Therefore, the return of contributions not exceeding [redacted] would not adversely affect the qualified status of the plan, provided this reversion occurs no later than one year from the date of this letter. (However, if it is not returned by your tax filing date, including extensions filed for and granted, the tax under section 4972 would apply to this amount). In granting this approval, we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request.

According to the information received, [redacted] was contributed to the plan for the 2002 plan year. The deductible limit for the plan year was [redacted]. Therefore,
[redacted] of the plan contributions exceeded the deductible limit. After the [redacted] is returned pursuant to this ruling, [redacted] of the contributions made for the 2002 plan year will be subject to the 10 percent excise tax under section 4972. Form 5330 should be timely filed with the payment of this excise tax.

200328038

When filing Form 5500 for the plan year commencing January 1, 2002, a copy of this letter must be attached to the Schedule B (Actuarial Information). A copy of this letter should be sent to the enrolled actuary servicing the plan. We have sent a copy to your authorized representative pursuant to a power of attorney (Form 2848), and to the
[redacted].

If you have any questions regarding this matter, please contact [redacted] at [redacted]. Also, please refer written replies to [redacted].

Sincerely yours,

Martin L. Pippins, Manager
Employee Plans Actuarial Group 2