Opinion ID: 185503
Heading Depth: 2
Heading Rank: 1

Heading: The 7476 Declaratory Judgment Provision and the Applicable Regulations

Text: 4 In 1974, Congress enacted the Employee Retirement Income Security Act (ERISA), sections of which were codified as part of the I.R.C. Pub. L. No. 93-406, 88 Stat. 829 (codified as amended at 29 U.S.C. 1001-1461 and scattered sections of the I.R.C., 26 U.S.C. (1994 & Supp. 1999)). Many of its provisions set forth requirements to which retirement and other benefit plans must conform. Among these requirements are the so-called backloading rules, mathematical formulae designed to prevent employers from providing rates of benefit accrual for older or more experienced workers that are excessive in relation to the rates of accrual for younger workers. See I.R.C. 401(a)(7) (providing that to qualify under ERISA, a trust must satisfy the requirements of 411); 411(b)(1) (setting forth various mathematical formulae that plans may use) (1994). When retirement plans comply with ERISA's requirements, they enjoy favorable tax treatment. ERISA is a remedial statute, whose express purpose is to protect, inter alia, the interests of participants in private pension plans and their beneficiaries. 29 U.S.C. 1001(c) (1994); Rettig v. Pension Benefit Guar. Corp., 744 F.2d 133, 155 n.54 (D.C. Cir. 1984) (discussing Congress' remedial purpose in enacting ERISA). 5 Internal Revenue Code 7476 gives the Tax Court jurisdiction to issue a declaration about a retirement plan's qualification for favorable tax treatment when there is a controversy involving the Secretary of the Treasury's determination that a plan qualifies or continues to qualify for such treatment. I.R.C. 7476(a). Any employee who qualifies as an interested party under regulations prescribed by the Secretary may petition the Tax Court for such a declaration. Id. The effect of the provision is to allow certain employees and other interested parties to act as watchdogs: when a plan or an amendment to a plan hurts those employees' interests by failing to conform to ERISA's requirements, those employees can seek a declaration preventing the plan from receiving a determination that will ensure favorable tax status. Employers and plan administrators are also interested parties who can use the declaratory judgment remedy provided in 7476. Id. 6 The regulations authorized by 7476(b)(1) define several categories of present employees as interested parties who can challenge plan determinations in most situations, including cases involving certain amendments to plans. Treas. Reg. 1.7476-1(b)(1)(i), (ii), (2)(ii), (3)(ii), (4), (5). The only instance in which former employees are included as interest ed parties is in the case of plan terminations. Id. 1.7476-1(b)(5). When an employer wishes to terminate a retirement plan that covers former employees with vested benefits under the plan, those former employees and all beneficiaries of deceased former employees currently receiving benefitsunder that plan have standing to seek a declaratory judgment. Id. 7 Additional regulations require the party applying for qualified status to notify the interested parties referred to in 7476(b)(1) of the application for a determination of qualified status. Treas. Reg. 1.7476-1(a)(1), 1.7476-2. The rules governing the content and timing of notice to interested parties are set forth at 26 C.F.R. 601.201 (2001). Part 601 of 26 C.F.R., entitled Statement of Procedural Rules, consists of rules issued by the Commissioner, rather than by the Secretary, pursuant to his power to promulgate rules for the government of his department, the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property. 5 U.S.C. 301 (1994). Section 601.201(o)(3)(xiv) requires, in cases in which plans apply for determinations of their qualification for special tax status, that notice of the application be given to all interested parties in the manner set forth in the regulations under section 7476. 26 C.F.R. 601.201(o)(3)(xiv). Section 601.201(o)(3)(xvi) requires the notice to contain, inter alia, a statement that any person to whom the notice is addressed is entitled to submit ... a comment on the question of whether the plan meets the requirements for qualification. Id. 601.201(o)(3)(xvi)(g). 8