Rev. Proc. 74-38

Section 1. Purpose.

.01 This Revenue Procedure provides supplemental and revised procedures of the Internal Revenue Service for issuing determination letters relating to the qualification of individually designed pension, annuity, profit-sharing, bond purchase, and stock bonus plans under sections 401 and 405 of the Internal Revenue Code of 1954 and the exempt status of related trusts and custodial accounts under section 501(a) of the Code.

.02 This revision is made because the Employee Retirement Income Security Act of 1974 (Public Law 93-406), approved September 2, 1974 (hereinafter referred to as "the Act"), adds new requirements relating to employees' plans and trusts under sections 401, 405, and 501(a) of the Code.

Sec. 2. Background and General Information.

.01 The general procedures of the Service relating to the issuance of rulings, determination letters, and opinion letters are set forth in Rev. Proc. 72-3, 1972-1 C.B. 698. Rev. Proc. 72-6, 1972-1 C.B. 710, provides the detailed procedures relating to the issuance of determination letters as to qualification of employees' plans under sections 401 and 405 of the Code and to the exempt status of related trusts or custodial accounts, if any, under section 501(a).

.02 Rev. Proc. 72-7, 1972-1 C.B. 715, contains procedures relating to master and prototype plans that include self-employed individuals. For revision of these procedures see Rev. Proc. 74-39, page 494, this Bulletin.

.03 Rev. Proc. 72-8, 1972-1 C.B. 716, contains procedures relating to master and prototype plans that do not include self-employed individuals. For revision of these procedures see Rev. Proc. 74-40, page 494, this Bulletin.

Sec. 3. Definitions.

.01 "Prior law" means the law as to qualification under sections 401 and 405 of the Internal Revenue Code of 1954, before changes made by the Act are effective.

.02 "Existing law" means the law as to qualification under sections 401 and 405 of the Code after changes made by the Act are effective.

.03 "Pre-existing plan" means a plan adopted and put into effect by an employer on or before January 1, 1974.

.04 "New plan subject to prior law" means a plan adopted and put into effect by an employer after January 1, 1974, whose first plan year begins on or before September 2, 1974, whether or not it is adopted and put into effect by an employer before September 2, 1974.

.05 "New plan subject to new law" means a plan adopted and put into effect by an employer after January 1, 1974, whose first plan year begins after September 2, 1974.

Sec. 4. Procedures.

.01 District Directors are authorized to issue determination letters under prior law with respect to preexisting plans and new plans which are subject to prior law. Such determination letters shall have limited application as follows:

(1) In the case of a pre-existing plan, the determination letter will not be effective for plan years beginning after December 31, 1975.

(2) In the case of a new plan subject to prior law, the determination letter will not be effective for plan years beginning after September 2, 1974.

.02 Requests for determination letters on the qualification of governmental plans described in section 414(d) of the Code, as added by the Act, will be processed in accordance with Rev. Proc. 72-6, without regard to the revisions contained in this Revenue Procedure. Requests for determination letters on the qualification of church plans described in section 414(e), as added by the Act, will also be processed in accordance with Rev. Proc. 72-6 if the church has not elected pursuant to section 410(d), as added by the Act, to have the provisions of the new law apply to the plan.

.03 Except as provided is section 4.05 below, District Directors are authorized to issue determination letters under section 4.01 above with respect to a plan that contains the limitation on earned income or compensation (first $100,000) described in section 401(a)(17) of the Code, as added by the Act, to be taken into account in a nondiscriminatory manner under a plan which covers an owner-employee (within the meaning of section 401(c)(3) of the Code), or a shareholder-employee (within the meaning of section 1379(d) of the Code).

.04 Except as provided in section 4.05 below, in the case of a plan which satisfies the requirements of section 401(a)(17), District Directors may issue determination letters under section 4.01 above with respect to the qualification of a plan which provides for employer contributions on behalf of owner-employees up to either the new maximum deductible limit (lesser of $7,500 or 15% of earned income) or the minimum deductible limit (lesser of $750 or 100% of earned income) in a nondiscriminatory manner.

.05 Determination letters will not be issued on any plans that are amended solely to provide the new limits described in section 4.03 and 4.04 above. The qualified status of such plans will not be adversely affected merely because of such amendments.

.06 Determination letters will not be issued under section 4.01 above with respect to transactions occurring after September 2, 1974, involving the merger or consolidation of plans, or the transfer of assets or liabilities from one plan to another.

.07 Except as provided in this section, District Directors will not issue determination letters with respect to any plans until further notice. A refusal to issue a determination letter pursuant to this provision is not appealable to the National Office under Section 7.02 of Rev. Proc. 72-6.

Sec. 5. Effect on Other Documents.

.01 Sec. 4 of Rev. Proc. 72-6, which contains instructions to taxpayers and prescribes application forms, is revised to require applications of plans established after January 1, 1974, to show the date the first plan year began. This information should be shown on Form 4573 (Line 14), Form 4574 (Line 9) and Form 4578 (directly above the form number). For pre-existing plans, the beginning of the most recent plan year is to be shown on the respective forms.

.02 The general procedures of Rev. Proc. 72-3 and Rev. Proc. 72-6 will continue to apply except to the extent they are inconsistent with this Revenue Procedure. Rev. Procs. 72-3 and 72-6 modified.

Sec. 6. Effective Date.

This Revenue Procedure is effective September 2, 1974.

¹ Also released as Technical Information Release 1308, dated September 10, 1974.