internal revenue bulletin no. 2001–38 bulletin september 17, … · september 17, 2001 2001–38...

INCOME TAXRev. Rul. 2001–40, page 276.Refund or credit of an overassessed tax. This rulingmodifies Rev. Rul. 78–127 (1978–1 C.B. 436) by clarifyingwhen the Service allows a refund or credit of an over-assessed tax. Rev. Rul. 78–127 modified.

EMPLOYEE PLANSNotice 2001–56, page 277.EGTRRA effective dates; compensation limit; top-heavy determination date; section 401(k) hardshipdistribution. This notice provides guidance relating to theeffective dates for sections of the Economic Growth and TaxRelief Reconciliation Act of 2001 (EGTRRA) relating to (1) theincrease in the compensation limit of section 401(a)(17) ofthe Code, (2) the modification to the top-heavy rules of sec-tion 416 of the Code, and (3) the suspension period for hard-ship distributions from a section 401(k) plan. Notice 98–52modified.

Notice 2001–57, page 279.Qualified plans; sample EGTRRA plan amendments.This notice sets forth various sample amendments that maybe adopted by qualified plan sponsors as “good faith” planamendments to reflect certain changes made by theEconomic Growth Tax Relief and Reconciliation Act of 2001(EGTRRA). Notice 2001–42 modified.

EMPLOYMENT TAXRev. Rul. 2001–40, page 276.Refund or credit of an overassessed tax. This rulingmodifies Rev. Rul. 78–127 (1978–1 C.B. 436) by clarifyingwhen the Service allows a refund or credit of an over-assessed tax. Rev. Rul. 78–127 modified.

EXEMPT ORGANIZATIONSAnnouncement 2001–89, page 291.A list is provided of organizations now classified as privatefoundations.

Internal Revenue

bbuulllleettiinnBulletin No. 2001–38September 17, 2001

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

Department of the TreasuryInternal Revenue Service

Finding Lists begin on page ii.

September 17, 2001 2001–38 I.R.B.

The Internal Revenue Bulletin is the authoritative instrumentof the Commissioner of Internal Revenue for announcing offi-cial rulings and procedures of the Internal Revenue Serviceand for publishing Treasury Decisions, Executive Orders, TaxConventions, legislation, court decisions, and other items ofgeneral interest. It is published weekly and may be obtainedfrom the Superintendent of Documents on a subscriptionbasis. Bulletin contents are consolidated semiannually intoCumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of in-ternal management are not published; however, statementsof internal practices and procedures that affect the rightsand duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulingsto taxpayers or technical advice to Service field offices,identifying details and information of a confidential natureare deleted to prevent unwarranted invasions of privacy andto comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not havethe force and effect of Treasury Department Regulations,but they may be used as precedents. Unpublished rulingswill not be relied on, used, or cited as precedents by Servicepersonnel in the disposition of other cases. In applying pub-lished rulings and procedures, the effect of subsequent leg-islation, regulations, court decisions, rulings, and proce-

dures must be considered, and Service personnel and oth-ers concerned are cautioned against reaching the same con-clusions in other cases unless the facts and circumstancesare substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisionsof the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B,Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references tothese subjects are contained in the other Parts and Sub-parts. Also included in this part are Bank Secrecy Act Admin-istrative Rulings. Bank Secrecy Act Administrative Rulingsare issued by the Department of the Treasury’s Office of theAssistant Secretary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The first Bulletin for each month includes a cumulative indexfor the matters published during the preceding months.These monthly indexes are cumulated on a semiannual basis,and are published in the first Bulletin of the succeeding semi-annual period, respectively.

The IRS Mission

Provide America’s taxpayers top quality service by help-ing them understand and meet their tax responsibilities

and by applying the tax law with integrity and fairness toall.

Introduction

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

September 17, 2001 276 2001–38 I.R.B.

Section 6407.—Date ofAllowance of Refund or Credit

26 CFR 301.6407–1: Date of allowance of refundor credit

This revenue ruling modifies RevenueRuling 78–127 by clarifying when the In-ternal Revenue Service allows a refund orcredit of an overassessed tax.

Rev. Rul. 2001–40

PURPOSE

This revenue ruling modifies the dis-cussion of section 6407 of the InternalRevenue Code (the Code) in Rev. Rul.78–127 (1978–1 C.B. 436). Specifically,this revenue ruling clarifies when the In-ternal Revenue Service (the Service) al-lows a refund or credit of an overassessedtax.

LAW AND ANALYSIS

Section 6407 of the Code states: “Thedate on which the Secretary first autho-rizes the scheduling of an overassessmentof any internal revenue tax shall be con-sidered as the date of allowance of refundor credit in respect of such tax.”

Congress adopted the rule defining thescheduling date as the allowance date inthe Revenue Act of 1926. See section1116 of the Act, the predecessor of currentsection 6407 of the Code. The rule wasdesigned to reflect Service processingpractice. The legislative history explains:

In the case of refunds, interest is al-lowed “to the date of the allowance ofthe refund.” In practice, the Commis-sioner first signs a schedule of over-

assessments, which is sent to the col-lector, in order to determine whetherthe overpayment should be credited orrefunded. The committee amendmentproposes to fix as the date on which therefund is allowed the date on which theCommissioner signs the schedule ofoverassessments. (S. Rep. No. 52, 69thCong., 1st Sess. 38 (1926).)

Section 301.6407–1 of the Regulationson Procedure and Administration reflectsthe legislative intent that the Secretarywould delegate authority to allow refundsand credits to Internal Revenue Serviceofficials. Over the years, different certi-fying officers have been authorized toschedule overassessments and allow re-funds and credits.

In addition, the Service has revised themethod of scheduling overassessmentsand allowing refunds and credits. For ex-ample, the Service does not currently useForm 1166 to schedule overassessments.It may use different paper forms or elec-tronic entries to schedule and allow re-funds and credits. Regardless of process-ing method, the taxpayer’s account willreflect the date that the certifying officerschedules the overassessment.

HOLDING

Consequently, references to the Form1166 and other processing forms are re-moved from Rev. Rul. 78–127. The twoparagraphs beginning “Section 6407 ofthe Code...” are modified to read as fol-lows:

Section 6407 of the Code provides thatthe date on which the Secretary first au-thorizes the scheduling of an over-

assessment of any internal revenue taxshall be considered the date of al-lowance of any refund or credit of thetax. Section 301.6407–1 of the regula-tions delegates scheduling authority toa certifying officer. The certifying offi-cer authorizes a credit or refund bysigning a schedule of overassessmentsidentifying the taxpayer and theamount of the overassessment.

The date the summary record of assess-ment is signed, and the date on whichthe schedule of overassessments issigned are dates of authorization for thepurpose of section 301.6521–1(c) ofthe regulations.

EFFECT ON OTHER REVENUERULING(S)

Rev. Rul. 78–127 is modified.

DRAFTING INFORMATION

The principal author of this revenueruling is Tiffany P. Smith of the Office ofthe Associate Chief Counsel (Procedureand Administration), Administrative Pro-visions and Judicial Practice Division.For further information regarding thisrevenue ruling, contact Tiffany Smith at(202) 622-4910 (not a toll-free call).

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

2001–38 I.R.B. 277 September 17, 2001

Effective Dates for CertainAmendments Made by theEconomic Growth and Tax ReliefReconciliation Act of 2001

Notice 2001–56

I. Purpose

This notice provides guidance relatingto the effective dates for §§ 611(c), 613,and 636(a) of the Economic Growth andTax Relief Reconciliation Act of 2001(EGTRRA), Pub. L. 107–16. Section611(c) of EGTRRA increases the com-pensation limit of § 401(a)(17) of the In-ternal Revenue Code (Code) and relatedsections. Section 613 of EGTRRA modi-fies the rules in § 416 of the Code regard-ing determination of top-heavy status.Section 636(a) of EGTRRA directs theSecretary to revise the regulations relatingto hardship distributions under § 401(k)(2)(B)(i)(IV) of the Code.

Notice 2001–42 (2001–30 I.R.B. 70),provides a remedial amendment periodfor EGTRRA, in which any neededretroactive remedial EGTRRA planamendments may be adopted. The avail-ability of the EGTRRA remedial amend-ment period is conditioned on the timelyadoption of required good faithEGTRRA plan amendments. See Notice2001–57, page 279, this bulletin, forsample good faith amendments. Al-though a good faith plan amendmentneed not reflect all guidance issuedunder EGTRRA, the plan’s operationmust be consistent with that guidance,beginning with the effective date of thatguidance.

II. Compensation Limit under§ 401(a)(17)

A. Background

Section 401(a)(17) of the Code limitsthe annual compensation that may betaken into account for purposes of deter-mining a participant’s benefit accrualsunder a defined benefit plan or a partici-pant’s allocations under a defined contri-bution plan. Section 401(a)(17) also lim-its the annual compensation that may betaken into account for purposes of certainnondiscrimination requirements, includ-ing those in §§ 401(a)(4), 401(a)(5),

401(l), 401(k), 401(m), 403(b)(12),404(a)(2), and 410(b)(2), and for pur-poses of determining whether a definitionof compensation is nondiscriminatoryunder § 414(s)(3). Under § 401(a)(17)as in effect prior to the effective date ofthe EGTRRA amendment, the compensa-tion limit is $150,000, indexed in $10,000increments for cost-of-living adjustments.For 2001, the compensation limit is$170,000. A higher compensation limitapplies to eligible participants in certaingovernmental plans. See Treas. Reg. § 1.401(a)(17)–1(d)(4)(ii).

Section 611(c) of EGTRRA amended § 401(a)(17) of the Code by increasingthe $150,000 limit (as adjusted) to$200,000, and changing the method usedfor cost-of-living adjustments. Section611(c) of EGTRRA made similar amend-ments to §§ 404(l), 408(k), and 505(b)(7)of the Code.

B. Effective Date

Section 611(i)(1) of EGTRRA pro-vides that the increase in the compensa-tion limit of § 401(a)(17) of the Codeapplies to years beginning after Decem-ber 31, 2001. Thus, for purposes of de-termining benefit accruals or the amountof allocations for plan years beginningon or after January 1, 2002, compensa-tion taken into account may not exceedthe compensation limit under § 401(a)(17), as amended by § 611(c) ofEGTRRA. In the case of a plan thatuses annual compensation for periodsprior to the first plan year beginning onor after January 1, 2002, to determineaccruals or allocations for a plan yearbeginning on or after January 1, 2002,the plan is permitted to provide that the$200,000 compensation limit applies toannual compensation for such prior peri-ods in determining such accruals or allo-cations.

The compensation l imit under § 401(a)(17) of the Code is adjusted forcost-of-living increases in accordancewith § 401(a)(17)(B), as amended byEGTRRA, as of the beginning of a cal-endar year. As under pre-EGTRRA law,any such increases shall apply only withrespect to annual compensation duringthe plan year or other 12-month period

over which compensation is determinedthat begins with or within such calendaryear (and any subsequent calendar year).

Example. B is a participant in a nongovernmen-tal defined benefit plan, Plan A. Plan A has acalendar plan year, and a benefit formula thatprovides for an annual benefit at normal retire-ment age equal to the product of: (years of ser-vice) x (1 percent) x (high 3-year average com-pensation). For this purpose, high 3-yearaverage compensation is the average of the com-pensation over the 3 consecutive plan years forwhich the average is the highest, and compensa-tion for each year is limited to $150,000, as ad-justed for cost-of-living increases. As of Decem-ber 31, 2001, B has 10 years of service andcompensation of $250,000 for each of the 3 years1999, 2000, and 2001. B’s high 3-year averagecompensation of $166,667 is determined as theaverage of annual compensation (as limited by § 401(a)(17) of the Code) of $160,000 for 1999,$170,000 for 2000, and $170,000 for 2001. B’sannual benefit under the plan formula as of De-cember 31, 2001, is $16,667, calculated as (10) x(.01) x ($166,667).

In 2002, Plan A is amended (1) to use the$200,000 compensation limit for compensationpaid in years beginning after December 31,2001, and (2) to use the $200,000 compensationlimit for compensation paid in years beginningprior to January 1, 2002, in determining benefitaccruals in years beginning after December 31,2001. B has annual compensation of $250,000for 2002. A high 3-year average compensation of$200,000 is determined for B as of December 31,2002, as the average of annual compensation (aslimited by § 401(a)(17) of the Code, as amendedby EGTRRA) of $200,000 for 2000, $200,000 for2001, and $200,000 for 2002. As of December31, 2002, B’s annual benefit under the plan for-mula is $22,000, calculated as (11) x (.01) x($200,000).

Plan A is not required to implement theEGTRRA increase in the compensation limitunder § 401(a)(17) of the Code in its benefitformula. Plan A could retain the compensationlimit in effect prior to EGTRRA, or provide forany other compensation limit that is less thanthe compensation l imit as amended byEGTRRA. Accordingly, Plan A could beamended to provide that the increased compen-sation limit applies only to annual compensa-tion paid in plan years beginning on or afterJanuary 1, 2002. In that case, a high 3-year av-erage compensation of $180,000 would be de-termined for B as of December 31, 2002, as theaverage of annual compensation of $170,000for 2000 and $170,000 for 2001 (both as limitedby § 401(a)(17) of the Code, as in effect priorto amendment by EGTRRA), and $200,000 for2002 (as limited by § 401(a)(17) of the Code, asamended by EGTRRA). B’s annual benefit as ofDecember 31, 2002, would be $19,800, calcu-lated as (11) x (.01) x ($180,000).

Part III. Administrative, Procedural, and Miscellaneous

September 17, 2001 278 2001–38 I.R.B.

III. Determination of Top-HeavyStatus under § 416

A. Background

Section 416(a) of the Code providesthat a plan that is a top-heavy plan for aplan year must satisfy the vesting andminimum benefit requirements of § 416(b) and (c) for the plan year. A de-fined benefit plan is a top-heavy plan for aplan year if, as of the determination date,the present value of the cumulative ac-crued benefits under the plan for key em-ployees exceeds 60 percent of the presentvalue of the cumulative accrued benefitsunder the plan for all employees. A de-fined contribution plan is a top-heavy planfor a plan year if, as of the determinationdate, the aggregate of the accounts of keyemployees under the plan exceeds 60 per-cent of the aggregate of the accounts of allemployees under the plan. The determina-tion date with respect to any plan year isthe last day of the preceding plan year or,in the case of the first plan year of a plan,the last day of such plan year. The deter-mination of whether a plan is top-heavy ismade in accordance with the requirementsof § 416(g) (including the aggregation re-quirements of § 416(g)(2)).

Section 613 of EGTRRA amended sev-eral provisions of § 416 of the Code, in-cluding provisions related to the require-ments for determining whether a plan is atop-heavy plan for a plan year. Section613(a) of EGTRRA modified the defini-tion of “key employee” in § 416(i)(1) ofthe Code by increasing the compensationthreshold for determining when officersare key employees to $130,000 and byeliminating the ten employees owning thelargest interests in the employer as a sepa-rate category of key employees. Section613(c) of EGTRRA also provides that thedetermination of key employee status ismade based on the plan year ending onthe determination date, thereby eliminat-ing the additional 4-year lookback periodfor determining key employee status. Ingeneral, § 613(c) of EGTRRA modified§§ 416(g)(3) and 416(g)(4)(E) of theCode to exclude from the determinationof top-heavy status (1) distributions madeprior to the 1-year period ending on thedetermination date (except that a 5-yearperiod is retained for in-service distribu-tions) and (2) the accrued benefits and ac-count balances of employees who per-

formed no service for the employer dur-ing the 1-year period ending on the deter-mination date.

B. Effective Date

Section 613(f) of EGTRRA providesthat the amendments made by § 613apply to years beginning after December31, 2001. Thus, the EGTRRA amend-ments to § 416 of the Code apply for pur-poses of determining whether a plan istop-heavy for the first plan year beginningafter December 31, 2001, even though thedetermination date for that plan year isbefore the effective date of the EGTRRAamendment.

Thus, for example, for a plan with acalendar plan year (other than a plan in itsfirst plan year), the determination ofwhether the plan is top-heavy for the planyear beginning January 1, 2002, is madeas of December 31, 2001. This determi-nation is made in accordance with theprovisions of § 416 of the Code, asamended by EGTRRA. For example, forpurposes of identifying key employees inaccordance with § 416(i)(1)(A) of theCode as amended by EGTRRA, officerswith annual compensation greater than$130,000 for 2001 are key employees,and the additional 4-year lookback perioddoes not apply for purposes of that deter-mination.

IV. Hardship Distributions

A. Background

Elective deferrals under a qualifiedcash or deferred arrangement subject to § 401(k) of the Code may not be distrib-utable to participants prior to the occur-rence of one of the events specified in § 401(k)(2). One of these events is ahardship of the employee. Treas. Reg. § 1.401(k)–1(d)(2)(i) provides that a dis-tribution is treated as made on account ofan employee’s hardship if it is made onaccount of an immediate and heavy finan-cial need and is necessary to satisfy the financial need. Treas. Reg. § 1.401(k)–1(d)(2)(iv)(B) provides a safe harborpursuant to which a distribution isdeemed necessary to satisfy an immediateand heavy financial need. One of the re-quirements of the safe harbor is that theemployee is prohibited from making elec-tive contributions and employee contribu-tions under the plan and all other plans

maintained by the employer for at least 12months after receipt of the hardship distribution. See Treas. Reg. § 1.401(k)–1(d)(2)(iv)(B)(4).

Sections 401(k)(12) and 401(m)(11) ofthe Code provide design-based safe har-bor methods for satisfying the actual de-ferral percentage (ADP) test contained in§ 401(k)(3)(A)(ii) and the actual contri-bution percentage (ACP) test contained in§ 401(m)(2) based on matching contribu-tions that meet certain conditions and thatsatisfy certain notice requirements. No-tice 98–52 (1998–2 C.B. 632), providesthat a plan will not fail to satisfy the ADPmatching contribution safe harbor merelybecause an eligible employee’s ability tomake elective deferrals is suspended for12 months following a hardship distribu-tion. Notice 98–52 also provides that aplan will not fail to satisfy the ACPmatching contribution safe harbor merelybecause an eligible employee’s ability tomake elective deferrals and employeecontributions is suspended for 12 monthsfollowing a hardship distribution. SeeTreas. Reg. § 1.401(k)–1(d)(2)(iv)(B)(4)and sections V.B.1.c.iv and VI.B of No-tice 98–52.

Section 636(a) of EGTRRA directs theSecretary of the Treasury to modify theregulations regarding hardship distribu-tions to provide that the period duringwhich an employee is prohibited frommaking elective deferrals in order for thedistribution to be deemed necessary tosatisfy a financial need shall be 6 months(instead of 12 months).

B. Effective Date

Section 636(a) of EGTRRA providesthat the regulations as revised in accor-dance with § 636(a) shall apply to yearsbeginning after December 31, 2001.Thus, the revised regulations will be ef-fective for calendar years beginning afterDecember 31, 2001, rather than effectiveonly with respect to hardship distributionsreceived after December 31, 2001. Forexample, a plan that provides for hardshipdistributions in accordance with the safeharbor in Treas. Reg. § 1.401(k)–1(d)(2)(iv)(B) may be amended to pro-vide that an employee who receives ahardship distribution in 2001 is prohibitedfrom making elective deferrals and em-ployee contributions for 6 months afterreceipt of the distribution (or until Janu-

2001–38 I.R.B. 279 September 17, 2001

ary 1, 2002, if later). However, a plansponsor generally could retain its existingsuspension period for all hardship distrib-utions (or for all hardship distributionsprior to January 1, 2002).

However, in order to continue to relyon the matching contribution safe harborin § 401(k)(12) or § 401(m)(11) of theCode to satisfy the ADP or ACP test, aplan must reduce the period during whichelective deferrals and employee contribu-tions are suspended following a hardshipdistribution from 12 months to 6 monthsfor calendar years beginning after Decem-ber 31, 2001. A plan will not fail to sat-isfy this requirement merely because itprovides that the reduction from 12months to 6 months applies only to hard-ship distributions made after December31, 2001.

V. Effect on Other Documents

Notice 98–52 is modified.


The principal author of this notice isAnn Trichilo of the Employee Plans, TaxExempt and Government Entities Divi-sion. For further information regardingthis notice, please contact the EmployeePlans’ taxpayer assistance telephone ser-vice at (202) 283-9516 or (202) 283-9517, between the hours of 1:30 p.m. and3:30 p.m. Eastern Time, Monday throughThursday. Ms. Trichilo may be reached at(202) 283-9695. These telephone num-bers are not toll-free.

Sample Plan Amendments forthe Economic Growth and TaxRelief Reconciliation Act of2001

Notice 2001–57

I. Purpose

This notice provides sample planamendments for the changes to the planqualification requirements under § 401(a) of the Internal Revenue Codethat were made by the Economic Growthand Tax Relief Reconciliation Act of2001, Pub. L. 107–16 (“EGTRRA”).These sample amendments will help plansponsors and sponsors and adopters ofpre-approved plans comply with the re-

quirement to adopt good faith EGTRRAplan amendments on a timely basis.

In some cases, plan sponsors may beable to adopt the sample amendments ver-batim. In other cases, plan sponsors mayhave to modify the sample amendments tomake the amendments appropriate foradoption in their plans.

The sample amendments are examplesof plan amendments that satisfy the goodfaith requirement and should not beviewed as interpretive guidance on theEGTRRA changes to the qualificationrequirements. Other guidance will ad-dress the EGTRRA changes. See, for ex-ample, Notice 2001–56, p. 277, this bul-letin.

II. Background

EGTRRA. EGTRRA, which was en-acted on June 7, 2001, includes numerouschanges to the qualified plan rules. Mostof these changes are effective in years be-ginning after December 31, 2001. Whilemany of the changes are not mandatory, aplan sponsor that chooses to implementan optional provision of EGTRRA willhave to amend its plan to conform planprovisions to plan operation.

EGTRRA Remedial Amendment PeriodRequirements. Notice 2001–42 (2001–30I.R.B. 70) designated as disqualifyingprovisions under Treas. Reg. § 1.401(b)–1(b) plan provisions that (1) must beamended to satisfy the qualification re-quirements of the Code because ofchanges in those requirements made byEGTRRA or (2) are integral to qualifica-tion requirements changed by EGTRRA.The effect of this designation is to providea remedial amendment period under § 401(b), ending no earlier than the endof the 2005 plan year, in which anyneeded retroactive remedial EGTRRAplan amendments may be adopted (theEGTRRA remedial amendment period).

The availability of the EGTRRA reme-dial amendment period is conditioned onthe timely adoption of required good faithEGTRRA plan amendments. There aretwo circumstances in which a good faithEGTRRA plan amendment is required.First, a plan is required to have a goodfaith EGTRRA plan amendment in effectfor a year if the plan is required to imple-ment a provision of EGTRRA for the yearand the plan language, prior to the amend-ment, is not consistent with the provision

of EGTRRA. Second, a plan is requiredto have a good faith EGTRRA planamendment in effect for a year if the plansponsor elects to implement a provisionof EGTRRA for the year and the plan lan-guage, prior to the amendment, is not con-sistent with the operation of the plan in amanner consistent with EGTRRA. Agood faith EGTRRA plan amendment istimely if it is adopted no later than thelater of (i) the end of the plan year inwhich the EGTRRA change in the qualifi-cation requirements is required to be, or isoptionally, put into effect under the planor (ii) the end of the GUST remedialamendment period for the plan.1

Good Faith. A plan amendment is agood faith EGTRRA plan amendmentonly if the amendment represents a rea-sonable effort to take into account all ofthe requirements of the applicableEGTRRA provision and does not reflectan unreasonable or inconsistent interpre-tation of the provision.

III. Sample EGTRRA Plan Amendments

In General. As provided in Notice2001–42, the Service is publishing sam-ple EGTRRA plan amendments that canbe adopted or used in drafting individual-ized good faith plan amendments for indi-vidually designed and pre-approvedplans. In some cases, plan sponsors maybe able to adopt the sample amendmentsin this notice verbatim. In other cases,plan sponsors may have to modify thesample amendments to make them appro-priate for adoption in their plans.

The availability of the EGTRRA reme-dial amendment period is conditioned onthe timely adoption of good faith

1 The term “GUST” refers to the following:• the Uruguay Round Agreements Act, Pub. L.

103-465;• the Uniformed Services Employment and

Reemployment Rights Act of 1994, Pub. L.103-353;

• the Small Business Job Protection Act of 1996,Pub. L. 104-188;

• the Taxpayer Relief Act of 1997, Pub. L. 105-34;

• the Internal Revenue Service Restructuring andReform Act of 1998, Pub. L. 105-206; and

• the Community Renewal Tax Relief Act of2000, Pub. L. 106-554

Unless section 19 of Rev. Proc. 2000-20, 2000-6I.R.B. 553, as modified by Notice 2001-42,applies, the GUST remedial amendment periodgenerally ends on the last day of the 2001 planyear.

September 17, 2001 280 2001–38 I.R.B.

EGTRRA plan amendments, as notedabove. Many of the issues and questionsconcerning the EGTRRA changes to thequalification requirements are not ad-dressed in the sample amendments.Therefore, the sample amendments maynot contain all those provisions that willbe necessary to comply with theEGTRRA changes once guidance on thechanges is issued. Nevertheless, properadoption of the sample amendments, orplan amendments that are materially simi-lar to the sample amendments, will, withrespect to the EGTRRA provisions ad-dressed in the amendments that a sponsoradopts, satisfy the good faith plan amend-ment requirement and allow the amendedplan provisions to be retroactivelyamended within the EGTRRA remedialamendment period.

Of course, regardless of whether a plansponsor adopts the sample amendments inthis notice or its own good faith amend-ments, the operation of the plan must alsoreflect a good faith, reasonable interpreta-tion of EGTRRA. Plan operation will notreflect a good faith, reasonable interpreta-tion of EGTRRA unless the operation isconsistent with published guidance begin-ning no later than the effective date of theguidance.

Some of the sample amendments re-flect other guidance issued with respect tothe applicable section of EGTRRA. No-tice 2001–56 provides guidance with re-spect to the effective dates of the increasein the § 401(a)(17) compensation limitunder EGTRRA § 611(c), the changes tothe top-heavy requirements of § 416under EGTRRA § 613, and the change tothe suspension period for hardship distrib-utions in a § 401(k) plan under EGTRRA§ 636(a). The Service and Treasury willissue additional guidance on otherEGTRRA changes in the near future, in-cluding the increase in the § 415(b) dol-lar limit under EGTRRA § 611(a) and thecatch-up contribution provisions underEGTRRA § 631. The sample amend-ments in this notice, materially similaramendments, and other good faith amend-ments will continue to be good faithEGTRRA plan amendments, even afterthe publication of additional guidance.However, as provided above, a plan willhave to be operated in accordance withsuch additional guidance as of the effec-tive date of the guidance, notwithstanding

the provisions of the plan’s good faithamendments.

Good Faith. The sample amendments,and plan amendments that are materiallysimilar to the sample amendments, aresufficient to satisfy the good faith planamendment requirement. A plan amend-ment that represents a reasonable effort totake into account all of the requirementsof the applicable EGTRRA provision anddoes not reflect an unreasonable or incon-sistent interpretation of the provision willnot fail to be a good faith plan amendmentmerely because it is not materially similarto a sample EGTRRA plan amendment.

Scope of the Sample Amendments. Thesample amendments address most of theEGTRRA changes for which plan amend-ments are either required or optional. Thesample amendments do not addresschanges not generally applicable to plans;changes not effective prior to the issuanceof regulations; and changes underEGTRRA §§ 602 and 617, regardingdeemed individual retirement accountsand annuities and Roth contribution pro-grams in qualified plans, respectively.The good faith plan amendment require-ment described above applies with respectto all the EGTRRA changes to the planqualification requirements, includingthose that are not addressed in the sampleamendments. The sample amendmentsalso do not address EGTRRA changes re-garding deduction limits and excise taxes.

Some amendments that would gener-ally be optional may, in certain circum-stances, be required. Plan sponsorsshould make the determination of whichamendments are appropriate after review-ing the EGTRRA changes in the contextof their plans and particular circum-stances. The sample amendments includenotes to assist plan sponsors in this deter-mination.

Format of the Sample Amendments.The format of the sample amendmentsgenerally follows the design of pre-ap-proved plans, including all M&P plans,that employ a “basic plan document” andan “adoption agreement.” Thus, eachsample amendment includes language de-signed for inclusion in a basic plan docu-ment. In addition, some of the sampleamendments include language designedfor inclusion in an adoption agreement toallow the employer to indicate whether, orwhen, the corresponding basic plan docu-

ment provision will be effective in theemployer’s plan and to select among op-tions related to the application of the basicplan document provision. Sponsors maymodify the amendments to specify the“default” option that will apply if an em-ployer does not select an alternative op-tion in the adoption agreement.

Sponsors of plans that do not use anadoption agreement should modify theformat of the amendments to incorporatethe appropriate adoption agreement op-tion(s) in the terms of the amendments.The adoption agreement format is notused in the sample amendment for multi-employer plans for EGTRRA §§ 611(a)and 654, regarding changes in the limita-tions of § 415(b) of the Code.

Pre-approved plans that are amendedfor EGTRRA in any manner other than bythe adoption of a separate, clearly identi-fied addendum to the plan (or basic plandocument) and/or adoption agreement,limited to the provisions of EGTRRA, willbe treated as individually designed plans.The sample EGTRRA plan amendmentsin this notice are designed to be easily in-corporated in such a separate addendum,so that a pre-approved plan will not betreated as an individually designed plan.

The sample amendments have been de-signed to facilitate their adoption in caseswhere the plan’s language, including defi-nitions, is similar to the sample plan pro-visions in the Service’s Listing of Re-quired Modifications(which is availableat http://www.irs.gov/ep). Thus, the sam-ple amendments generally do not providedefinitions of terms used in the amend-ments if equivalent terms should alreadybe defined in a plan. Among these termsare the following: annual addition, annualbenefit, defined benefit compensationlimitation, determination date for top-heavy status, elective deferrals, eligibleretirement plan, eligible rollover distribu-tion, limitation year, and matching contri-butions. Of course, a sponsor needs to en-sure that the terminology of its good faithEGTRRA plan amendments is consistentwith the plan’s existing terminology anddefinitions. The sample amendmentsgenerally do not address issues of plan de-sign. Sponsors may want to add to ormodify the sample amendments to ad-dress these issues.

The sample amendments are arrangedin these categories: all plans, defined

2001–38 I.R.B. 281 September 17, 2001

contribution plans, section 401(k) plans,and defined benefit plans.

Effective Dates.Sponsors that adopt thesample amendments may have to modifythe amendments’ effective dates to ensurethat no optional plan amendment is effec-tive earlier than the date on which the cor-responding EGTRRA change is put into ef-fect under the plan. For plans maintainedpursuant to a collective bargaining agree-ment, the effective date of the sampleamendment for EGTRRA § 633, regard-ing faster vesting of matching contribu-tions, may be modified to reflect the effec-tive date in § 633(c)(2).

Time and Manner of Adoption.Al-though good faith EGTRRA plan amend-ments are generally not required to beadopted earlier than the end of the planyear in which the amendments are re-quired to be, or are optionally, put into ef-fect, earlier adoption may be necessary inorder to avoid a decrease or elimination ofbenefits protected by § 411(d)(6). Seethe discussion of § 411(d)(6) in sectionIII of Notice 2001–42.

A pre-approved plan may be amendedby the document’s sponsor to the extentauthorized. For example, a sponsor of anM&P plan may amend the plan on behalfof adopting employers. If the amendmentof a pre-approved plan includes an adden-dum to the adoption agreement, the ad-dendum is effective only if signed anddated by the employer.

Determination Letters and Reliance.Until further notice, the Service will notconsider EGTRRA in issuing determina-tion, opinion, and advisory letters, andsuch letters may not be relied on with re-spect to the EGTRRA changes, regardlessof whether the plan has been amended bythe adoption of the sample EGTRRA planamendments. However, an employer’sability to otherwise rely on a favorableletter will not be adversely affected by thetimely adoption of good faith EGTRRAplan amendments.

Possible Subsequent Required Amend-ments. The Service and Treasury willprovide additional guidance onEGTRRA. Plans amended by the timelyadoption of good faith EGTRRA planamendments, including the sampleamendments, may have to be amendedagain by the end of the EGTRRA reme-dial amendment period to comply withadditional guidance. In addition, as pro-

vided above, plans will have to be oper-ated consistent with such additional guid-ance as of the effective date of the guid-ance.

Application to Other Plans.Althoughthe sample amendments are designed forplans qualified under § 401(a), some ofthe sample amendments may be used inan appropriate context in other plans, in-cluding § 403(b) plans. Future guidancewill address the EGTRRA changes ap-plicable to § 457 plans.

IV. Effect on Other Documents.

Notice 2001–42 is modified.


The principal drafter of this notice isJames Flannery of Employee Plans. Forfurther information regarding this notice,please contact Employee Plans’ taxpayerassistance telephone service at (202) 283-9516 or (202) 283-9517, between thehours of 1:30 p.m. and 3:30 p.m. EasternTime, Monday through Thursday. Mr.Flannery may be reached at (202) 283-9613. These telephone numbers are nottoll-free.

SAMPLE EGTRRA PLANAMENDMENTS FOR ALL PLANS

Sample Preamble Adopting GoodFaith Amendments and SupersedingInconsistent Plan Provisions

(The following sample preamble is op-tional. However, plan sponsors that donot adopt this or a similar provision willhave to modify some of the amend-ments that follow to specify effectivedates and supersede inconsistent planprovisions.)

AMENDMENT OF THE PLAN FOREGTRRA

PREAMBLE

1. Adoption and effective date of amend-ment. This amendment of the plan isadopted to reflect certain provisions of theEconomic Growth and Tax Relief Recon-ciliation Act of 2001 (“EGTRRA”). Thisamendment is intended as good faithcompliance with the requirements ofEGTRRA and is to be construed in accor-dance with EGTRRA and guidance issuedthereunder. Except as otherwise pro-vided, this amendment shall be effective

as of the first day of the first plan year be-ginning after December 31, 2001.

2. Supersession of inconsistent provi-sions. This amendment shall supersedethe provisions of the plan to the extentthose provisions are inconsistent with theprovisions of this amendment.

Sample Plan Amendment for § 612 ofEGTRRA

(The following amendment is required forplans that provide loans to participantsbut prohibit the making of loans to owner-employees or Subchapter S shareholder-employees.)

SECTION . PLAN LOANS FOROWNER-EMPLOYEES ANDSHAREHOLDER EMPLOYEES

Effective for plan loans made after Decem-ber 31, 2001, plan provisions prohibitingloans to any owner-employee or share-holder-employee shall cease to apply.

SAMPLE EGTRRA PLANAMENDMENTS FOR DEFINEDCONTRIBUTION PLANS

Sample Plan Amendment for §§ 611(b)and 632 of EGTRRA

(Although plans may impose lower limitson contributions and allocations than thelimits under § 415(c) of the Code, thefollowing amendment will generally berequired in order to avoid a related viola-tion of § 401(a). This could occur, forexample, if the plan allocates excess an-nual additions to a suspense account.(See Notice 99–44, Q&A–8, 1999–2 C.B.326.) A plan that correctly incorporatesthe § 415(c) limits by reference will auto-matically reflect the EGTRRA changesand need not be amended.)

SECTION . LIMITATIONS ONCONTRIBUTIONS

1. Effective date. This section shall beeffective for limitation years beginningafter December 31, 2001.

2. Maximum annual addition. Except tothe extent permitted under section ofthis amendment [enter the section of theamendment that provides for catch-up

September 17, 2001 282 2001–38 I.R.B.

contributions under EGTRRA § 631] andsection 414(v) of the Code, if applicable,the annual addition that may be con-tributed or allocated to a participant’s ac-count under the plan for any limitationyear shall not exceed the lesser of:

(a) $40,000, as adjusted for in-creases in the cost-of-livingunder section 415(d) of theCode, or

(b) 100 percent of the participant’scompensation, within the mean-ing of section 415(c)(3) of theCode, for the limitation year.

The compensation limit referred to in (b)shall not apply to any contribution formedical benefits after separation fromservice (within the meaning of section401(h) or section 419A(f)(2) of the Code)which is otherwise treated as an annualaddition.

Sample Plan Amendment for § 611(c)of EGTRRA

(The following sample amendment is op-tional. It should be adopted if the plansponsor wants to increase the limit on an-nual compensation taken into accountunder the plan in plan years beginningafter December 31, 2001, to $200,000. Ifthe plan bases allocations for plan yearsbeginning after December 31, 2001, oncompensation for periods beginning beforeJanuary 1, 2002, the amendment should bemodified to include provisions similar tothe prior year limit and adoption agree-ment provisions of the sample amendmentfor EGTRRA § 611(c) for defined benefitplans. Also see Notice 2001–56 for guid-ance regarding the effective date of thechange made by EGTRRA § 611(c).)

SECTION . INCREASE INCOMPENSATION LIMIT

The annual compensation of each partici-pant taken into account in determining al-locations for any plan year beginningafter December 31, 2001, shall not exceed$200,000, as adjusted for cost-of-livingincreases in accordance with section401(a)(17)(B) of the Code. Annual com-pensation means compensation during theplan year or such other consecutive 12-month period over which compensation isotherwise determined under the plan (the

determination period). The cost-of-livingadjustment in effect for a calendar yearapplies to annual compensation for thedetermination period that begins with orwithin such calendar year.


(The following sample amendment ap-plies to all plans that are required to in-clude provisions to determine whether theplan is top-heavy and that apply if theplan is top-heavy. The amendment is re-quired. However, the amendment is notrequired for plans that consist solely of acash or deferred arrangement whichmeets the safe harbor requirements of § 401(k)(12) of the Code and matchingcontributions with respect to which thesafe harbor requirements of § 401(m)(11)of the Code are met. For these plans, seethe sample plan amendments forEGTRRA § 613 under Sample PlanAmendments for Section 401(k) Plans.)

SECTION . MODIFICATIONOF TOP-HEAVY RULES

1. Effective date. This section shallapply for purposes of determiningwhether the plan is a top-heavy planunder section 416(g) of the Code for planyears beginning after December 31, 2001,and whether the plan satisfies the mini-mum benefits requirements of section416(c) of the Code for such years. Thissection amends section of the plan[enter the section of the plan that includestop-heavy provisions].

2. Determination of top-heavy status.

2.1 Key employee. Key employeemeans any employee or former em-ployee (including any deceased em-ployee) who at any time during the planyear that includes the determination datewas an officer of the employer havingannual compensation greater than$130,000 (as adjusted under section416(i)(1) of the Code for plan years be-ginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer havingannual compensation of more than$150,000. For this purpose, annual com-pensation means compensation withinthe meaning of section 415(c)(3) of the

Code. The determination of who is a keyemployee will be made in accordancewith section 416(i)(1) of the Code andthe applicable regulations and otherguidance of general applicability issuedthereunder.

2.2 Determination of present values andamounts. This section 2.2 shall apply forpurposes of determining the present val-ues of accrued benefits and the amountsof account balances of employees as ofthe determination date.

2.2.1 Distributions during year ending onthe determination date. The present val-ues of accrued benefits and the amountsof account balances of an employee as ofthe determination date shall be increasedby the distributions made with respect tothe employee under the plan and any planaggregated with the plan under section416(g)(2) of the Code during the 1-yearperiod ending on the determination date.The preceding sentence shall also apply todistributions under a terminated planwhich, had it not been terminated, wouldhave been aggregated with the plan undersection 416(g)(2)(A)(i) of the Code. Inthe case of a distribution made for a rea-son other than separation from service,death, or disability, this provision shall beapplied by substituting “5-year period”for “1-year period.”

2.2.2 Employees not performing servicesduring year ending on the determinationdate. The accrued benefits and accountsof any individual who has not performedservices for the employer during the 1-year period ending on the determinationdate shall not be taken into account.

3. Minimum benefits.

3.1 Matching contributions. Employermatching contributions shall be taken intoaccount for purposes of satisfying theminimum contribution requirements ofsection 416(c)(2) of the Code and the plan.The preceding sentence shall apply withrespect to matching contributions underthe plan or, if the plan provides that theminimum contribution requirement shallbe met in another plan, such other plan.Employer matching contributions that areused to satisfy the minimum contributionrequirements shall be treated as matchingcontributions for purposes of the actualcontribution percentage test and other re-quirements of section 401(m) of the Code.

2001–38 I.R.B. 283 September 17, 2001

3.2 Contributions under other plans. Theemployer may provide in the adoptionagreement that the minimum benefit re-quirement shall be met in another plan(including another plan that consistssolely of a cash or deferred arrangementwhich meets the requirements of section401(k)(12) of the Code and matching con-tributions with respect to which the re-quirements of section 401(m)(11) of theCode are met).

(Adoption agreement provision)

Minimum Benefits for Employees AlsoCovered Under Another Plan:

(The employer should describe below theextent, if any, to which the top-heavyminimum benefit requirement of section416(c) of the Code and section ofthe plan shall be met in another plan.This should include the name of the otherplan, the minimum benefit that will beprovided under such other plan, and theemployees who will receive the minimumbenefit under such other plan.)


(Plans that provide for matching contribu-tions, as defined in § 401(m)(4)(A) of theCode, that do not vest at least as rapidlyas under one of the two alternative sched-ules in EGTRRA § 633 must be amendedto satisfy EGTRRA § 633 for contribu-tions for plan years beginning after De-

cember 31, 2001. The following amend-ment is effective for plan years beginningafter December 31, 2001, but applies toall matching contributions under the plan,including contributions for plan years be-ginning before January 1, 2002. Theamendment may be modified to limit itsapplication to contributions for plan yearsbeginning after December 31, 2001. Theamendment may also be modified to pro-vide for any other vesting schedule that isat least as rapid as one of the alternativeschedules in EGTRRA § 633.)

SECTION . VESTING OFEMPLOYER MATCHINGCONTRIBUTIONS

1. Applicability. This section shall applyto participants with accrued benefits de-rived from employer matching contribu-tions who complete an hour of serviceunder the plan in a plan year beginningafter December 31, 2001. If elected bythe employer in the adoption agreement,this section shall also apply to all otherparticipants with accrued benefits derivedfrom employer matching contributions.

2. Vesting schedule. A participant’s ac-crued benefit derived from employermatching contributions shall vest as pro-vided by the employer in the adoptionagreement. If the vesting schedule foremployer matching contributions in Op-tion 3 of the adoption agreement iselected, the election in section ofthe plan [enter the section of the plan thatprovides for the election of the former

vesting schedule under § 411(a)(10) ofthe Code] shall apply.

(Adoption agreement provisions)

Application of Section , Vesting ofEmployer Matching Contributions:

(Check the following option to apply Sec-tion , Vesting of Employer MatchingContributions, to all participants with ac-crued benefits derived from employermatching contributions, rather than justthose who complete an hour of serviceunder the plan in a plan year beginningafter December 31, 2001.)

Section , Vesting of Em-ployer Matching Contributions, shallapply to all participants with accrued ben-efits derived from employer matchingcontributions.

Vesting Schedule for Employer MatchingContributions:

Option 1. A participant’s accruedbenefit derived from employer matchingcontributions shall be fully and immedi-ately vested.

Option 2. A participant’s accruedbenefit derived from employer matchingcontributions shall be nonforfeitable uponthe participant’s completion of three yearsof vesting service.

Option 3. A participant’s accruedbenefit derived from employer matchingcontributions shall vest according to thefollowing schedule:

Years of vesting service Nonforfeitable percentage

2 203 404 605 806 100

Sample Plan Amendment for§§ 636(b), 641, 642, and 643 of EGTRRA

(The following sample amendment is re-quired. However, the third paragraphshould be deleted in the case of plans thatdo not provide for hardship distributions.The fourth paragraph should be deleted inthe case of plans that do not have after-taxemployee contributions.)

SECTION . DIRECTROLLOVERS OF PLANDISTRIBUTIONS

1. Effective date. This section shallapply to distributions made after Decem-ber 31, 2001.

2. Modification of definition of eligibleretirement plan. For purposes of the di-rect rollover provisions in section ofthe plan, an eligible retirement plan shall

also mean an annuity contract describedin section 403(b) of the Code and an eligi-ble plan under section 457(b) of the Codewhich is maintained by a state, politicalsubdivision of a state, or any agency orinstrumentality of a state or political sub-division of a state and which agrees toseparately account for amounts trans-ferred into such plan from this plan. Thedefinition of eligible retirement plan shallalso apply in the case of a distribution to a

surviving spouse, or to a spouse or formerspouse who is the alternate payee under aqualified domestic relation order, as de-fined in section 414(p) of the Code.

3. Modification of definition of eligiblerollover distribution to exclude hardshipdistributions. For purposes of the directrollover provisions in section ofthe plan, any amount that is distributed onaccount of hardship shall not be an eligi-ble rollover distribution and the distribu-tee may not elect to have any portion ofsuch a distribution paid directly to an eli-gible retirement plan.

4. Modification of definition of eligiblerollover distribution to include after-taxemployee contributions. For purposesof the direct rollover provisions in sec-tion of the plan, a portion of adistribution shall not fail to be an eligi-ble rollover distribution merely becausethe portion consists of after-tax em-ployee contributions which are not in-cludible in gross income. However,such portion may be transferred only toan individual retirement account or an-nuity described in section 408(a) or (b)of the Code, or to a qualified definedcontribution plan described in section401(a) or 403(a) of the Code that agreesto separately account for amounts sotransferred, including separately ac-counting for the portion of such distribu-tion which is includible in gross incomeand the portion of such distributionwhich is not so includible.

Sample Plan Amendment to SpecifyAdditional Types of Rollovers Acceptedby the Plan Pursuant to EGTRRA§§ 641, 642, and 643

(A plan is not required to accept rollovercontributions, including direct rolloversunder § 401(a)(31) of the Code. The fol-lowing optional sample amendment maybe used to specify additional types ofrollovers the plan will accept pursuant toEGTRRA §§ 641, 642, and 643. A planthat accepts rollovers may be required toseparately account for such amounts.)

SECTION _____. ROLLOVERS FROMOTHER PLANS

If provided by the employer in the adop-tion agreement, the plan will accept par-

ticipant rollover contributions and/or di-rect rollovers of distributions made afterDecember 31, 2001, from the types ofplans specified in the adoption agreement,beginning on the effective date specifiedin the adoption agreement.


Direct Rollovers:

The plan will accept a direct rollover ofan eligible rollover distribution from:(Check each that applies or none.)

a qualified plan described in section401(a) or 403(a) of the Code, excludingafter-tax employee contributions.

a qualified plan described in section401(a) or 403(a) of the Code, includingafter-tax employee contributions.

an annuity contract described in sec-tion 403(b) of the Code, excluding after-tax employee contributions.

an eligible plan under section 457(b)of the Code which is maintained by astate, political subdivision of a state, orany agency or instrumentality of a state orpolitical subdivision of a state.

Participant Rollover Contributions fromOther Plans:

The plan will accept a participant contri-bution of an eligible rollover distributionfrom: (Check each that applies or none.)

a qualified plan described in section401(a) or 403(a) of the Code.

an annuity contract described in sec-tion 403(b) of the Code.


Participant Rollover Contributions fromIRAs:

The plan: (Choose one.)

will

will not

accept a participant rollover contributionof the portion of a distribution from an in-dividual retirement account or annuity de-scribed in section 408(a) or 408(b) of theCode that is eligible to be rolled over and

would otherwise be includible in gross in-come.

Effective Date of Direct Rollover andParticipant Rollover ContributionProvisions:

Section , Rollovers From OtherPlans, shall be effective:

________________ (Enter a date no ear-lier than January 1, 2002.)


(The following optional sample amend-ment may be adopted by plans that pro-vide for involuntary cash-outs, other thanplans that are subject to the qualified jointand survivor annuity requirements of §§ 401(a)(11) and 417 of the Code. Notethat this amendment will result in the in-voluntary distribution of a separated par-ticipant’s account over $5,000 if the por-tion of the account that is not attributableto rollover contributions is $5,000 orless.)

SECTION . ROLLOVERSDISREGARDED IN INVOLUNTARYCASH-OUTS

1. Applicability and effective date. Thissection shall apply if elected by the em-ployer in the adoption agreement andshall be effective as specified in the adop-tion agreement.

2. Rollovers disregarded in determiningvalue of account balance for involuntarydistributions. If elected by the employerin the adoption agreement, for purposesof section of the plan [enter thesection of the plan that provides for theinvoluntary distribution of vested accruedbenefits of $5,000 or less], the value of aparticipant’s nonforfeitable account bal-ance shall be determined without regardto that portion of the account balance thatis attributable to rollover contributions(and earnings allocable thereto) within themeaning of sections 402(c), 403(a)(4),403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the par-ticipant’s nonforfeitable account balanceas so determined is $5,000 or less, theplan shall immediately distribute the par-ticipant’s entire nonforfeitable accountbalance.

September 17, 2001 284 2001–38 I.R.B.


Treatment of Rollovers in Application ofInvoluntary Cash-out Provisions:

The employer: (choose one)

elects

does not elect

to exclude rollover contributions in deter-mining the value of the participant’s non-forfeitable account balance for purposesof the plan’s involuntary cash-out rules.

If the employer has elected to excluderollover contributions, the election shallapply with respect to distributions madeafter:

(Enter a date no earlierthan December 31, 2001.)

with respect to participants who separatedfrom service after:

(Enter date. The datemay be earlier than December 31, 2001.)


(The following sample amendment is re-quired for plans subject to the multipleuse test described in Treas. Reg. § 1.401(m)–2.)

SECTION . REPEAL OFMULTIPLE USE TEST

The multiple use test described in Trea-sury Regulation section 1.401(m)–2 andsection of the plan shall notapply for plan years beginning after De-cember 31, 2001.

SAMPLE PLAN AMENDMENTSFOR SECTION 401(k) PLANS

Sample Plan Amendment for § 611(d)of EGTRRA

(Unless the plan correctly incorporatesthe limitation of § 402(g) of the Code byreference, the plan cannot permit thehigher amount of elective deferrals underEGTRRA unless it adopts the followingor similar amendment.)

SECTION . ELECTIVEDEFERRALS — CONTRIBUTIONLIMITATION

No participant shall be permitted to haveelective deferrals made under this plan, orany other qualified plan maintained by theemployer during any taxable year, in ex-cess of the dollar limitation contained insection 402(g) of the Code in effect forsuch taxable year, except to the extentpermitted under section of thisamendment [enter the section of theamendment that provides for catch-upcontributions under EGTRRA § 631] andsection 414(v) of the Code, if applicable.

Sample Plan Amendment for § 611(f)of EGTRRA

(The following sample amendment isonly for SIMPLE 401(k) plans. Thisamendment is not necessary if the plancorrectly incorporates the limitation in § 408(p)(2)(A)(ii) of the Code.)

SECTION . MAXIMUMSALARY REDUCTIONCONTRIBUTIONS

Except to the extent permitted under sec-tion of this amendment [enter thesection of the amendment that providesfor catch-up contributions underEGTRRA § 631] and section 414(v) ofthe Code, if applicable, the maximumsalary reduction contribution that can bemade to this plan is the amount deter-mined under section 408(p)(2)(A)(ii) ofthe Code for the calendar year.


(The following sample amendment isonly for plans that consist solely of a cashor deferred arrangement which meets therequirements of § 401(k)(12) of the Codeand matching contributions with respectto which the requirements of § 401(m)(11) of the Code are met.)


The top-heavy requirements of section416 of the Code and section of theplan shall not apply in any year beginningafter December 31, 2001, in which theplan consists solely of a cash or deferredarrangement which meets the require-ments of section 401(k)(12) of the Code

and matching contributions with respectto which the requirements of section401(m)(11) of the Code are met.


(The following amendment is optional.)

SECTION . CATCH-UPCONTRIBUTIONS

If elected by the employer in the adoptionagreement, all employees who are eligibleto make elective deferrals under this planand who have attained age 50 before theclose of the plan year shall be eligible tomake catch-up contributions in accor-dance with, and subject to the limitationsof, section 414(v) of the Code. Suchcatch-up contributions shall not be takeninto account for purposes of the provi-sions of the plan implementing the re-quired limitations of sections 402(g) and415 of the Code. The plan shall not betreated as failing to satisfy the provisionsof the plan implementing the require-ments of section 401(k)(3), 401(k)(11),401(k)(12), 410(b), or 416 of the Code, asapplicable, by reason of the making ofsuch catch-up contributions.


Section , Catch-up Contributions:(Choose one.)

shall apply to contributions after . (Enter December 31, 2001, or a

later date).

shall not apply.

Sample Plan Amendment for § 636(a)of EGTRRA

(The following sample amendment is op-tional for section 401(k) plans (other thanplans described in § 401(k)(12) or401(m)(11) of the Code) that use the safeharbor (deemed) standards for hardshipdistributions of elective contributions setforth in Treas. Reg. § 1.401(k)–1(d)(2)(iv). The amendment is required for aplan described in § 401(k)(12) or401(m)(11) of the Code. Also see Notice2001–56 for guidance regarding the effec-tive date of the change made by EGTRRA§ 636(a).)

2001–38 I.R.B. 285 September 17, 2001

SECTION _____. SUSPENSIONPERIOD FOLLOWING HARDSHIPDISTRIBUTION

A participant who receives a distributionof elective deferrals after December 31,2001, on account of hardship shall be pro-hibited from making elective deferralsand employee contributions under thisand all other plans of the employer for 6months after receipt of the distribution. Aparticipant who receives a distribution ofelective deferrals in calendar year 2001on account of hardship shall be prohibitedfrom making elective deferrals and em-ployee contributions under this and allother plans of the employer for the periodspecified by the employer in the adoptionagreement.


Suspension Period for HardshipDistributions: (Choose one.)

A participant who receives a distri-bution of elective deferrals in calendaryear 2001 on account of hardship shall beprohibited from making elective deferralsand employee contributions under thisand all other plans of the employer for 6months after receipt of the distribution oruntil January 1, 2002, if later.

A participant who receives a distri-bution of elective deferrals in calendaryear 2001 on account of hardship shall beprohibited from making elective deferralsand employee contributions under thisand all other plans of the employer for theperiod specified in the provisions of theplan relating to suspension of elective de-ferrals that were in effect prior to thisamendment.


(The following amendment is optional.)

SECTION . DISTRIBUTIONUPON SEVERANCE FROMEMPLOYMENT

1. Effective date. If elected by the em-ployer in the adoption agreement, thissection shall apply for distributions andseverances from employment occurringafter the dates specified in the adoptionagreement.

2. New distributable event. A partici-pant’s elective deferrals, qualified non-elective contributions, qualified matchingcontributions, and earnings attributable tothese contributions shall be distributed onaccount of the participant’s severancefrom employment. However, such a dis-tribution shall be subject to the other pro-visions of the plan regarding distribu-tions, other than provisions that require aseparation from service before suchamounts may be distributed.


Section , Distribution Upon Sev-erance from Employment, shall apply fordistributions after:

(Enter a date no earlier than De-cember 31, 2001.),

(Choose one.)

regardless of when the sever-ance from employment occurred.

for severances from employ-ment occurring after . (Enterdate.)

SAMPLE PLAN AMENDMENTSFOR DEFINED BENEFIT PLANS

Sample Plan Amendment for § 611(a)of EGTRRA for Non-MultiemployerPlans

(The following sample amendment is op-tional for non-multiemployer plans thatdo not incorporate the § 415(b) limits byreference.

The last two sentences of section 3.2(b) ofthe amendment and the last sentence ofsection 3.2(c) may be modified to con-form to Notice 87–21 (1987–1 C.B. 458)and Notice 83–10 (1983–1 C.B. 536).These notices provide alternatives withregard to the application of the mortalitydecrement in making the adjustmentsunder section 3.2(b) and (c) of the amend-ment.

In addition to the following amendment,non-multiemployer plans should beamended as necessary to reflect EGTRRA§ 654(b). Section 654(b) of EGTRRAchanged the § 415 aggregation rules toprovide that, for limitation years begin-ning after December 31, 2001, a multiem-ployer plan is not combined or aggregated

with a non-multiemployer plan for pur-poses of applying the § 415(b)(1)(B)compensation limit to the non-multiem-ployer plan.

If a plan’s normal retirement age (NRA)is below 65, the plan’s provisions regard-ing post-NRA accruals and actuarial in-creases for deferred benefits must be co-ordinated with the following amendmentto ensure that the plan does not violate § 401(a) of the Code. In order to avoidsuch a violation, a plan may have to paybenefits at NRA, notwithstanding a par-ticipant’s continued employment, or pro-vide for the suspension of benefits in ac-cordance with § 411(a)(3)(B) of theCode.)

SECTION . LIMITATIONS ONBENEFITS

1. Effective date. This section shall beeffective for limitation years ending afterDecember 31, 2001.

2. Effect on participants. Benefit in-creases resulting from the increase in thelimitations of section 415(b) of the Codewill be provided to those participantsspecified by the employer in the adoptionagreement.

3. Definitions.

3.1 Defined benefit dollar limitation.The “defined benefit dollar limitation” is$160,000, as adjusted, effective January 1of each year, under section 415(d) of theCode in such manner as the Secretaryshall prescribe, and payable in the form ofa straight life annuity. A limitation as ad-justed under section 415(d) will apply tolimitation years ending with or within thecalendar year for which the adjustmentapplies.

3.2 Maximum permissible benefit: The“maximum permissible benefit” is thelesser of the defined benefit dollar limita-tion or the defined benefit compensationlimitation (both adjusted where required,as provided in (a) and, if applicable, in (b)or (c) below).

(a) If the participant has fewer than 10years of participation in the plan, thedefined benefit dollar limitation shallbe multiplied by a fraction, (i) the nu-merator of which is the number ofyears (or part thereof) of participationin the plan and (ii) the denominator of

September 17, 2001 286 2001–38 I.R.B.

which is 10. In the case of a participantwho has fewer than 10 years of servicewith the employer, the defined benefitcompensation limitation shall be multi-plied by a fraction, (i) the numerator ofwhich is the number of years (or partthereof) of service with the employerand (ii) the denominator of which is 10.

(b) If the benefit of a participant beginsprior to age 62, the defined benefit dol-lar limitation applicable to the partici-pant at such earlier age is an annualbenefit payable in the form of a straightlife annuity beginning at the earlier agethat is the actuarial equivalent of thedefined benefit dollar limitation applic-able to the participant at age 62 (ad-justed under (a) above, if required).The defined benefit dollar limitationapplicable at an age prior to age 62 isdetermined as the lesser of (i) the actu-arial equivalent (at such age) of the de-fined benefit dollar limitation com-puted using the interest rate andmortality table (or other tabular factor)specified in section of theplan and (ii) the actuarial equivalent (atsuch age) of the defined benefit dollarlimitation computed using a 5-percentinterest rate and the applicable mortal-i ty table as defined in section

of the plan. Any decrease inthe defined benefit dollar limitationdetermined in accordance with thisparagraph (b) shall not reflect a mor-tality decrement if benefits are not for-feited upon the death of the partici-pant. If any benefits are forfeitedupon death, the full mortality decre-ment is taken into account.

(c) If the benefit of a participant beginsafter the participant attains age 65, thedefined benefit dollar limitation applic-able to the participant at the later age isthe annual benefit payable in the formof a straight life annuity beginning atthe later age that is actuarially equiva-lent to the defined benefit dollar limita-tion applicable to the participant at age65 (adjusted under (a) above, if re-quired). The actuarial equivalent of thedefined benefit dollar limitation applic-able at an age after age 65 is deter-mined as (i) the lesser of the actuarialequivalent (at such age) of the definedbenefit dollar limitation computedusing the interest rate and mortality

table (or other tabular factor) specifiedin section of the plan and (ii)the actuarial equivalent (at such age) ofthe defined benefit dollar limitationcomputed using a 5-percent interestrate assumption and the applicablemortality table as defined in section

of the plan. For these pur-poses, mortality between age 65 andthe age at which benefits commenceshall be ignored.


Benefit Increases Resulting from the Increase in the Limitations of Section 415(b) of the Code

Benefit increases resulting from the in-crease in the limitations of section 415(b)of the Code shall be provided to: (Chooseone.)

all current and former participants(with benefits limited by section 415(b))who have an accrued benefit under theplan immediately prior to the effectivedate of this section (other than an accruedbenefit resulting from a benefit increasesolely as a result of the increases in limi-tations under section 415(b)).

all employees participating in theplan who have one hour of service on orafter the first day of the first limitationyear ending after December 31, 2001.

Sample Plan Amendment for §§ 611(a)and 654 of EGTRRA for MultiemployerPlans

(The following sample amendment is op-tional for multiemployer plans that do notincorporate the § 415(b) limits by refer-ence.

The last two sentences of section 3.2(b) ofthe amendment and the last sentence ofsection 3.2(c) may be modified to conformto Notice 87–21 (1987–1 C.B. 458) andNotice 83–10 (1983–1 C.B. 536). Thesenotices provide alternatives with regard tothe application of the mortality decrementin making the adjustments under section3.2(b) and (c) of the amendment.

Section 3.2(d) of the amendment shouldbe deleted if the plan’s limitation year isthe calendar year.

Section 654(b) of EGTRRA changed the§ 415 aggregation rules to provide that,

for limitation years beginning after De-cember 31, 2001, a multiemployer plan isnot combined or aggregated with a non-multiemployer plan for purposes of ap-plying the § 415(b)(1)(B) compensationlimit to the non-multiemployer plan. Thischange is not reflected in this amendmentfor multiemployer plans. Plan sponsorsshould review their plans to determine if aplan amendment for EGTRRA § 654(b)should be adopted.

If a plan’s normal retirement age (NRA)is below 65, the plan’s provisions regard-ing post-NRA accruals and actuarial in-creases for deferred benefits must be co-ordinated with the following amendmentto ensure that the plan does not violate § 401(a) of the Code. In order to avoidsuch a violation, a plan may have to paybenefits at NRA, notwithstanding a par-ticipant’s continued employment, or pro-vide for the suspension of benefits in ac-cordance with § 411(a)(3)(B) of theCode.)

SECTION . LIMITATIONS ONBENEFITS

1. Effective date. This section shall beeffective for limitation years ending afterDecember 31, 2001, except as provided insection 3.2(d).

2. Effect on participants. Benefit in-creases resulting from the increase in thelimitations of section 415(b) of the Codewill be provided to [enter one of the fol-lowing 2 options: all current and formerparticipants (with benefits limited by sec-tion 415(b)) who have an accrued benefitunder the plan immediately prior to theeffective date (other than an accrued ben-efit resulting from a benefit increasesolely as a result of the increases in limi-tations under section 415(b)); all employ-ees participating in the plan who have onehour of service on or after the first day ofthe first limitation year ending after De-cember 31, 2001].

3. Definitions.

3.1 Defined benefit dollar limitation.The “defined benefit dollar limitation” is$160,000, as adjusted, effective January 1of each year, under section 415(d) of theCode in such manner as the Secretaryshall prescribe, and payable in the form ofa straight life annuity. A limitation as ad-

2001–38 I.R.B. 287 September 17, 2001

justed under section 415(d) will apply tolimitation years ending with or within thecalendar year for which the adjustmentapplies.

3.2 Maximum permissible benefit: The“maximum permissible benefit” is the de-fined benefit dollar limitation (adjustedwhere required, as provided in (a) and, ifapplicable, in (b) or (c) below, and lim-ited, if applicable, as provided in (d)below).

(a) If the participant has fewer than 10years of participation in the plan, thedefined benefit dollar limitation shallbe multiplied by a fraction, (i) the nu-merator of which is the number ofyears (or part thereof) of participationin the plan and (ii) the denominator ofwhich is 10.

(b) If the benefit of a participant be-gins prior to age 62, the defined bene-fit dollar limitation applicable to theparticipant at such earlier age is an an-nual benefit payable in the form of astraight life annuity beginning at theearlier age that is the actuarial equiva-lent of the defined benefit dollar limi-tation applicable to the participant atage 62 (adjusted under (a) above, if re-quired). The defined benefit dollarlimitation applicable at an age prior toage 62 is determined as the lesser of(i) the actuarial equivalent (at suchage) of the defined benefit dollar limi-tation computed using the interest rateand mortality table (or other tabularfactor) specif ied in section

of the plan and (ii) the actu-arial equivalent (at such age) of thedefined benefit dollar limitation com-puted using a 5-percent interest rateand the applicable mortality table asdefined in section of the plan.Any decrease in the defined benefitdollar limitation determined in accor-dance with this paragraph (b) shall notreflect a mortality decrement if bene-fits are not forfeited upon the death ofthe participant. If any benefits are for-feited upon death, the full mortalitydecrement is taken into account.

(c) If the benefit of a participant be-gins after the participant attains age65, the defined benefit dollar limita-tion applicable to the participant at thelater age is the annual benefit payable

in the form of a straight life annuitybeginning at the later age that is actu-arially equivalent to the defined bene-fit dollar limitation applicable to theparticipant at age 65 (adjusted under(a) above, if required). The actuarialequivalent of the defined benefit dol-lar limitation applicable at an age afterage 65 is determined as (i) the lesserof the actuarial equivalent (at suchage) of the defined benefit dollar limi-tation computed using the interest rateand mortality table (or other tabularfactor) specified in section ofthe plan and (ii) the actuarial equiva-lent (at such age) of the defined bene-fit dollar limitation computed using a5-percent interest rate assumption andthe applicable mortality table as de-fined in section of the plan.For these purposes, mortality betweenage 65 and the age at which benefitscommence shall be ignored.

(d) Notwithstanding the above, for lim-itation years beginning before January1, 2002, the maximum permissible ben-efit will not exceed the defined benefitcompensation limitation. In the case ofa participant who has fewer than 10years of service with the employer, thedefined benefit compensation limita-tion shall be multiplied by a fraction,(i) the numerator of which is the num-ber of years (or part thereof) of servicewith the employer and (ii) the denomi-nator of which is 10.

Sample Plan Amendment for § 611(c)of EGTRRA

(The following sample amendment is op-tional. It should be adopted if the plansponsor wants to increase the limit on an-nual compensation taken into accountunder the plan in plan years beginningafter December 31, 2001, to $200,000.

The last sentence of the first paragraph ofthe amendment and the related adoptionagreement provision are applicable toplans that base benefit accruals in planyears beginning after December 31, 2001,on compensation for periods beginningbefore January 1, 2002. Also see Notice2001–56 for guidance regarding the effec-tive date of the change made by EGTRRA§ 611(c).)

SECTION _____. INCREASE INCOMPENSATION LIMIT

1. Increase in limit. The annual com-pensation of each participant taken intoaccount in determining benefit accrualsin any plan year beginning after Decem-ber 31, 2001, shall not exceed $200,000.Annual compensation means compensa-tion during the plan year or such otherconsecutive 12-month period over whichcompensation is otherwise determinedunder the plan (the determination pe-riod). For purposes of determining bene-fit accruals in a plan year beginning afterDecember 31, 2001, compensation forany prior determination period shall belimited as provided by the employer inthe adoption agreement.

2. Cost-of-l iving adjustment. The$200,000 limit on annual compensationin paragraph 1 shall be adjusted for cost-of-living increases in accordance withsection 401(a)(17)(B) of the Code. Thecost-of-living adjustment in effect for acalendar year applies to annual compen-sation for the determination period thatbegins with or within such calendaryear.


Compensation Limit for Prior Determina-tion Periods:

In determining benefit accruals in planyears beginning after December 31, 2001,the annual compensation limit in para-graph 1 of Section , Increase inCompensation Limit, for determinationperiods beginning before January 1, 2002,shall be: (Choose one.)

$200,000.

$150,000 for any determinationperiod beginning in 1996 or earlier;$160,000 for any determination periodbeginning in 1997, 1998, or 1999; and$170,000 for any determination periodbeginning in 2000 or 2001.


(The following sample amendment appliesto all plans that are required to include pro-visions to determine whether the plan istop-heavy and that apply if the plan is top-heavy. The amendment is required.

September 17, 2001 288 2001–38 I.R.B.

The amendment may be modified in ac-cordance with § 416(f) of the Code andthe regulations thereunder to provide thatthe minimum benefit requirement shallbe satisfied by benefits or contributions,including employer matching contribu-tions, under another plan, including an-other plan that consists solely of a cash ordeferred arrangement which meets the re-quirements of § 401(k)(12) of the Codeand matching contributions with respectto which the requirements of § 401(m)(11) of the Code are met. See section 3and the adoption agreement provision forthe sample plan amendment forEGTRRA § 613 for defined contributionplans.)


1. Effective date. This section shallapply for purposes of determiningwhether the plan is a top-heavy planunder section 416(g) of the Code for planyears beginning after December 31, 2001,and whether the plan satisfies the mini-mum benefits requirements of section416(c) of the Code for such years. Thissection amends section of theplan [enter the section of the plan that in-cludes top-heavy provisions].

2. Determination of top-heavy status.

2.1 Key employee. Key employee meansany employee or former employee (in-cluding any deceased employee) who atany time during the plan year that in-cludes the determination date was an offi-cer of the employer having annual com-pensation greater than $130,000 (asadjusted under section 416(i)(1) of theCode for plan years beginning after De-cember 31, 2002), a 5-percent owner ofthe employer, or a 1-percent owner of theemployer having annual compensation ofmore than $150,000. For this purpose,annual compensation means compensa-tion within the meaning of section415(c)(3) of the Code. The determinationof who is a key employee will be made inaccordance with section 416(i)(1) of theCode and the applicable regulations andother guidance of general applicability is-sued thereunder.

2.2 Determination of present values andamounts. This section 2.2 shall apply forpurposes of determining the present val-

ues of accrued benefits and the amountsof account balances of employees as ofthe determination date.

2.2.1 Distributions during year ending onthe determination date. The present val-ues of accrued benefits and the amountsof account balances of an employee as ofthe determination date shall be increasedby the distributions made with respect tothe employee under the plan and any planaggregated with the plan under section416(g)(2) of the Code during the 1-yearperiod ending on the determination date.The preceding sentence shall also apply todistributions under a terminated planwhich, had it not been terminated, wouldhave been aggregated with the plan undersection 416(g)(2)(A)(i) of the Code. Inthe case of a distribution made for a rea-son other than separation from service,death, or disability, this provision shall beapplied by substituting “5-year period”for “1-year period.”

2.2.2 Employees not performing ser-vices during year ending on the determi-nation date. The accrued benefits andaccounts of any individual who has notperformed services for the employer dur-ing the 1-year period ending on the de-termination date shall not be taken intoaccount.

3. Minimum benefits. For purposes ofsatisfying the minimum benefit require-ments of section 416(c)(1) of the Codeand the plan, in determining years ofservice with the employer, any servicewith the employer shall be disregardedto the extent that such service occursduring a plan year when the plan bene-fits (within the meaning of section410(b) of the Code) no key employee orformer key employee.

Sample Plan Amendment for §§ 641,642, and 643 of EGTRRA

(The following sample amendment is re-quired. However, the third paragraphshould be deleted in the case of plans thatdo not have after-tax employee contribu-tions.)

SECTION . DIRECTROLLOVERS OF PLANDISTRIBUTIONS

1. Effective date. This section shallapply to distributions made after Decem-ber 31, 2001.

2. Modification of definition of eligibleretirement plan. For purposes of the di-rect rollover provisions in section

of the plan, an eligible retire-ment plan shall also mean an annuity con-tract described in section 403(b) of theCode and an eligible plan under section457(b) of the Code which is maintainedby a state, political subdivision of a state,or any agency or instrumentality of a stateor political subdivision of a state andwhich agrees to separately account foramounts transferred into such plan fromthis plan. The definition of eligible retire-ment plan shall also apply in the case of adistribution to a surviving spouse, or to aspouse or former spouse who is the alter-nate payee under a qualified domestic re-lation order, as defined in section 414(p)of the Code.

3. Modification of definition of eligiblerollover distribution to include after-taxemployee contributions. For purposes ofthe direct rollover provisions in section

of the plan, a portion of a dis-tribution shall not fail to be an eligiblerollover distribution merely because theportion consists of after-tax employeecontributions which are not includible ingross income. However, such portionmay be paid only to an individual retire-ment account or annuity described in sec-tion 408(a) or (b) of the Code, or to aqualified defined contribution plan de-scribed in section 401(a) or 403(a) of theCode that agrees to separately account foramounts so transferred, including sepa-rately accounting for the portion of suchdistribution which is includible in grossincome and the portion of such distribu-tion which is not so includible.

Sample Plan Amendment to SpecifyAdditional Types of Rollovers Acceptedby the Plan Pursuant to EGTRRA§§ 641, 642, and 643

(A plan is not required to accept rollovercontributions, including direct rolloversunder § 401(a)(31) of the Code. The fol-lowing optional sample amendment maybe used to specify additional types ofrollovers the plan will accept pursuant toEGTRRA §§ 641, 642, and 643. A de-

2001–38 I.R.B. 289 September 17, 2001

fined benefit plan that accepts rolloversmust separately account for suchamounts.)

SECTION . ROLLOVERSFROM OTHER PLANS

If provided by the employer in the adop-tion agreement, the plan will accept par-ticipant rollover contributions and/or di-rect rollovers of distributions made afterDecember 31, 2001, from the types ofplans specified in the adoption agreement,beginning on the effective date specifiedin the adoption agreement.


Direct Rollovers:

The plan will accept a direct rollover ofan eligible rollover distribution from:(Check each that applies or none.)




Participant Rollover Contributions fromOther Plans:

The plan will accept a participant contri-bution of an eligible rollover distributionfrom: (Check each that applies or none.)




Participant Rollover Contributions fromIRAs:

The plan: (Choose one.)

will

will not

accept a participant rollover contributionof the portion of a distribution from an in-dividual retirement account or annuity de-scribed in section 408(a) or 408(b) of theCode that is eligible to be rolled over andwould otherwise be includible in gross in-come.

Effective Date of Direct Rollover andParticipant Rollover Contribution Provi-sions:

Section , Rollovers From OtherPlans, shall be effective:

(Enter a date no earlierthan January 1, 2002.)

September 17, 2001 290 2001–38 I.R.B.

Foundations Status of CertainOrganizations

Announcement 2001–89The following organizations have

failed to establish or have been unable tomaintain their status as public charities oras operating foundations. Accordingly,grantors and contributors may not, afterthis date, rely on previous rulings or des-ignations in the Cumulative List of Orga-nizations (Publication 78), or on the pre-sumption arising from the filing of noticesunder section 508(b) of the Code. Thislisting does not indicate that the organiza-tions have lost their status as organiza-tions described in section 501(c)(3), eligi-ble to receive deductible contributions.

Former Public Charities.The follow-ing organizations (which have beentreated as organizations that are not pri-vate foundations described in section509(a) of the Code) are now classified asprivate foundations:

Academie-Therapeutic Equestrian Park,Gladwin, MI

Affection Connection Rescue League,Macomb, MI

Affordable Housing Ventures, Inc., Dade City, FL

Affordable Neighborhood EconomicDevelopment, Inc., Jacksonville, FL

Aids Memorial Monument Foundation,Inc., Orlando, FL

Airseds Institute, Inc., Holland, MIAll Kentucky Ag Expo, Inc.,

Lexington, KYAmerican Cross Foundation, Amarillo, TXAmerican Foundation for Education in

Health Care, Inc., Tampa, FLAngels Group, Inc., Leesburg, FLAngelvision, Inc., Parsippany, NJAssociation of Ethiopian Community in

Colorado, Inc., Aurora, COAthletic Booster Club, Inc.,

New Smyrna Beach, FLAtlantic Non-Profit Housing Corp.,

Los Angeles, CAAutism Community of the Upper

Midwest, Fargo, NDB.V. Assisted Living, Inc., Melbourne, FLBay Area Cheerleader Association, Inc.,

Tampa, FLBird Lovers of the Bluegrass, Inc.,

Lexington, KY

Black-Footed Ferret RecoveryFoundation, Wheatland, WY

Black Wolf Farm, Inc., Lipan, TXBlessed Sacrament Athletic Boosters

Association, Inc., Fort Mitchell, KYBRE CD, Inc., Chicago, ILCandyland Kinder Kollege Enterprise,

Marrero, LACave Services, Inc., St. Petersburg, FLCedar Springs Volunteer Fire

Department, Inc., Scottsville, KYCentral Florida Center for Grieving

Children, Inc., Maitland, FLChase Place Housing, Inc.,

Dunn, NCCherith House Ministries, Inc.,

Blackey, KYChildrens Hope International, Inc.,

Plant City, FLChrist Healing & Restoration Ministries,

Inc., Walton, KYChrist the Redeemer Foundation, Inc.,

Louisville, KYCircle Non-Profit Housing Corporation,

Elizabethtown, KYCitizens Against Domestic Violence, Inc.,

New York, NYCJS Angels, Inc., Maitland, FLCloverport Community Volunteer Fire

Department, Incorporated, Cloverport, KY

Colins Park, Inc., Ormond Beach, FLCommunity Fund for America,

Colchester, VTComprehensive Healthcare Services, Inc.,

Auburn, ALConcern Citizens of Tripoli, Inc.,

Loughman, FLCornelia Lluberes Family Fund, Inc.,

New York, NYCristoasis, Elgin, ILDaughters of Jerusalem, Inc.,

Louisville, KYDeaf Heritage Library and Cultural

Center, Lehi, UTDeb Richard Foundation, Inc.,

Ponte Vedra Beach, FLDogwood Invitational, Inc.,

Jacksonville, FLDorton Volunteer Fire Department,

Dorton, KYEast Bay Rockies Fast Pitch Girls

Softball, Inc., Wilmauma, FLEast Little Rock Community

Development Corporation,East Little Rock, AR

Eastern KY Needy Childrens Foundation,Pikeville, KY

Emerald Coast Foundation,Fort Walton Beach, FL

Equal Start Child Development Center,Inc., Jacksonville, FL

Eye Research Foundation, Albany, NY

Faith in Action in Northwest Florida,Inc., Pensacola, FL

Family Services Home Makers, Inc.,Philadelphia, PA

Far Corners Medical Missions, Inc.,Cerritos, CA

Fishing for Success, Inc., Gainesville, FL

Fleming County Hospital Foundation,Inc., Flemingsburg, KY

Florida Association of Healthy StartsCoalition, Inc., Clearwater, FL

Florida Horse Trainers Association,Brooksville, FL

Florida Indian Alliance, Inc., Petersburg, FL

Florida Performing Arts, Inc., Ormond Beach, FL

Forsyth Foundation, Inc.,Golden Valley, MN

Friends of the Lynn Haven Library, Inc.,Lynn Haven, FL

Friends of Wakulla Springs State Park,Inc., Wakulla Springs, FL

Good Shepherd Christian Charities,Mitchell, IL

Grace Citadel of Social and Job TrainingPrograms, Inc., Newark, NJ

Green Networking for Orange County,Gibsonia, PA

Half Moon Bay Coastside Sister CityCommittee, Half Moon Bay, CA

Havanna Non-Profit HousingCorporation, Tampa, FL

Health Alliance Foundation, Inc.,Louisville, KY

Helping Hand Financial Services, Inc.,Dade City, FL

Henry Clay Football Boosters, Inc.,Lexington, KY

HPC Foundation For Hospice Care, Port Smith, AR

Independence Civic Association,Independence, KY

Institute For Health and HumanPerformance, Inc., Orlando, FL

International Leadership Foundation,Inc., Altamonte Springs, FL

2001–38 I.R.B. 291 September 17, 2001

Part IV. Items of General Interest

International Peace Contest, Beachwood, OH

Isef Kentucky, Inc., Louisville, KYJacksonville Community Access

Network, Inc., Jacksonville, FLKanapaha Park Development Committee,

Incorporated, Gainsville, FLKeenes Creek Youth Organization,

Duluth, MNKids Safe Education Foundation,

Encino, CAKinsman Transportation, Inc., Orlando, FLKorean Association of North Florida,

Inc., Jacksonville, FLLansing Housing Commission City-Wide

Resident Council, Lansing, MILee Middle School Foundation, Inc.,

Orlando, FLLUCI Let us Conserve, Del Rio, TXManaged Care Institute, Harleysville, PAManagement Technologies International,

Inc., Poulsbo, WAMangrove Action Group, Naples, FLMarion Non-Profit Housing Corporation,

Tampa, FLMaryland Space Research Institute, Ltd.,

Columbia, MDMason County Historical Society, Inc.,

Maysville, KYMedical Mission-Ecuador, Inc.,

Nicholasville, KYMercy Ministries, Inc., San Jose, CAMichaele Vollbracht Humanitarian

Foundation, Inc., Safety Harbor, FLNational Alliance for Quality Health

Care, Inc., Clearwater, FLNational Animal Health Alliance, Inc.,

Trilby, FLNational Forensic Science Technology

Center, Inc., Largo, FLNetwork of Humane Organization of

Florida, Inc., Beverly Hills, FLNeustart Social Services, Inc.,

Eagan, MNNew Beginnings of South West Florida,

Inc., Sarasota, FLNew Heart, Ashland, KYNew Life Hope Foundation, Inc.

Orlando, FLNorth American Indian Center of Western

Florida, Inc., Homosassa Springs, FLNorthside Improvements Corporation,

Lexington, KYOasis Ministries International, Inc., of

Tampa Florida, Ormond Beach, FLOhio Black Expo Boxing Association,

Inc., Cleveland, OHOhio County Kinship, Inc., Hartford, KY

Old James County Chapter of EastTennessee Historical Society,Ooltewah, TN

Open Door Community Services, Inc.,Titusville, FL

Operation Win, Inc., Houston, TXOrlando Singers, Inc.,

Altamonte Springs, FLPals Society, Inc., Milton, FLParent Education Project, Sanford, FLPet-A-Pup Therapy Dogs, Inc.,

Cape Coral, FLPhiladelphia Support Resources Corp.,

Jamison, PAPlantation Retreat and Conference

Center, Inc., Tallahassee, FLPleasant Hills Dolphins Swim Team,

Pleasant Hill, MOProud to be Good Charitable Foundation,

St. Augustine, FLPunjabi Sangh of Florida, Inc.,

Altamonte Springs, FLReach Out International, Inc.,

Clendenin, WVReaching Out Against Guns Endangering

Our Youth, Inc., Jacksonville, FLReaching Out For Christian Kids,

Scottsville, KYReality Check, Inc., Leesburg, FLRenewed Hope, Inc., Bartlesville, OKRex Logan Dean Hoskins Memorial

Fund, Inc., Manchester, KYRising Suns Home, Inc., Greensboro, NCRybnikov Foundation, Inc., Osprey, FLSafehouse Ministries, Inc., St. Louis, MOSanta Fe High School Band Booster

Association, Inc., Santa Fe, NMSearch & Rescue Dogs of Broken Arrow

Oklahoma, Inc., Broken Arrow, OKSeven Hills Charitable Fund, Inc.,

Spring Hill, FLShaktikrupa Charitable Foundation, Inc.,

Tampa, FLShelter to Endemic Wildlife Appreciation

Recovery Discovery, Orlando, FLShiloh Foundation, Rockville Center, NYSouth Louisville Football Association,

Louisville, KYSpace Coast Water Ski Club, Inc.,

Melbourne, FLSparta Volunteer Fire Department,

Sparta, KYSpeaking Life Ministries, Inc.,

Wilmington, DESt. John Lutheran School Foundation,

Inc., Ocala, FLSunset Terrace Resident Organization,

Little Rock, AR

Tampa Jazz Club, Inc., Tampa, FLTheatre of the Mind, Inc., Glendale, CAThistleberry Ministries, Belfair, WATime Has Come Ministry, Inc.,

Miami, FLTurning Point of Brevard, Inc.,

Merritt Island, FLTwin City Performing Arts, Inc.,

Monroe, LAVelvet Bird Cage, Chicago, ILVictim Trauma Care, Inc.,

Tallahassee, FLVolunteer Firefighter Charitable Trust,

Panama City, FLWCC II, Inc., Uncasville, CTWest Central Florida Urban League

Sponsoring Committee, Inc., Ocala, FLWest Fresno School District Foundation

No. 1819326, Fresno, CAWhat’s Up Club, Houston, TXWheelchair Sports USA, Inc., of Florida,

St. Petersburg, FLWildlife Sanctuary Fund, Inc.,

Ormond Beach, FLWiseburn Education Foundation,

Hawthorne, CAYouth in Action, Covington, KY

If an organization listed above sub-mits information that warrants the re-newal of its classification as a publiccharity or as a private operating founda-tion, the Internal Revenue Service willissue a ruling or determination letterwith the revised classification as tofoundation status. Grantors and contrib-utors may thereafter rely upon such rul-ing or determination letter as providedin section 1.509(a)–7 of the Income TaxRegulations. It is not the practice of theService to announce such revised classi-fication of foundation status in the Inter-nal Revenue Bulletin.

September 17, 2001 292 2001–38 I.R.B.

2001–38 I.R.B. i September 17, 2001

Revenue rulings and revenue procedures(hereinafter referred to as “rulings”)that have an effect on previous rulingsuse the following defined terms to de-scribe the effect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus,if an earlier ruling held that a principleapplied to A, and the new ruling holdsthat the same principle also applies to B,the earlier ruling is amplified. (Comparewith modified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling is being changed.

Distinguisheddescribes a situationwhere a ruling mentions a previouslypublished ruling and points out an essen-tial difference between them.

Modified is used where the substanceof a previously published position isbeing changed. Thus, if a prior rulingheld that a principle applied to A but notto B, and the new ruling holds that it ap-

plies to both A and B, the prior ruling ismodified because it corrects a publishedposition. (Compare with amplified andclarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly usedin a ruling that lists previously publishedrulings that are obsoleted because ofchanges in law or regulations. A rulingmay also be obsoleted because the sub-stance has been included in regulationssubsequently adopted.

Revoked describes situations where theposition in the previously published rul-ing is not correct and the correct positionis being stated in the new ruling.

Superseded describes a situation wherethe new ruling does nothing more thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the

new ruling does more than restate thesubstance of a prior ruling, a combinationof terms is used. For example, modifiedand superseded describes a situationwhere the substance of a previously pub-lished ruling is being changed in part andis continued without change in part and itis desired to restate the valid portion ofthe previously published ruling in a newruling that is self contained. In this casethe previously published ruling is firstmodified and then, as modified, is super-seded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling andthat list is expanded by adding furthernames in subsequent rulings. After theoriginal ruling has been supplementedseveral times, a new ruling may be pub-lished that includes the list in the originalruling and the additions, and supersedesall prior rulings in the series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in current use and for-merly used will appear in material published in theBulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security

Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

Definition of Terms

September 17, 2001 ii 2001–38 I.R.B.

Numerical Finding List1

Bulletins 2001–27 through 2001–37

Announcements:

2001–69, 2001–27 I.R.B. 232001–70, 2001–27 I.R.B. 232001–71, 2001–27 I.R.B. 262001–72, 2001–28 I.R.B. 392001–73, 2001–28 I.R.B. 402001–74, 2001–28 I.R.B. 402001–75, 2001–28 I.R.B. 422001–76, 2001–29 I.R.B. 672001–77, 2001–30 I.R.B. 832001–78, 2001–30 I.R.B. 872001–79, 2001–31 I.R.B. 972001–80, 2001–31 I.R.B. 982001–81, 2001–33 I.R.B. 1752001–82, 2001–32 I.R.B. 1232001–83, 2001–35 I.R.B. 2052001–84, 2001–35 I.R.B. 2062001–85, 2001–36 I.R.B. 2192001–86, 2001–35 I.R.B. 2072001–87, 2001–35 I.R.B. 2082001–88, 2001–36 I.R.B. 2202001–90, 2001–35 I.R.B. 2082001–91, 2001–36 I.R.B. 221

Court Decisions:

2070, 2001–31 I.R.B. 90

Notices:

2001–39, 2001–27 I.R.B. 32001–41, 2001–27 I.R.B. 22001–42, 2001–30 I.R.B. 702001–43, 2001–30 I.R.B. 722001–44, 2001–30 I.R.B. 772001–45, 2001–33 I.R.B. 1292001–46, 2001–32 I.R.B. 1222001–47, 2001–36 I.R.B. 2122001–48, 2001–33 I.R.B. 1302001–49, 2001–34 I.R.B. 1882001–50, 2001–34 I.R.B. 1892001–51, 2001–34 I.R.B. 1902001–52, 2001–35 I.R.B. 2032001–53, 2001–37 I.R.B. 2252001–54, 2001–37 I.R.B. 225

Proposed Regulations:

REG–110311–98, 2001–35 I.R.B. 204REG–106917–99, 2001–27 I.R.B. 4REG–103735–00, 2001–35 I.R.B. 204REG–103736–00, 2001–35 I.R.B. 204REG–100548–01, 2001–29 I.R.B. 67REG–106431–01, 2001–37 I.R.B. 272

Railroad Retirement Quarterly Rates:

2001–27, I.R.B. 1

Revenue Procedures:

2001–39, 2001–28 I.R.B. 382001–40, 2001–33 I.R.B. 1302001–41, 2001–33 I.R.B. 1732001–42, 2001–36 I.R.B. 2122001–43, 2001–34 I.R.B. 1912001–44, 2001–35 I.R.B. 2032001–45, 2001–37 I.R.B. 2272001–46, 2001–37 I.R.B. 263

Revenue Rulings:

2001–30, 2001–29 I.R.B. 462001–33, 2001–32 I.R.B. 1182001–34, 2001–28 I.R.B. 312001–35, 2001–29 I.R.B. 592001–36, 2001–32 I.R.B. 1192001–37, 2001–32 I.R.B. 1002001–38, 2001–33 I.R.B. 1242001–39, 2001–33 I.R.B. 1252001–41, 2001–35 I.R.B. 1932001–42, 2001–37 I.R.B. 2232001–43, 2001–36 I.R.B. 2092001–44, 2001–37 I.R.B. 223

Treasury Decisions:

8947, 2001–28 I.R.B. 368948, 2001–28 I.R.B. 278949, 2001–28 I.R.B. 338950, 2001–28 I.R.B. 348951, 2001–29 I.R.B. 638952, 2001–29 I.R.B. 608953, 2001–29 I.R.B. 448954, 2001–29 I.R.B. 478955, 2001–32 I.R.B. 1018956, 2001–32 I.R.B. 1128957, 2001–33 I.R.B. 1258958, 2001–34 I.R.B. 1838959, 2001–34 I.R.B. 1858960, 2001–34 I.R.B. 1768961, 2001–35 I.R.B. 1948962, 2001–35 I.R.B. 2018963, 2001–35 I.R.B. 197

1 A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., published inInternal Revenue Bulletins 2001–1 through 2001–26is in Internal Revenue Bulletin 2001–27, dated July2, 2001.

2001–38 I.R.B. iii September 17, 2001

Finding List of Current Actions onPreviously Published Items1

Bulletins 2001–27 through 2001–37

Announcements:

2000–48Modified byNotice 2001–43, 2001–30 I.R.B. 72

Notices:



2001–15Supplemented byNotice 2001–51, 2001–34 I.R.B. 190

Proposed Regulations:

LR–97–79Withdrawn byREG–100548–01, 2001–29 I.R.B. 67

LR–107–84Withdrawn byREG–100548–01, 2001–29 I.R.B. 67

REG–110311–98Supplemented byT.D. 8961, 2001–35 I.R.B. 194

REG–106917–99Corrected byAnn. 2001–86, 2001–35 I.R.B. 207



REG–107186–00Corrected byAnn. 2001–71, 2001–27 I.R.B. 26

REG–130477–00Supplemented byAnn. 2001–82, 2001–32 I.R.B. 123

REG–130481–00Supplemented byAnn. 2001–82, 2001–32 I.R.B. 123

Revenue Procedures:

93–27Clarified byRev. Proc. 2001–43, 2001–34 I.R.B. 191

97–13Modified byRev. Proc. 2001–39, 2001–28 I.R.B. 38

98–44Superseded byRev. Proc. 2001–40, 2001–33 I.R.B. 130

Revenue Procedures—continued:

99–27Superseded byRev. Proc. 2001–42, 2001–36 I.R.B. 212

99–49Modified and amplified byRev. Proc. 2001–46, 2001–37 I.R.B. 263


2000–39Corrected byAnn. 2001–73, 2001–28 I.R.B. 40

2001–2Modified byRev. Proc. 2001–41, 2001–33 I.R.B. 173


Revenue Rulings:

57–589Obsoleted byREG–106917–99, 2001–27 I.R.B. 4




70–379Obsoleted byRev. Rul. 2001–39, 2001–33 I.R.B. 125



92–19Supplemented byRev. Rul. 2001–38, 2001–33 I.R.B. 124

Treasury Decisions:

8948Corrected byAnn. 2001–90, 2001–35 I.R.B. 208

1 A cumulative list of current actions on previouslypublished items in Internal Revenue Bulletins2001–1 through 2001–26 is in Internal RevenueBulletin 2001–27, dated July 2, 2001.

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

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