Pension contribution may revert without harming plan qualification

Plain-English summary

A defined benefit pension plan requested disallowance of an employer-contribution deduction so the contribution could revert to the employer under Revenue Procedure 90-49. The IRS determined that the redacted contribution amount could be treated as disallowed solely for purposes of Revenue Ruling 91-4. Returning no more than that amount, reduced by attributable losses, would not harm the plan's qualified status if completed within one year of the ruling. Section 4972 tax would apply if the amount was not returned by the employer's tax filing deadline, including granted extensions.

Ruling snapshot

• Question: Could excess employer contributions be treated as disallowed and returned without disqualifying the pension plan?
• Outcome: Approved, subject to amount and timing limits.
• Key authorities: Rev. Proc. 90-49; Rev. Rul. 91-4; IRC § 4972.

Full text (IRS public release)

Significant Index No. 0404.00-00

Number: 201639018
Release Date: 9/23/2016

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUN 30 2016

Re: [redacted] (Plan No. [redacted])
    (“Plan”)
EIN: [redacted]

Dear [redacted]:

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, 2015.

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
plan may be obtained; thereby fulfilling a condition under which such contributions
could revert to the employer.

Based on the information submitted, we have determined that contributions totaling
$[redacted] which were made for the plan year commencing January 1, 2015, may be
considered as disallowed solely for the purpose of applying Rev. Rul. 91-4. Therefore,
the return of contributions not exceeding $[redacted] less losses attributable thereto
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 opinions 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
Code provides that it may not be used or cited by others as precedent.

When filing Forms 5500 for the plan years commencing January 1, 2015, a copy of
this letter must be attached to the Schedule SB. A copy of this letter should be
furnished to the enrolled actuary for the plan. We have sent a copy to your authorized
representative pursuant to a power of attorney on file in this office.

If you require further assistance concerning this matter, please contact [redacted].

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc: