PLR 200432018: Pension contributions may revert without disqualifying the plan

Plain-English summary

An employer asked for a determination under Revenue Procedure 90-49 concerning contributions to a defined benefit pension plan. The IRS determined that the specified contributions could be treated as disallowed to the extent they were not deductible, solely for applying Revenue Ruling 91-4. A return of contributions up to the redacted amount would not harm the plan's qualified status if completed within one year of the letter. The IRS warned that section 4972 tax would apply if the money was not returned by the employer's tax filing deadline, including granted extensions.

Ruling snapshot

• Question: Could specified plan contributions be returned to the employer without disqualifying the pension plan?
• Outcome: Approved, subject to the one-year return deadline and the letter's other limits.
• Key authorities: Rev. Proc. 90-49; Rev. Rul. 91-4; IRC § 4972.

Full text (IRS public release)

Significant Index No. 0404.00-00

200432018

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 12 2004

This letter is in response to your request with respect to the above-referenced defined benefit pension plan pursuant to Revenue Procedure 90-49 for the plan year commencing January 1, 2003.

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.

Based upon the information submitted, we have determined that contributions amounting to $ , which were made for the plan year commencing

January 1, , may be considered as disallowed, to the extent that they are not deductible, solely for the purpose of applying Rev. Rul. 91-4, 1991-1 C.B. 57. Therefore, the return of contributions not exceeding $ 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.

This ruling is directed only to the taxpayer 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.

200432018
2

When filing Form 5500 for the plan year commencing January 1, , a copy of this letter must be attached to the Schedule B (Actuarial Information). We have sent a copy of this letter to the Manager, EP Classification,

and to your authorized representative in accordance with a power of attorney on file in this office. If you require further assistance in this matter, please contact

Sincerely yours,

[signature]

Donna M. Prestia, Acting Manager
Employee Plans Actuarial Group 2