PLR 200444043: Return of excess pension contributions will preserve plan status

Plain-English summary

An employer sought a determination that certain contributions to a defined benefit plan could be treated as disallowed deductions for the limited purpose of returning them to the employer. The IRS said the contributions could be considered disallowed to the extent they were not deductible under the cited revenue ruling. Returning no more than the stated amount would not harm the plan's qualified status if the return occurred within one year of the letter. The IRS warned that section 4972 tax would apply if the contributions were not returned by the employer's tax filing deadline, including granted extensions. It did not approve the submitted calculations.

Ruling snapshot

• Question: Could the employer recover contributions without harming the plan's qualified status?
• Outcome: Approved up to the stated amount, subject to the 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 200444043

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

APR 21 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

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.

200444043

When filing Form 5500 for the plan year commencing January 1, 2003, a copy of this letter must be attached to the Schedule B (Actuarial Information). We have sent a copy of this letter to the:

, 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,

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