PLR 9940042: Limited pension contribution reversion will preserve plan qualification

Plain-English summary

An employer sought permission to treat part of its defined benefit pension plan contributions as disallowed so the excess could be returned. The IRS ruled that contributions up to $37,758 could be treated as disallowed to the extent they were not deductible, solely for applying Revenue Ruling 91-4. Returning no more than that amount would not harm the plan's qualified status if it occurred within one year of the letter. The IRS warned that section 4972 tax could still apply if the return came after the employer's tax filing deadline. It did not approve the calculations submitted with the request.

Ruling snapshot

• Question: Can the employer recover specified pension contributions without jeopardizing the plan's qualified status?
• Outcome: Approved, subject to the stated amount and one year deadline.
• Key authorities: Rev. Proc. 90-49; Rev. Rul. 91-4; IRC § 4972.

Full text (IRS public release)

199940042

Internal Revenue Service Department of the Treasury

Significant Index No. 0404.00-00
Washington, DC 20224

Person to Contact:
Telephone Number:

Refer Reply to:
QP:E:EP:A:2
Date:

JUL 14 1999

In re:

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, 1998.

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 $37,758, which were made for the plan year commencing January 1, 1998, 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 $37,758 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.

(2) 199940042

When filing Form 5500 for the plan year commencing January 1, 1998, a copy of this letter must be attached to the Schedule B (Actuarial Information). We have sent a copy to the Key District Office in

Sincerely yours,

Martin L. Pippins
Chief, Actuarial Branch 2 (Acting)