[Federal Register Volume 66, Number 11 (Wednesday, January 17, 2001)]
[Proposed Rules]
[Pages 3954-3956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-131]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 601

[REG-129608-00]
RIN 1545-AY68


Notice to Interested Parties

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to the 
notice to interested parties. Before the IRS can issue an advance 
determination regarding the qualification of a retirement plan, a plan 
sponsor must provide evidence that it has notified all persons who 
qualify as interested parties that an application for an advance 
determination will be filed. These proposed regulations set forth 
standards by which a plan sponsor may satisfy the notice to interested 
parties requirement. The proposed regulations affect retirement plan 
sponsors, plan participants and other interested parties with respect 
to an application for a determination letter, and certain 
representatives of interested parties.

DATES: Written or electronic comments and requests for a public hearing 
must be received by April 17, 2001.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG-129608-00), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to: CC:M&SP:RU (REG-129608-00), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Internet by selecting the ``Tax Regs'' option on 
the IRS Home Page, or by submitting comments directly to the IRS 
Internet site at http://www.irs.gov/tax_regs/reglist.html.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
contact Pamela R. Kinard, (202) 622-6060; concerning the submission of 
comments, contact LaNita VanDyke, (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR parts 1 and 601) under section 7476 of the Internal 
Revenue Code of 1986 (Code).
    Section 7476(b)(2) provides that, with respect to a pleading filed 
by a petitioner for a request for a determination on the qualified 
status of a retirement plan under section 7476(a), the Tax Court may 
find the pleading to be premature unless the petitioner establishes to 
the satisfaction of the court that he has complied with the 
requirements prescribed by the regulations of the Secretary regarding 
the notice to interested parties.
    On May 21, 1976, Final Income Tax Regulations (TD 7421) under 
section 7476 were published in the Federal Register (41 FR 20874). The 
final regulations provide guidance on the nature and method of giving 
notice to interested parties. Existing Sec. 1.7476-1(a)(1) provides 
that in order to receive a determination on the qualified status of a 
retirement plan, the applicant must provide evidence that individuals 
who qualified as interested parties received notification of the 
determination letter application. In general, interested parties are 
defined in Sec. 1.7476-1(b)(1) as all present employees of the employer 
eligible to participate in the plan, and all other present employees 
whose principal place of employment is the same as the principal place 
of employment of the employees eligible to participate. For plan 
terminations, Sec. 1.7476-1(b)(5) defines interested parties as all 
present employees with accrued benefits, all former employees with 
vested benefits, and all beneficiaries of deceased former employees 
currently receiving benefits under the plan.
    Existing Sec. 1.7476-2(b) provides that the notice must be given in 
writing, must contain the information in Sec. 601.201(o)(3) (Statement 
of Procedural Rules) and must be given in the manner prescribed in 
Sec. 1.7476-2(c). For present employees, Sec. 1.7476-2(c)(1) provides 
that the notice must be given in person, by mailing, by posting, or by 
printing it in a publication of the employer or an employee 
organization that is reasonably available to employees. For interested 
parties who are in a unit of employees covered by a collective-
bargaining agreement, the notice must also be given in person or by 
mail to the collective-bargaining representative of the interested 
parties. For former

[[Page 3955]]

employees and beneficiaries who qualify as interested parties, 
Sec. 1.7476-2(c)(2)(i) provides that notice shall be given in person or 
by mail to the last known address of the interested party.
    On February 8, 2000, the IRS and Treasury published Final Income 
Tax Regulations (TD 8873) in the Federal Register (65 FR 6001) that 
provide safe harbor methods for plan sponsors and administrators using 
electronic media to transmit notices and consents required under 
sections 402(f), 411(a)(11), or 3405(e)(10)(B). Notice 99-1 (1999-2 
I.R.B. 8) and Announcement 99-6 (1999-4 I.R.B. 24) also provide 
guidance on the use of electronic media by retirement plans.
    In order to continue to advance the goal of permitting plan 
sponsors to use electronic media in administering their retirement 
plans, this amendment to the regulations eliminates the writing 
requirement for the notice to interested parties. Instead, the proposed 
regulations set forth new standards for satisfying the notice 
requirement that would ensure that interested parties will receive 
timely and adequate notice.

Explanation of Provisions

    This notice of proposed rulemaking would amend Secs. 1.7476-2 and 
601.201 regarding the nature and method of giving notices to interested 
parties. The proposed regulations do not change the information that 
the notice must contain or the time period in which the notice must be 
given. These regulations continue to provide that the notice to 
interested parties must contain the information and be given within the 
time period prescribed in Sec. 601.201(o)(3) (Statement of Procedural 
Rules). The proposed regulations would set forth new standards for 
providing the notice to interested parties. These new standards permit 
greater flexibility in the manner in which the notice may be provided.
    The proposed regulations provide that, in the case of a present 
employee, former employee, or beneficiary who is an interested party, 
the notice may be provided by any method that reasonably ensures that 
all interested parties will receive the notice. The method used must be 
reasonably calculated to provide timely and adequate notice to all 
interested parties. In addition, the proposed regulations provide that 
if an interested party who is a present employee is in a unit of 
employees covered by a collective-bargaining agreement between employee 
representatives and one or more employers, notice shall also be given 
to the collective-bargaining representative of such interested party by 
any method that reasonably ensures that the collective-bargaining 
representative will receive the notice. The proposed regulations also 
provide if the notice to interested parties is delivered using an 
electronic medium under a system that satisfies the requirements of 
Q&A-5 of Sec. 1.402(f)-1, the notice will be deemed to be provided in a 
manner that satisfies the notice to interested parties requirement.
    The proposed regulations provide that whether the notice to 
interested parties is given in a manner that satisfies the requirements 
under these regulations will be determined on the basis of all the 
facts and circumstances. These regulations further provide that since 
the facts and circumstances will differ depending on the interested 
party, it is possible that more than one method of delivery (including 
nonelectronic writing) must be used in order to ensure timely and 
adequate notice to all interested parties.
    The proposed regulations also revise Sec. 601.201 (Statement of 
Procedural Rules) to conform to the changes in Sec. 1.7476-2.

Proposed Effective Date

    These regulations are proposed to be effective with respect to 
applications made on or after the date they are published in the 
Federal Register as final regulations. Plan sponsors may rely on these 
proposed regulations for guidance pending the issuance of final 
regulations. If, and to the extent, future guidance is more restrictive 
than the guidance in these proposed regulations, the future guidance 
will be applied without retroactive effect.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations, and because 
these regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, these proposed 
regulations will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury specifically request comments on the 
clarity of the proposed rule and how it may be made easier to 
understand. All comments will be available for public inspection and 
copying.
    A public hearing may be scheduled if requested in writing by a 
person that timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Pamela R. Kinard of 
the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt 
and Government Entities), IRS. However, other personnel from the IRS 
and Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805 * * *
    Par. 2. Section 1.7476-2 is amended as follows:
    1. Paragraphs (b) and (c) are revised.
    2. Paragraph (d) is redesignated as paragraph (e) and a new 
paragraph (d) is added.
    3. Paragraph (e)(1) is revised.
    The revisions and additions read as follows:


Sec. 1.7476-2  Notice to interested parties.

* * * * *
    (b) Nature of notice. The notice required by this section shall --
    (1) Contain the information and be given within the time period 
prescribed in Sec. 601.201(o)(3) of this chapter (Statement of 
Procedural Rules); and,
    (2) Be given in a manner prescribed in paragraph (c) of this 
section.
    (c) Method of giving notice. (1) In the case of a present employee, 
former employee, or beneficiary who is an interested party, the notice 
may be provided by any method that reasonably ensures that all 
interested parties will

[[Page 3956]]

receive timely and adequate notice. If an interested party who is a 
present employee is in a unit of employees covered by a collective-
bargaining agreement between employee representatives and one or more 
employers, notice shall also be given to the collective-bargaining 
representative of such interested party by any method that satisfies 
this paragraph. Whether the notice is provided in a manner that 
satisfies the requirements of this paragraph will be determined on the 
basis of all the facts and circumstances. Because the facts and 
circumstances will differ depending on the interested party, it is 
possible that more than one method of delivery must be used in order to 
ensure timely and adequate notice to all interested parties.
    (2) If the notice to interested parties is delivered using an 
electronic medium under a system that satisfies the requirements of 
Q&A-5 of Sec. 1.402(f)-1, the notice will be deemed to be provided in a 
manner that satisfies the requirements of paragraph (c)(1) of this 
section.
    (d) Examples. The principles of this section are illustrated by the 
following examples:

    Example 1. (i) Employer A is amending Plan C and applying for a 
determination letter. Plan C is not maintained pursuant to one or 
more collective-bargaining agreements and is not being terminated. 
As part of the determination letter application process, Employer A 
provides the notice required under this section to interested 
parties. For present employees, Employer A provides the notice by 
posting the notice at those locations within the principal places of 
employment of the interested parties which are customarily used for 
employer notices to employees with regard to labor-management 
relations matters.
    (ii) In this Example 1, Employer A satisfies the notice to 
interested parties requirement described in this section.

    Example 2. (i) Employer B is amending Plan D and applying for a 
determination letter. As part of the determination letter 
application process, Employer B provides the notice required under 
this section to interested parties.
    (ii) Employer B has multiple worksites. Employer B's employees 
located at worksites 1 through 4 have access to computers at their 
workplace. However, Employer B's employees located at worksite 5 do 
not have access to computers.
    (iii) For present employees with access to computers (worksites 
1 through 4), Employer B provides the notice by posting the notice 
on Employer B's web site (Internet or intranet). Employer B 
customarily posts employer notices to employees at worksites 1 
through 4 with regard to labor-management relations matters on its 
web site. For present employees without access to computers 
(worksite 5), Employer B provides the notice by posting the notice 
at worksite 5 in a location that is customarily used for employer 
notices to employees with regard to labor-management relations 
matters.
    (iv) Employer B also sends the notice by e-mail to each 
collective-bargaining representative of interested parties who are 
present employees of Employer B covered by a collective-bargaining 
agreement between employee representatives and Employer B, using the 
e-mail address previously provided to Employer B by such collective-
bargaining representative.
    (v) In this Example 2, Employer B satisfies the notice to 
interested parties requirement described in this section.
    Example 3. (i) Employer C is terminating Plan E and applying for 
a determination letter as to whether the plan termination affects 
the continuing qualification of Plan E. As part of the determination 
letter application process, Employer C provides the notice required 
under this section to interested parties.
    (ii) All of Employer C's employees have access to computers. 
Each employee has an e-mail address where he or she can receive 
messages from Employer C. Employer C has set up kiosks for 
employees' use. The kiosks are located within the principal places 
of employment of the employees and are customarily used for employer 
notices to employees with regard to labor-management relations 
matters.
    (iii) For present employees, Employer C provides the notice by 
sending the notice by e-mail.
    (iv) Employer C also sends the notice by e-mail to each 
collective-bargaining representative of interested parties who are 
present employees of Employer C covered by a collective-bargaining 
agreement between employee representatives and Employer C, using the 
e-mail address previously provided to Employer C by such collective-
bargaining representative.
    (v) In addition, Employer C sends the notice by e-mail to each 
interested party who is a former employee or beneficiary, using the 
e-mail address previously provided to Employer C by such interested 
party. For any former employee or beneficiary who did not provide an 
e-mail address, Employer C sends the notice by regular mail to the 
last known address of such former employee or beneficiary.
    (vi) In this Example 3, Employer C satisfies the notice to 
interested parties requirement described in this section.

    (e) Effective date. (1) The provisions of this section shall apply 
to applications referred to in paragraph (a) of Sec. 1.7476-1 made on 
or after the date the regulations are published in the Federal Register 
as final regulations.

PART 601--STATEMENT OF PROCEDURAL RULES

    Paragraph 1. The authority citation for part 601 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 601.201 is amended as follows:
    1. In paragraph (o)(3)(xv), the first sentence is replaced by two 
new sentences.
    2. In paragraph (o)(3)(xvi), introductory text is revised.
    The revisions read as follows:


Sec. 601.201  Rulings and determination letters.

* * * * *
    (o) * * * (3) * * *
    (xv) When the notice referred to in paragraph (o)(3)(xiv) of this 
section is given in the manner set forth in Sec. 1.7476-2(c), the 
following time limitations for providing the notice apply. When the 
notice is given other than by mailing, it should be given not less than 
7 days nor more than 21 days prior to the date that the application for 
a determination is made. * * *
    (xvi) The notice referred to in paragraph (o)(3)(xiv) of this 
section shall be given in the manner prescribed in Sec. 1.7476-2 and 
shall contain the following information:
* * * * *

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 01-131 Filed 1-16-01; 8:45 am]
BILLING CODE 4830-01-U