PLR 200336036: Return of excess pension contributions preserves plan qualification

Plain-English summary

An employer asked for a determination that certain defined benefit pension plan contributions could be treated as nondeductible so they could be returned to the employer. The IRS determined that the contributions could be considered disallowed solely for applying Revenue Ruling 91-4. Returning no more than $200,000 within one year of the letter would not harm the plan's qualified status. If the return occurred after the employer's tax filing deadline, including granted extensions, the section 4972 tax would apply. The IRS did not approve or verify the calculations submitted with the request.

Ruling snapshot

• Question: Can the employer receive returned pension contributions without disqualifying the plan?
• Outcome: Approved for a return of up to $200,000 within one year; section 4972 tax applies if returned after the tax filing deadline.
• Key authorities: Rev. Proc. 90-49; Rev. Rul. 91-4; IRC § 4972.

Full text (IRS public release)

Significant Index No. 0404.00-00
200336036

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
JUN 10 2003
[illegible]

Re:
EIN:
Dear
This letter is in response to your request, dated , 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

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, we have determined that contributions amounting to which were made for the plan year commencing

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 $200,000 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.) 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.

When filing Form 5500 for the plan year commencing 01, a copy of this letter must be attached to the Schedule B (Actuarial Information). This letter is sent to you pursuant to a power of attorney (Form 2848) on file. We have sent a copy of this letter to . We have also sent a copy to the

2
200336036

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

Sincerely yours,

Martin L. Pippins, Manager
Employee Plans Actuarial Group 2