Notice to Interested Parties

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Parts 1 and 601 [REG-129608-00] RIN
1545-AY68

TITLE: Notice to Interested Parties

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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/prod/tax_regs/regslist.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. §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 §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,
§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 §1.7476-2(b) provides that the notice must be given in
writing, must contain the information in §601.201(o)(3)
(Statement of Procedural Rules) and must be given in the manner
prescribed in §1.7476-2(c). For present employees,
§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 employees and
beneficiaries who qualify as interested parties, §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 §§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 §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 §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 §601.201 (Statement of
Procedural Rules) to conform to the changes in §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:

§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 §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 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 §1.402(f)-1, the notice will be deemed to be provided
in a manner that satisfies the requirements of paragraph (c)(1).

(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 §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:

§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 §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 §1.7476-2
and shall contain the following information:

* * * * *

Deputy Commissioner of Internal Revenue

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