us-irs-announcements-irb-2009-12-pdf•Internal Revenue Bulletin 2009-12 (PDF rendition): IRS Announcements
Internal Revenue Bulletin 2009-12 (PDF rendition): IRS Announcements
us-irs-announcements-irb-2009-12-pdfInternal Revenue Bulletin 2009-12 (PDF rendition): IRS AnnouncementsGuidance
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Bulletin No. 200 9-12 March 23, 2009 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX Rev. Rul. 2009–6, page 694. Fringe benefits aircraft valuation formula.TheStandard Industry Fare Level (SIFL) cents-per-mile rates and terminal charge in effect for the first half of 2009 are set forth for purposes of determining the value of non-commercial flights on employer-provided aircraft under section 1.61–21(g) of the regulations. EMPLOYEE PLANS T.D. 9447, page 694. Final regulations under section 401 and other sections of the Code provide guidance relating to certain automatic contribu- tion arrangements, eligible rollover distributions, forfeitures, and excise tax on certain excess contributions and excess ag- gregate contributions. Notice 2009–20, page 711. Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in March 2009; the 24-month average segment rates; the funding transitional segment rates applicable for March 2009; and the minimum present value transitional rates for February 2009. EXEMPT ORGANIZATIONS Announcement 2009–17, page 714. This announcement is a public notice of the suspension of the federal tax exemption under section 501(p) of the Code of a certain organization that has been designated as supporting or engaging in terrorist activity or supporting terrorism. Contribu- tions made to this organization during the period that the or- ganization’s tax-exempt status is suspended are not deductible for federal tax purposes. ADMINISTRATIVE Announcement 2009–18, page 714. This document contains corrections to final and temporary reg- ulations (T.D. 9441, 2009–7 I.R.B. 460) providing further guid- ance and clarification regarding methods under section 482 oftheCodetodeterminetaxableincomeinconnectionwitha cost-sharing arrangement in order to address issues that have arisen in administering the current regulations. Announcement 2009–19, page 715. This document contains corrections to proposed regulations (REG–144615–02, 2009–7 I.R.B. 561) providing further guid- ance and clarification regarding methods under section 482 oftheCodetodeterminetaxableincomeinconnectionwitha cost-sharing arrangement in order to address issues that have arisen in administering the current regulations. Announcement 2009–20, page 716. This document contains corrections to final regulations (T.D. 9442, 2009–6 I.R.B. 434) under section 1502 of the Code providing guidance regarding the treatment of transactions in- volving obligations between members of a consolidated group. Finding Lists begin on page ii. The IRS Mission Provide Americ a’s taxpayers top quality service by helping them understand an d meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative 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 application of the tax laws, including all rulings that supersede, revoke, mod- ify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indi- cated. Procedures relating solely to matters of internal man- agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—19 86 Code. This part i ncludes rulings and decisions based on provisions of the Intern al 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, Leg- islation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secre- tary (Enforcement). Part IV .—Items of General Interest. This par t includes notices of proposed rulemakings, disbar- ment an d suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The c ontents 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. March 23, 20092009–12 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 61. —Gross Income Defined 26 CFR 1.61– 21: Taxation of fringe benefits. Fringe ben efits aircraft valuation for- mula.TheS tandard Industry Fare Level (SIFL) cen ts-per-mile rates and terminal charge in e ffect for the first half of 2009 are set fo rth for purposes of determining the value of non-commercial flights on employer -provided aircraft under section 1.61–21( g) of the regulations. Rev. Rul. 20 09–6 For purpose s of the taxation of fringe benefits u nder section 61 of the Inter- nal Revenu e Code, section 1.61–21(g) of the Income Tax Regulations provides a rule for va luing noncommercial flights on employ er-provided aircraft. Section 1.61–21( g)(5) provides an aircraft valua- tion form ula to determine the value of such flights. The value of a flight is determined under the base aircraft valuation formula (also kn own as the Standard Industry Fare Level formu la or SIFL) by multiplying the SIFL ce nts-per-mile rates applicable for the per iod during which the flight was takenbyth e appropriate aircraft multiple provided i n section 1.61–21(g)(7) and then adding th e applicable terminal charge. The SIFL cent s-per-mile rates in the formula and the te rminal charge are calculated by the Depar tment of Transportation and are reviewed semi-annually. The follo wing chart sets forth the termi- nal charg e and SIFL mileage rates: Period During Which the Flight Is Taken Terminal Charge SIFL Mileage Rates 1/1/09 - 6/30/09 $45.4 1 Up to 500 miles = $.2484 per mile 501-1 500 miles =$.189 4 per mile Over 1500 miles = $.1821 per mile DRA FTING INFORMATION The principal author of this revenue rul ing is Kathleen Edmondson of the Off ice of Division Counsel/Associate Chi ef Counsel (Tax Exempt/Govern- me nt Entities). For further information re garding this revenue ruling, contact Ms . Edmondson at (202) 622–0047 (not a to ll-free call). Sec tion 401.—Qualified Pension, Profit-Sharing, and Stock Bonus Plans 26 CFR 1.401(k)–1: Certain cash or deferred ar- rangements. T.D. 9447 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 54 Automatic Contribution Arrangements AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains fi- nal regulations relating to automatic con- tribution arrangements. These regulations affect administrators of, employers main- taining, participants in, and beneficiaries of section 401(k) plans and other eligible plans that include an automatic contribu- tion arrangement. DAT ES:Effective date:These regulations are effective on February 24, 2009. App licability date:Except as pro- vid ed in §§1.401(k)–3(j)(1)(i) and 1.4 01(m)–2(a)(6)(ii), the final regula- tio ns relating to qualified automatic con- tr ibution arrangements (§§1.401(k)–2, 1. 401(k)–3, 1.401(m)–2, and 1.401(m)–3) ap ply to plan years beginning on or after Ja nuary 1, 2008. The regulations re- la ting to eligible automatic contribution a rrangements (§§1.402(c)–2, 1.411(a)–4, 1 .414(w)–1, and 54.4979–1) apply for p lan years beginning on or after January 1 , 2010. FOR FURTHER INFORMATION CONTACT: R. Lisa Mojiri-Azad, Dana Barry, or William D. Gibbs at (202) 622–6060 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information con- tained in these final regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 2009–12 I.R.B.694March 23, 2009 (44 U.S.C. 3507(d)) under control number 1545–2135 . The collection of information in these final regulations is in §§1.401(k)–3 and 1.414(w)–1. The information in §1.401(k)–3isrequiredtocomplywith the statutory notice requirements in sec- tions 401(k)(13) and 401(m)(12), and is expected to be included in the notices cur- rently provided to employees that inform them of their rights and benefits under the plan. The collection of information under §1.414(w)–1 is required to comply with the statutory notice requirements of section 414(w) and is expected to be in- cluded in the notices currently provided to employees that inform them of their rights and benefits under the plan. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background This document contains amendments to regulations under sections 401(k), 401(m), 402(c), 411(a), and 4979 of the Internal Revenue Code (Code) and new regulations under section 414(w) in order to reflect certain of the provisions of section 902 of the Pension Protection Act of 2006, Pub- lic Law 109–280 (PPA ’06), taking into account certain of the changes made by section 109(b) of the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110–458 (WRERA). Section 902 of PPA ’06 added sections 401(k)(13), 401(m)(12), and 414(w) to the Code to facilitate automatic contribution arrangements (sometimes referred to as automatic enrollment) in qualified cash or deferred arrangements under section 401(k), as well as in similar arrangements under sections 403(b) and 457(b). An au- tomatic contribution arrangement is a cash or deferred arrangement that provides that, in the absence of an affirmative election by an eligible employee, a default elec- tion applies under which the employee is treated as having made an election to have a specified contribution made on his or her behalf under the plan. Section 401(k)(1) provides that a profit-sharing, stock bonus, pre-ERISA money purchase, or rural cooperative plan will not fail to qualify under section 401(a) merely because it contains a qualified cash or deferred arrangement. Section 1.401(k)–1(a)(2) defines a cash or deferred arrangement (CODA) as an arrangement under which an eligible employee may make a cash or deferred election with respect to contributions to, or accruals or other benefits under, a plan that is intended to satisfy the requirements of section 401(a).Section 1.401(k)–1(a)(3)(i) defines a cash or deferred election as any direct or indirect election (or modification of an earlier election) by an employee to have the employer either: (1) provide an amount to the employee in the form of cash (or some other taxable benefit) that is not currently available; or (2) contribute an amount to a trust, or provide an accrual or other benefit, undera plan deferring the receipt of compensation. For purposes of determining whether an election is a cash or deferred election, §1.401(k)–1(a)(3)(ii) provides that it is irrelevant whether the default that applies in the absence of an affirmative election is cash (or some other taxable benefit) or a contribution, an accrual, or other benefit under a plan deferring the receipt of compensation. Contributions that are made pursuant to a cash or deferred election under a qualified CODA are commonly referred to as elective contributions. In order for a CODA to be a qualified CODA, it must satisfy a number of other requirements. Section 401(k)(2)(A) provides that the amount that each eligible employee under the arrangement may defer as an elective contribution must be available to the employee in cash. Section 1.401(k)–1(e)(2)(ii) provides that, in order for a CODA to satisfy this requirement, the arrangement must provide each eligible employee with an effective opportunity to make (or change) a cash or deferred election at least once during each plan year. Section 401(k)(2)(B) provides that a qualified CODA must provide that elective contributions may only be distributed after certain events, including hardship and severance from employment. Similar distribution restrictions apply under sections 403(b)(7) and 403(b)(11). Section 457(d)(1)(A) includes distribution restrictions for eligible governmental deferred compensation plans. Section 401(k)(3)(A)(ii) applies a spe- cial nondiscrimination test to the elective contributions of highly compensated em- ployees, within the meaning of section 414(q) (HCEs). Under this test, called the actual deferral percentage (ADP) test, the average percentage of compensation deferred for HCEs is compared annually to the average percentage of compensation deferred for nonhighly compensated em- ployees (NHCEs) eligible under the plan, and if certain limits are exceeded by the HCEs, corrective action must be taken. Pursuant to section 401(k)(8), one method of correction is distribution to HCEs of excess contributions made on their behalf. Section 401(m) provides a parallel test for matching contributions and employee after-tax contributions under a defined contribution plan, called the actual con- tribution percentage (ACP) test. Pursuant to section 401(m)(6), one method of cor- rection of the ACP test is distribution to HCEs of excess aggregate contributions made on their behalf. Sections 401(k)(12) and 401(m)(11) provide a design-based safe harbor un- der which elective contributions under a CODA and any associated matching contributions are treated as satisfying the ADP and ACP tests if the arrangement meets certain contribution and notice requirements. Sections 1.401(k)–3 and 1.401(m)–3 provide guidance on the requirements for this design-based safe harbor. Sections 401(k)(13) and 401(m)(12), added by PPA ’06 and effective for plan years beginning on or after January 1, 2008, provide an alternative design-based safe harbor for a CODA that provides for automatic contributions at a specified level and meets certain employer contribution, notice, and other requirements. A CODA that satisfies these requirements, referred to as a qualified automatic contribution arrangement (QACA), is treated as satisfying the ADP test and ACP test with respect to matching contributions. Section 414(w), added to the Code by section 902(d)(1) of PPA ’06 and effec- tive for plan years beginning on or after January 1, 2008, further facilitates au- tomatic enrollment by providing limited March 23, 20096952009–12 I.R.B. relief from the distribution restrictions under section 401(k)(2)(B), 403(b)(7), 403(b)(11), or 457(d)(1)(A) in the case of an eligible automatic contribution ar- rangement (EACA). Sections 414(w)(1) and 414(w)(2) pro- vide that an applicable employer plan that contains an EACA is permitted to allow employees to elect to receive a distribution equal to the amount of default elective contributions (and attributable earnings) made with respect to the employee beginning with the first payroll period to which the EACA applies to the employee and ending with the effective date of the election. The election must be made within 90 days after the date of the first default elective contribution with respect to the employee under the arrangement. Sections 414(w)(1)(A) and 414(w)(1)(B) provide that the amount of the distribution is includible in gross income for the taxable year in which the distribution is made, but is not subject to the additional income tax under section 72(t). Section 414(w)(3) defines an EACA as an arrangement under which: (1) a participant may elect to have the employer make payments as contributions under the plan on behalf of the participant, or to the participant directly in cash; (2) the participant is treated as having elected to have the employer make such contributions in an amount equal to a uniform percentageof compensation provided under the plan until the participant specifically elects not to have such contributions made (or specifically elects to have such contributions made at a different percentage); and (3) participants are provided a notice that satisfies the requirements of section 414(w)(4). Section 109(b)(4) of WRERA eliminated the provision previously found under section 414(w)(3)(C) that, in the absence of an investment election by the participant, default elective contributions must be invested in accordance with the regulations prescribed by the Secretary of Labor under section 404(c)(5) of the Employee Retirement Income Security Act of 1974 (ERISA). Section 414(w)(4) requires that, within a reasonable period before each plan year, each employee to whom the arrange- ment applies for such year receive written notice of the employee’s rights and obli- gations under the arrangement which is sufficiently accurate and comprehensive to apprise the employee of such rights and obligations. Section 414(w)(4)(A)(ii) requires that the notice be written in a manner calculated to be understood by the average employee to whom the ar- rangement applies. Section 414(w)(4)(B) provides that the notice must explain: (1) the employee’s rights under the ar- rangement to elect not to have elective contributions made on the employee’s behalf or to elect to have contributions made at a different percentage; and (2) how contributions made under the auto- matic contribution arrangement will be invested in the absence of any investment decision by the employee. In addition, theemployeemustbegivenareasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to contributions. In many respects, the notice under section 414(w)(4) is the same as the notice required under section 401(k)(13) for a QACA. Section 414(w)(5), as amended by section 109(b)(5) of WRERA, defines an applicable employer plan as a trust described in section 401(a) that is exempt from tax under section 501(a), a plan described in section 403(b), a section 457(b) plan that is maintained by a governmental employer described in section 457(e)(1)(A), a simplified employee pension the terms of which provide for a salary reduction arrangement described in section 408(k)(6), or a SIMPLEdescribedinsection408(p). Section 414(w)(6) provides that a with- drawal described in section 414(w)(1) is not to be taken into account for pur- poses of the ADP test. Section 109(b)(6) of WRERA amended section 414(w)(6) to provide that a withdrawal described in section 414(w)(1) is not to be taken into account for purposes of applying the limitation under section 402(g)(1). Section 411(a)(3)(G), as amended by section 902(d)(2) of PPA ’06, provides that a matching contribution shall not be treated as forfeitable merely because the matching contribution is forfeitable if it re- lates to a contribution that is withdrawn under an automatic contribution arrange- ment that satisfies the requirements of sec- tion 414(w). Section 4979 provides for an excise tax on excess contributions (within the mean- ing of section 401(k)(8)(B)) and excess ag- gregate contributions (within the meaning of section 401(m)(6)(B)) not distributed within 2 1 /2months after the close of the plan year for which the contributions are made. Section 902 of PPA ’06 amended section4979tolengthenthis2 1 /2month correction period for excess contributions and excess aggregate contributions under an EACA to 6 months. Thus, in the case of an EACA that is part of a section 401(k) plan, the section 4979 excise tax does not apply to any excess contributions or excess aggregate contributions which, together with income allocable to the contributions, are distributed or forfeited (if forfeitable) within 6 months after the close of the plan year. Section 902 of PPA ’06 amended sec- tion 4979(f)(2) to provide that any distri- butions of excess contributions and excess aggregate contributions (whether or not under an EACA) are includible in the employee’s gross income for the taxable year in which distributed. However, pursuant to sections 401(k)(8)(D) and 401(m)(7)(A), the distributions are not subject to the additional income tax under section 72(t). Section 902 of PPA ’06 also amended sections 401(k)(8), 401(m)(6), and 4979(f)(1) to eliminate the requirement that distributions of excess contributions or excess aggregate contributions (whether or not under an EACA) include income allocable to the period after the end of the plan year (gap period income). On November 8, 2007, proposed reg- ulations under sections 401(k), 401(m), 402(c), 411(a), 414(w), and 4979(f) re- lating to automatic contribution arrange- ments were issued (REG–133300–07, 2007–2 C.B. 1140 [72 FR 63144]). Writ- ten public comments were received on the proposed regulations, and a public hearing was held on May 19, 2008. After consideration of the comments, these final regulations adopt the provisions of the proposed regulations with certain modifi- cations, the most significant of which are highlighted in the Summary of Comments and Explanation of Revisions. In addition, these final regulations reflect the amend- ments to sections 401(k)(13) and 414(w) that were made by WRERA. 2009–12 I.R.B.696March 23, 2009 Summary of Comments and Explanation of Revisions I.Qualified Automatic Contribution Arrangement under Section 401(k)(13) A.Minimum percentage requirement Section 401(k)(13)(C)(iii) sets forth a series of minimum default contribution percentages that an automatic contribu- tion arrangement must satisfy in order to be a qualified automatic contribution ar- rangement (QACA). The final regulations clarify that the minimum percentage for theinitialperiodisbasedonwhenthe employee first has contributions made pursuant to a default election under the QACA. Thus, if an employee makes an affirmative election before the default contribution would have begun, then the initial period does not begin for the employee. The minimum percentages are increased for plan years after the initial period. Several commentators requested guid- ance on the application of the minimum percentage requirement in the case of a rehired employee. The final regulations provide that the minimum percentages are determined without regard to whether an employee has continued to be eligible to make contributions under the plan. Thus, the minimum percentage is generally de- termined based on the number of years since the date the employee first had de- fault contributions made under the QACA. However, in response to recordkeeping concerns raised by commentators, the final regulations also provide that a plan is permitted to treat an employee who for an entire plan year did not have contributions made pursuant to a default election under the QACA as if the employee had not had such contributions for any prior plan year as well. For example, if an employee terminates in one plan year, remains terminated for a full plan year, and is rehired in a subsequent plan year, the plan is permitted to provide that a new initial period begins after the employee is rehired, regardless of whether the employee had in fact had contributions made pursuant to a default election under the QACA in some earlier plan year. Other commentators asked whether plans are permitted to limit the duration of an affirmative election or to require employees to make new elections. Under the final regulations, automatic enroll- ment applies for periods during which the affirmative election is not in effect. Accordingly, a plan could specifically provide that an affirmative election ex- pires and, thus, require an employee to make a new affirmative election if he or she wants the prior rate of elective con- tribution to continue. In the absence of a second affirmative election, the employee will be automatically enrolled at the plan’s default percentage (which must meet the minimum percentage requirement de- scribed in the preceding paragraph). For example, if an employer has a QACA beginning in 2009 and the plan provides that all affirmative elections in effect on December 31, 2010 expire on that date, then, if the QACA continues into 2011, all eligible employees who do not make a new affirmative election will be automatically enrolled under the QACA. Similarly, if an employee who made an affirmative election takes a hardship withdrawal under the plan and the plan suspends elective contributions for 6 months after receipt of the hardship distribution in accordance with §1.401(k)–3(c)(6)(v)(B), then, if the plan does not reinstate the affirmative election at the end of the 6 months, the employer must automatically enroll the employee. The final regulations provide that, for plan years beginning on or after January 1, 2010, compensation for purposes of determining default contributions means safe harbor compensation as defined in §1.401(k)–3(b)(2). B.Uniformity requirement Section 401(k)(13)(C)(iii) provides that the default percentage must be ap- plied uniformly. The proposed regulations provided that a plan does not fail to sat- isfy this uniformity requirement merely because: the percentage varies based on the number of years an eligible employee has participated in the automatic con- tribution arrangement intended to be a QACA; the rate of elective contributions under a cash or deferred election that is in effect immediately prior to the effective date of the default percentage under the QACA is not reduced; the rate of elective contributions is limited so as not to exceed the limits of sections 401(a)(17), 402(g) (determined with or without catch-up contributions described in section 402(g)(1)(C) or 402(g)(7)), and 415; or the default election is not applied during the period an employee is not permitted to make elective contributions in order for the plan to satisfy the requirements of §1.401(k)–3(c)(6)(v)(B). Some commentators asked whether a QACA may provide for an increase in the default percentage in the middle of the plan year. These commentators suggested that some employers wanted to provide for such an increase to coincide with salary increases or performance evaluations. To address this issue, the final regu- lations expand the exception to the uni- formity requirement that allows variance based on the number of years since the date the employee first had contributions made pursuant to a default election under an arrangement that is intended to be a QACA. Under the final regulations, the default percentage may also vary based on the portions of years since that date. Thus, the plan may provide for the increase of the default percentage mid-year, as long as the percentage is uniform based on the number of years or portions of years since an employee first had contributions made pursuant to a default election and satisfies the minimum percentage requirement throughout the plan year. C.Notice timing requirement The proposed regulations provided that a QACA satisfies the notice requirement of section 401(k)(13)(E) only if the notice satisfies the notice requirements under section 401(k)(12) and satisfies the additional requirements found in section 401(k)(13)(E)(ii). Section 401(k)(12)(D) and section 401(k)(13)(E)(i) provide that the notice must be provided within a reasonable period before each plan year to each employee eligible to participate in the QACA. The final regulations under section 401(k)(12) provide that the determination of whether the notice satisfies the timing requirement is based on all of the relevant facts and circumstances. The timing re- quirement is deemed satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is provided to each eligible employee. In the case where an eligible employee March 23, 20096972009–12 I.R.B. is not provided the notice within this 30–90 day period because the employee becomes eligible after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the employee becomes eligi- ble and no later than the date the employee becomes eligible. The proposed regulations under sec- tion 401(k)(13) applied these same rules to the notice required under section 401(k)(13)(E)(i). In accordance with section 401(k)(13)(E)(ii), the proposed regulations also provided that the notice satisfies the timing requirements only if it is provided sufficiently early so that the employee has a reasonable period of time after receipt of the notice and before the first contribution is made pursuant to a default election under the arrangement to make an affirmative election to defer a different amount or percentage. Some commentators raised a concern about meeting the notice requirement for employees who are eligible to participate in the plan immediately upon hire. Com- mentators suggested that employers be given a grace period to provide notice, such as 15 days after hire, as long as the employee has an effective opportunity to elect not to make contributions or make an affirmative election to defer a different amount or percentage of compensation prior to the first contribution made pur- suant to a default election. The final regulations modify the deemed satisfaction of timing requirement set forth in §1.401(k)–3(d)(3)(ii). The regulations provide that if it is not practi- cable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible, the notice will nonetheless be treated as provided timely if it is provided as soon as practi- cable after that date and the employee is permitted to elect to defer from all types of compensation that may be deferred under the plan earned beginning on that date. Thus, an employer is required to provide the notice to the employee prior to the pay date for the payroll period that includes the date the employee becomes eligible. This change applies to the safe harbor describedinsection401(k)(12),aswellas section 401(k)(13). The final regulations provide rules for when the default election must first be- come effective. In accordance with section 401(k)(13)(E)(ii)(III), the final regulations provide that the default election must be effective no earlier than a reasonable pe- riod of time after the receipt of the notice (in order to provide the employee with a reasonable period of time to make an affir- mative election). However, the final reg- ulations provide that the default election must be effective no later than the earlier of the pay date for the second payroll pe- riod that begins after the date the notice is provided or the first pay date that oc- curs at least 30 days after the notice is provided. Notwithstanding any delay in when the first default contribution is made, nonelective contributions that are based on a full year’s contributions and the rate of matching contributions that varies based on compensation must be based on the safe harbor compensation earned since the par- ticipant was first eligible under the plan. D.Exclusion of current affirmative elections from automatic enrollment The proposed regulations provided that an automatic contribution arrange- ment does not fail to be a QACA merely because the default election is not applied to an employee who was eligible under the cash or deferred arrangement (or a predecessor arrangement) immediately prior to the effective date of the QACA and on that effective date had an affirmative election in effect (that remains in effect) to have elective contributions made on his or her behalf (in a specified amount or percentage of compensation) or not have elective contributions made on his or her behalf. Some commentators requested that em- ployers be permitted to treat employees who did not affirmatively elect to make elective contributions under the plan as though they had affirmatively elected zero. These commentators stated that it would be administratively difficult to determine which employees had affirmative elections in effect prior to the effective date of the QACA. The regulations do not expand the exception for automatically enrolling cur- rent employees to employees who have not made an affirmative election. Un- der section 401(k)(13)(C)(iv)(II), only those employees who had an affirmative election in effect immediately before the QACA became effective are permitted to be excluded from having a default election applytothem. E.Other topics Commentators requested clarification as to whether the safe harbor nonelec- tive and matching contributions made under a QACA are eligible for hardship withdrawal. The final regulations clarify that these safe harbor contributions are subject to the withdrawal restrictions found in §1.401(k)–1(d) that apply to QNECs and QMACs. Thus, the maximum distributable amount under §1.401(k)–1(d)(3)(ii) does not include earnings, QNECs, QMACs, or these safe harbor contributions. A commentator asked whether safe har- bor matching or nonelective contributions were required for all employees, including those eligible employees with affirmative elections in effect. The final regulations retain the requirement that all eligible em- ployees must receive safe harbor matching contributions or nonelective contributions, whichever is applicable. The special treat- ment under section 401(k)(13)(C)(iv) for employees who have an affirmative elec- tion in effect does not affect whether safe harbor matching contributions or nonelec- tive contributions are required to be made for those employees. II.Eligible Automatic Contribution Arrangement under Section 414(w) A.Non-universal eligible automatic contribution arrangements The proposed regulations provided that an eligible automatic contribution arrange- ment (EACA) is an automatic contribution arrangement under an applicable employer plan that applies to each “eligible employee.” An eligible employee was defined as an employee who is eligible to make a cash or deferred election under the plan. Therefore, under the proposed regulations, an employer was required to apply automatic enrollment to all current and new employees eligible to make a deferral election under the applicable plan who did not have an affirmative election in effect. Commentators requested flexibility in the implementation of an EACA by permitting an employer to apply automatic 2009–12 I.R.B.698March 23, 2009 enrollment only to those employees who are hired on or after the effective date of the EACA. The final regulations modify the rule in the proposed regulations to provide that the employees who must be subject to the automatic enrollment provisions under an EACA are only those employees who are specified in the plan as being covered employees under the EACA. Thus, automatic enrollment under an EACA need not apply to all employees eligible to make a deferral election under the applicable plan, but only to those employees who are covered by the EACA. The final regulations provide that the plan document must specify the employ- ees who are covered under the EACA and must state whether an employee who makes an affirmative election remains covered under the EACA. Under section 414(w)(4), the notice regarding an employee’s rights and obligations under the arrangement need only be provided to those employees who are covered employees under the EACA as set forth in the plan. Thus, if a plan provides that an employee who makes an affirmative election is no longer a covered employee under the EACA, then the employee is not required to receive the notice after he or she makes an affirmative election. With respect to the correction of ex- cess contributions for a plan year be- ginning on or after January 1, 2010, the final regulations provide that a plan that contains an EACA is entitled to the extended 6-month period for correcting excess contributionsand excess aggregate contributions without incurring an excise tax under section 4979, only if all eligible NHCEs and eligible HCEs are covered employees under the EACA for the entire plan year (or the portion of the plan year that the employees are eligible employees). Thus, if an EACA covers fewer than all the eligible employees under the plan, the employer will be unable to take advantage of the extension under section 4979. B.Uniformity requirement The proposed regulations provided that an EACA must provide that the default elective contribution is a uniform percentage of compensation. The exceptions to the uniformity requirement for a QACA set forth in §1.401(k)–3(j)(2)(iii) also applied to an EACA (without regard to whether the arrangement was intended to be a QACA). Some commentators requested that the uniformity requirement be eased if the plan is a multiemployer plan or a multiple employer plan, or if the sponsor wants to have different default contributions for collectively bargained and non-col- lectively bargained employees. The final regulations do not specifically permit this. However, these plan sponsors can accomplish a similar goal by establish- ing separate EACAs for each of these separate groups. To address the possibility that a plan may contain more than one EACA, the final regulations provide that the requirement that the default elective contributions under an EACA be a uniform percentage of compensation is applied by aggregating all automatic contribution arrangements within the plan that are intended to be EACAs. For this purpose, in the case of a plan subject to section 410(b), the definition of plan is determined after applying the disaggregation rules of §1.401(k)–1(b)(4). Thus, a plan that is subject to the rules of section 410(b) is permitted to provide for separate EACAs for different groups of collectively bargained employees or different employers in a multiple employer plan with a different default percentage for each EACA, but such a plan could not have different default percentages apply to different groups of employees that are in the same plan after application of the disaggregation rules of §1.401(k)–1(b)(4). C.Mid-year implementation of an eligible automatic contribution arrangement Section 401(k)(12)(D) contains the no- tice requirement applicable to a plan that is relying on the safe harbor for nondiscrim- ination testing in section 401(k)(12). It re- quires that the notice be provided “within a reasonable period before any year.” The final regulations under section 401(k)(12) provide that the notice must be provided within a reasonable period of time before the plan year (or, in the first year that the employee becomes eligible, within a reasonable period of time before the em- ployee becomes eligible). The final reg- ulations further provide that whether this timing requirement is satisfied is based upon all of the relevant facts and circum- stances and that the timing requirement is deemed to be satisfied if the notice is given at least 30 days (and no more than 90 days) before the beginning of each plan year. In the case of an employee who becomes el- igible after the 90th day before the begin- ning of the plan year, the timing require- ment is deemed to be satisfied if the notice is provided no more than 90 days before the employee becomes eligible for the cash or deferred arrangement (and no later than the date the employee becomes eligible). Section 401(k)(13)(E), which con- tains the notice requirements applica- ble to a QACA, and section 414(w)(4), which contains the notice requirements applicable to an EACA, each require that the notice be provided “within a reasonable period before each plan year.” The proposed regulations interpreted these provisions in a manner consistent with the interpretation in the final regulations under section 401(k)(12) of the almost identical language in that section, including the requirement that the notice be provided within a reasonable period of time before each plan year, except that, for individuals who become eligible employees during the plan year, the notice need only be provided within a reasonable period before the employee becomes an eligible employee. Some commentators noted that the notice timing requirement could be inter- preted to preclude the establishment of an EACA in the middle of the plan year, in situations where the notice was not provided before the beginning of the plan year. They suggested that the statutory requirement to provide notice before the start of each plan year should not preclude starting an EACA in the middle of the plan year of an existing cash or deferred arrangement that is not an EACA, if notice is provided to each eligible employee within a reasonable period of time before the employee becomes eligible for the arrangement. The final regulations do not adopt this suggestion. Instead, the final reg- ulations generally retain the rule in the proposed regulations, which is consis- tent with the statutory requirements of section 414(w)(4) and with the interpre- tation of the identical language in section 401(k)(13) and the almost identical lan- guage in section 401(k)(12). The final regulations do, however, treat individuals March 23, 20096992009–12 I.R.B. who first become covered under an auto- matic contribution arrangement as a result of a change in employment status the same as individuals who first become eligible to make a cash or deferred election for pur- poses of the notice timing requirements. Consistent with the revisions to the deemed timing rule for purposes of sec- tions 401(k)(12) and 401(k)(13) described in this preamble, the final regulations pro- vide that if it is not practicable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible, the notice will nonethe- less be treated as provided timely if it is provided as soon as practicable after that date and the employee is permitted to elect to defer from all types of compensation that may be deferred under the plan earned beginning on that date. Thus, an employer is required to provide the notice to the em- ployee prior to the pay date for the payroll period that includes the date the employee becomes eligible. D.Permissible withdrawal Section 414(w)(2) limits the period for the special election to withdraw default elective contributions to the first 90 days after the date of the first default contri- bution under the EACA. The proposed regulations provided that the date of the first default elective contribution is the date that the compensation that is subject to the cash or deferred election would otherwise have been included in gross income. Some commentators suggested that the 90-day period start from the date the first contribution is received by the plan for the participant. The final regulations retain the rule in the proposed regulations that the 90-day period starts after the date the com- pensation would otherwise have been in- cluded in gross income. This date is used for other relevant Code provisions, such as the application of the section 402(g) limi- tation. If an employer is concerned about inad- vertently permitting withdrawal elections outside the 90-day period due to misiden- tifying the date of the first default elective contribution as defined under the regula- tions, the plan is permitted to limit the pe- riod during which the election can be made to less than 90 days. Under the final reg- ulations, a plan is permitted to set an ear- lier deadline for the election to withdraw default elective contributions. However, if a plan offers a permissible withdrawal for covered employees, the election period for the covered employees must be at least 30 days. The final regulations also provide that the date of the first default elec- tive contribution must take into account any default elective contributions made under any EACA under the plan. For this purpose, all EACAs under the plan must be aggregated. However, if the plan provides for multiple EACAs to cover different employees in different portions of the plan and these portions of the plan are mandatorily disaggregated under section 410(b), then there is no requirement to aggregate those different EACAs. Thus, in the case where a plan that is subject to the rules of section 410(b) has separate EACAs for different groups of collectively bargained employees or different employers in a multiple employer plan, the date for determining the first default elective contribution is determined with respect to each EACA within the separate disaggregated plan. In addition, in response to comments, the final regulations provide that for purposes of determining the date of the first default elective contribution, a plan is permitted to treat an employee who for an entire plan year did not have default elective contributions made under the EACA as if the employee had not had such contributions for any prior plan year as well. Commentators asked whether em- ployers can restrict the permissible with- drawals based on subsequent affirmative elections made by employees. For ex- ample, one commentator requested that an employer be permitted to limit the permissible withdrawal election to those employees who are automatically enrolled and who do not make a subsequent affir- mative election of an amount (other than zero) within the 90-day election period. Under a section 401(a) plan or a section 403(b) plan, an employer is not permitted to condition an employee’s right to take a permissible withdrawal on the level of the employee’s deferral election under the plan. Thus, an employee’s permissible withdrawal rights may not be restricted based upon the employee’s subsequent affirmative election. The proposed regulations provided that theeffectivedateofthepermissiblewith- drawal election must be no later than the last day of the payroll period that begins af- ter the date the election is made. This rule was included in the proposed regulations to limit section 414(w) withdrawals to de- fault elective contributions made for short periods of time. In response to comments, the final regulations modify this rule to provide that the latest effective date of the permissible withdrawal election cannot be after the earlier of: (1) the pay date for the second payroll period beginning after the election is made, or (2) the first pay date that occurs at least 30 days after the elec- tion is made. Of course, a plan may permit an earlier effective date. Commentators also requested that the IRS clarify when the permissible with- drawal amount must be distributed. The final regulations clarify that the permissi- ble withdrawal distribution must be made in accordance with the plan’s ordinary timing procedures for processing distri- butions and making distributions. Thus, the permissible withdrawal distribution should be processed and distributed no differently than any other distribution per- mitted under the plan. The proposed regulations provided that a permissible withdrawal distribution may be reduced by any generally applicable fees, but specified that the plan may not charge a different fee for a distribution un- der section 414(w) than would apply to other distributions. In response to com- ments, the final regulations clarify that the plan cannot charge a higher fee for a dis- tribution under section 414(w) than would apply to any other distributions of cash. One commentator requested guidance with respect to the withholding treatment of permissible withdrawal amounts. These amounts are subjectto section 3405(b). E.Forfeiture of employer matching contributions The proposed regulations provided that matching contributions with respect to de- fault elective contributions that had been distributed pursuant to a permissible with- drawal election must be forfeited. In re- sponse to comments, the final regulations clarify that the forfeiture applies to any matching contributions that have been al- located to the participant’s account, ad- 2009–12 I.R.B.700March 23, 2009 justed for allocable gain or loss. The fi- nal regulations provide that the plan is per- mitted to provide that matching contribu- tions will not be made with respect to any withdrawal made under §1.414(w)–1(c) if the withdrawal has been made prior to the date as of which the matching contribu- tions would otherwise be allocated. III.Other Issues A.Other automatic contribution arrangements Many employers have previously adopted automatic contribution arrange- ments as originally described in prior guidance, such as Rev. Rul. 2000–8, 2000–1 C.B. 617. This prior guidance, which was reflected in regulations under section 401(k) issuedin 2004, permitted employers to automatically enroll employ- ees in a section 401(k) plan. These final regulations do not affect any automatic contribution arrangement that is not in- tendedtobeaQACAoranEACA. B.Other issues under section 902 of PPA ’06 and WRERA These regulations also reflect the mod- ification to the correction rules for excess contributions and excess aggregate con- tributions provided in section 902(e) of PPA ’06. These provisions include: (1) the change in the year of inclusion in in- come for distributedexcess contributions to the year of distribution; and (2) the elimination of the requirement to include gap period income for a distribution that is made to correct an ADP or ACP fail- ure. However, these regulations do not reflect: (1) the change made by section 109(b)(3) of WRERA that eliminates the requirement to include gap period income for a distribution of an excess deferral under section 402(g); (2) the additional time to correct excess contributions under a SARSEP that includes an EACA; (3) the tax treatment of excess contributions and earnings thereon under a SARSEP; and (4) guidance on SIMPLE IRA plans that include an EACA. Effective Date Exceptasprovidedin §§1.401(k)–3(j)(1)(i) and 1.401(m)–2(a) (6)(ii), the final regulations relating to qualified automatic contribution arrangements (§§1.401(k)–2, 1.401(k)–3, 1.401(m)–2, and 1.401(m)–3) apply to plan years beginning on or after January 1, 2008. The regulations relating to eligible automatic contribution arrangements (§§1.402(c)–2, 1.411(a)–4, 1.414(w)–1, and 54.4979–1) apply for plan years beginning on or after January 1, 2010. For plan years that begin in 2008, a plan must operate in accordance with a good faith interpretation of section 414(w). For this purpose, a plan that operates in accordance with the proposed regulations under §1.414(w)–1 or these final regulations will be treated as operating in accordance with a good faith interpretation of section 414(w). Special Analyses It has been determined that these fi- nal regulations are not a significant regu- latory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has been determined that 5 U.S.C. 533(b) of the Administrative Pro- cedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby cer- tified that the collection of information in these final regulations will not have a sig- nificant economic impact on a substantial number of small entities. This certification is based on the fact that most small enti- ties that maintain plans that will be eligible for the safe harbor provisions of sections 401(k) and 401(m) or the distribution re- lief provisions of section 414(w) currently provide a similar notice with which this notice can be combined. Therefore, an analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Inter- nal Revenue Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advo- cacy of the Small Business Administration for comments on its impact on small busi- ness. Drafting Information The principal authors of these regula- tions are Dana Barry, William D. Gibbs, and R. Lisa Mojiri-Azad, Office of Di- vision Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in the development of these regulations. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1 and 54 are amended as follows: Part 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended to read as follows: Authority: 26 U.S.C. 401(m)(9) and 26U.S.C.7805*** Section 1.401(k)–3 is also issued under 26 U.S.C. 401(m)(9) Par. 2. Section 1.401(k)–0 is amended in: 1. The entry for §1.401(k)–2 is amended by— a. Adding the entry for §1.401(k)–2 (a)(5)(vi) and revising the entry for §1.401(k)–2(b)(2)(iv)(D). b. Revising entries for §1.401(k)–2 (b)(2)(vi)(A) and (b)(2)(vi)(B). c. Adding an entry for §1.401(k)–2 (b)(5)(iii). 2. The entry for §1.401(k)–3 is amended by— a. Adding entries for §§1.401(k)–3 (a)(1), 1.401(k)–3(a)(2) and 1.401(k)–3 (a)(3). b. Adding an entry for §1.401(k)–3(i). c. Adding entries for §§1.401(k)–3 (j)(1) and 1.401(k)–3(j)(2). d. Adding entries for §§1.401(k)–3 (k)(1), 1.401(k)–3(k)(2), 1.401(k)–3 (k)(3) and 1.401(k)–3(k)(4). The additions and revisions read as fol- lows: §1.401(k)–0 Table of Contents. ***** §1.401 (k)–2 ADP test. (a) * * * (5) * * * (vi) Default elective contributions pur- suant to section 414(w). ***** (b) * * * (2) * * * (iv)*** (A) * * * March 23, 20097012009–12 I.R.B. ***** (D) Plan years before 2008. ***** (vi) * * * (A) Corrective distributions for plan years beginning on or after January 1, 2008. (B) Corrective distributions for plan years beginning before January 1, 2008. ***** (5) * * * (iii) Special rule for eligible automatic contribution arrangements. ***** §1.401(k)–3 Safe harbor requirements. (a) * * * (1) Section 401(k)(12) safe harbor. (2) Section 401(k)(13) safe harbor. (3) Requirements applicable to safe har- bor contributions. ***** (i) [Reserved]. (j) Qualified automatic contribution ar- rangement. (1) Automatic contribution require- ment. (i) In general. (ii) Automatic contribution arrange- ment. (iii) Exception to automatic enrollment for certain current employees. (2) Qualified percentage. (i) In general. (ii) Minimum percentage requirements. (A) Initial-period requirement. (B) Second-year requirement. (C) Third-year requirement. (D) Later years requirement. (iii)Exceptiontouniform percentage requirement. (iv) Treatment of periods without de- fault contributions. (k) Modifications to contribution re- quirements and notice requirements for automatic contribution safe harbor. (1) In general. (2) Lower matching requirement. (3) Modified nonforfeiture require- ment. (4) Additional notice requirements. (i) In general. (ii) Additional information. (iii) Timing requirements. Par. 3. Section 1.401(k)–1 is amended by: 1. Revising paragraph (b)(1)(ii)(C) and adding new paragraph (b)(1)(ii)(D). 2. Adding a new sentence after the fifth sentence in paragraph (e)(7). The additions and revisions to read as follows: §1.401(k)–1 Certain cash or deferred arrangements. ***** (b) * * * (1) * * * (ii) * * * (C) The ADP safe harbor provi- sions of section 401(k)(13) described in §1.401(k)–3; or (D) The SIMPLE 401(k) provi- sions of section 401(k)(11) described in §1.401(k)–4. ***** (e) * * * (7)Plan provision requirement.*** In addition, a plan that uses the safe harbor method of section 401(k)(13), as described in paragraph (b)(1)(ii)(C) of this section, must specify the default percentages that apply for the plan year and whether the safe harbor contribution will be the non- elective safe harbor contribution or the matching safe harbor contribution, and is not permitted to provide that ADP testing will be used if the requirements for the safe harbor are not satisfied. * * * ***** Par. 4. Section 1.401(k)–2 is amended by: 1. Adding paragraph (a)(5)(vi). 2. Revising paragraphs (b)(2)(iv)(A) and (b)(2)(iv)(D). 3. Removing paragraph (b)(2)(iv)(E). 4. Revising paragraph (b)(2)(vi)(A). 5. Revising the heading and adding a new first sentence to paragraph (b)(2)(vi)(B). 6. RemovingExamples 3, 4,and5of paragraph (b)(2)(viii). 7. Revising paragraph (b)(4)(iii) and adding paragraph (b)(5)(iii). The additions and revisions to read as follows: §1.401(k)–2 ADP test. (a) * * * (5) * * * (vi)Default elective contributions pur- suant to section 414(w). Default elective contributions made under an eligible au- tomatic contribution arrangement (within the meaning of §1.414(w)–1(b)) that are distributed pursuant to §1.414(w)–1(c) for plan years beginning on or after January 1, 2008, are not taken into account under paragraph (a)(4) of this section for the plan year for which the contributions are made, or for any other plan year. ***** (b) * * * (2) * * * (iv)Income allocable to excess contri- butions—(A)General rule. For plan years beginning on or after January 1, 2008, the income allocable to excess contributions is equal to the allocable gain or loss through the end of the plan year. See paragraph (b)(2)(iv)(D) of this section for rules that apply to plan years beginning before Jan- uary 1, 2008. ***** (D)Plan years before 2008.For plan years beginning before January 1, 2008, the income allocable to ex- cess contributions is determined under §1.401(k)–2(b)(2)(iv) (as it appeared in the April 1, 2007, edition of 26 CFR part 1). ***** (vi)Tax treatment of corrective distri- butions—(A)Corrective distributions for plan years beginning on or after January 1, 2008. Except as provided in this paragraph (b)(2)(vi), for plan years beginning on or after January 1, 2008, a corrective distri- bution of excess contributions (and alloca- ble income) is includible in the employee’s gross income for the employee’s taxable year in which distributed. In addition, the corrective distribution is not subject to the early distribution taxof section 72(t). See paragraph (b)(5) of this section for addi- tional rules relating to the employer ex- cise tax on amounts distributed more than 2 1 /2months (6 months in the case of cer- tain plans that include an eligible auto- matic contribution arrangement within the meaning of section 414(w)) after the end of the plan year. See also §1.402(c)–2, A–4 for restrictions on rolling over distri- butions that are excess contributions. (B)Corrective distributions for plan years beginning before January 1, 2008. The tax treatment of corrective distri- butions for plan years beginning before January 1, 2008, is determined under 2009–12 I.R.B.702March 23, 2009 §1.401(k)–2(b)(2)(vi) (as it appeared in the April 1, 2007, edition of 26 CFR Part 1). *** ***** (4) * * * (iii)Permitted forfeiture of QMAC.Pur- suant to section 401(k)(8)(E), a qualified matching contribution is not treated as for- feitable under §1.401(k)–1(c) merely be- cause under the plan itis forfeited in ac- cordance with paragraph (b)(4)(ii) of this section or §1.414(w)–1(d)(2). ***** (5) * * * (iii)Special rule for eligible automatic contribution arrangements. In the case of excess contributions under a plan that in- cludes an eligible automatic contribution arrangement within the meaning of section 414(w), 6 months is substituted for 2 1 /2 months in paragraph (b)(5)(i) of this sec- tion. The additional time described in this paragraph (b)(5)(iii) applies to a distribu- tion of excess contributions for a plan year beginning on or after January 1, 2010 only wherealltheeligibleNHCEsandeligible HCEs are covered employees under the el- igible automatic contribution arrangement (within the meaning of §1.414(w)–1(e)(3)) for the entire plan year (or for the portion of the plan year that the eligible NHCEs and eligible HCEs are eligible employees). ***** Par. 5. Section 1.401(k)–3 is amended by: 1. Revising paragraph (a). 2. Adding a new sentence at the end of paragraph (d)(3)(ii). 3. Revising the firstsentence of para- graph (e)(1). 4. Revising the last sentence of para- graph (h)(2). 5. Revising the firstsentence of para- graph (h)(3). 6. Adding paragraphs (i), (j), and (k). The additions and revisions to read as follows: §1.401 (k)–3 Safe harbor requirements. (a)ADP test safe harbor—(1)Section 401(k)(12) safe harbor. A cash or deferred arrangement satisfies the ADP safe harbor provision of section 401(k)(12) for a plan year if the arrangement satisfies the safe harbor contribution requirement of para- graph (b) or (c) of this section for the plan year, the notice requirement of paragraph (d) of this section, the plan year require- ments of paragraph (e) of this section, and the additional rules of paragraphs (f), (g), and (h) of this section, as applicable. (2)Section 401(k)(13) safe harbor.For plan years beginning on or after January 1, 2008, a cash or deferred arrangement satisfies the ADP safe harbor provision of section 401(k)(13) for a plan year if the arrangement is described in paragraph (j) of this section and satisfies the safe harbor contribution requirement of paragraph (k) of this section for the plan year, the notice requirement of paragraph (d) of this sec- tion (modified to include the information set forth in paragraph (k)(4) of this sec- tion), the plan year requirements of para- graph (e) of this section, and the additional rules of paragraphs (f), (g), and (h) of this section, as applicable. A cash or deferred arrangement that satisfies the requirements of this paragraph (a)(2) is referred to as a qualified automatic contribution arrange- ment. (3)Requirements applicable to safe harbor contributions.Pursuantto section 401(k)(12)(E)(ii) and section 401(k)(13)(D)(iv), the safe harbor con- tribution requirement of paragraph (b), (c), or (k) of this section must be satis- fied without regard to section 401(l). The contributions made under paragraph (b) or (c) of this section (and the correspond- ing contributions under paragraph (k) of this section) are referred to as safe harbor nonelective contributions and safe harbor matching contributions. ***** (d) * * * (3) * * * (ii)Deemed satisfaction of timing re- quirement. * * * If it is not practicable for the notice to be provided on or before the date specified in the plan that an em- ployee becomes eligible, the notice will nonetheless be treated as provided timely if it is provided as soon as practicable af- ter that date and the employee is permitted to elect to defer from all types of compen- sation that may be deferred under the plan earned beginning on the date the employee becomes eligible. (e)Plan year requirement—(1)Gen- eral rule. Except as provided in this para- graph (e) or in paragraph (f) of this sec- tion, a plan will fail to satisfy the require- ments of sections 401(k)(12), 401(k)(13), and this section unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year and re- main in effect for an entire 12-month plan year. * * * ***** (h) * * * (2)Use of safe harbor nonelective contributions to satisfy other discrimi- nation tests. * * * However, pursuant to section 401(k)(12)(E)(ii) and section 401(k)(13)(D)(iv), to the extent they are needed to satisfy the safe harbor contribu- tion requirement of paragraph (b) of this section, safe harbor nonelective contribu- tions may not be taken into account under any plan for purposes of section 401(l) (including the imputation of permitted disparity under §1.401(a)(4)–7). (3)Earlyparticipation rules.Section 401(k)(3)(F) and §1.401(k)–2(a)(1)(iii)(A), which provide an alternative nondiscrimination rule for certain plans that provide for early participation, do not apply for purposes of section 401(k)(12), section 401(k)(13), and this section. * * * ***** (i) [Reserved]. (j)Qualified automatic contribution arrangement—(1)Automatic contribution requirement—(i)In general. A cash or deferred arrangement is described in this paragraph (j) if it is an automatic contribu- tion arrangement described in paragraph (j)(1)(ii) of this section where the default election under that arrangement is a con- tribution equal to the qualified percentage described in paragraph (j)(2) of this sec- tion multiplied by the eligible employee’s compensation from which elective con- tributions are permitted to be made under the cash or deferred arrangement. For plan years beginning on or after January 1, 2010, the compensation used for this purpose must be safe harbor compensation as defined under paragraph (b)(2) of this section. (ii)Automatic contribution arrange- ment. An automatic contribution arrange- ment is a cash or deferred arrangement within the meaning of §1.401(k)–1(a)(2) that provides that, in the absence of an eligible employee’s affirmative election, a default election applies under which the employee is treated as having made an March 23, 20097032009–12 I.R.B. election to have a specified contribution made on his or her behalf under the plan. The default election begins to apply with respect to an eligible employee no earlier than a reasonable period of time after re- ceipt of the notice describing the automatic contribution arrangement. The default election ceases to apply with respect to an eligible employee for periods of time with respect to which the employee has an affirmative election that is currently in effect to— (A) Have elective contributions made in a different amount on his or her behalf (in a specified amount or percentage of compensation); or (B) Not have any elective contributions made on his or her behalf. (iii)Exception to automatic enrollment for certain current employees.Anauto- matic contribution arrangement will not fail to be a qualified automatic contri- bution arrangement merely because the default election provided under paragraph (j)(1)(i) of this section is not applied to an employee who was an eligible employee under the cash or deferred arrangement (or a predecessor arrangement) immediately prior to the effective date of the qualified automatic contribution arrangement and on that effective date had an affirmative election in effect (that remains in effect) to— (A) Have elective contributions made on his or her behalf (in a specified amount or percentage of compensation); or (B) Not have elective contributions made on his or her behalf. (2)Qualified percentage—(i)In gen- eral. A percentage is a qualified percent- age only if it— (A) Is uniform for all employees (ex- cept to the extent provided in paragraph (j)(2)(iii) of this section); (B) Does not exceed 10 percent; and (C) Satisfies the minimum percentage requirements of paragraph (j)(2)(ii) of this section. (ii)Minimum percentage require- ments—(A)Initial-period requirement. The minimum percentage requirement of this paragraph (j)(2)(ii)(A) is satisfied only if the percentage that applies for the initial period is at least 3 percent. For this purpose, the initial period begins when the employee first has contributions made pursuant to a default election under an arrangement that is intended to be a qual- ified automatic contribution arrangement for a plan year and ends on the last day of the following plan year. (B)Second-year requirement.The minimum percentage requirement of this paragraph (j)(2)(ii)(B) is satisfied only if the percentage that applies for the plan year immediately following the last day described in paragraph (j)(2)(ii)(A) of this section is at least 4 percent. (C)Third-year requirement. The mini- mum percentage requirement of this para- graph (j)(2)(ii)(C) is satisfied only if the percentage that applies for the plan year immediately following the plan year de- scribed in paragraph (j)(2)(ii)(B) of this section is at least 5 percent. (D)Later years requirement.Aper- centage satisfies the minimum percentage requirement of this paragraph (j)(2)(ii)(D) only if the percentage that applies for all plan years following the plan year de- scribed in paragraph (j)(2)(ii)(C) of this section is at least 6 percent. (iii)Exception to uniform percentage requirement. A plan does not fail to sat- isfy the uniform percentage requirement of paragraph (j)(2)(i)(A) of this section merely because— (A) The percentage varies based on the number of years (or portions of years) since the beginning of the initial period for an eligible employee; (B) The rate of elective contributions under a cash or deferred election that is in effect for an employee immediately prior to the effective date of the default percent- age under the qualified automatic contri- bution arrangement is not reduced; (C) The rate of elective contributions is limited so as not to exceed the lim- its of sections 401(a)(17), 402(g) (deter- mined with or without catch-up contribu- tions described in section 402(g)(1)(C) or 402(g)(7)), and 415; or (D) The default election provided under paragraph (j)(1)(i) of this section is not ap- plied during the period an employee is not permitted to make elective contributions in order for the plan to satisfy the require- ments of §1.401(k)–3(c)(6)(v)(B). (iv)Treatment of periods without de- fault contributions. The minimum per- centages described in paragraph (j)(2)(ii) of this section are based on the date the initial period begins, regardless of whether the employee is eligible to make elective contributions under the plan after that date. Thus, for example, if an employee is ineli- gible to make contributions under the plan for 6 months because the employee had a hardship withdrawal and the 6-month period includes a date as of which the default minimum percentage is increased, then the default percentage must reflect that increase when the employee is permit- ted to resume contributions. However, for purposes of determining the date the initial period described in paragraph (j)(2)(ii)(A) of this section begins, a plan is permitted to treat an employee who for an entire plan year did not have contributions made pur- suant to a default election under the qual- ified automatic contribution arrangement as if the employee had not had such con- tributions made for any prior plan year as well. (k)Modifications to contribution re- quirements and noticerequirements for automatic contribution safe harbor—(1) In general. A cash or deferred arrange- ment satisfies the contribution require- ments of this paragraph (k) only if it satisfies the contribution requirements of either paragraph (b) or (c) of this section, as modified by the rules of paragraphs (k)(2) and (k)(3) of this section. In ad- dition, a cash or deferred arrangement satisfies the notice requirement of section 401(k)(13)(E) only if the notice satisfies the additional requirements of paragraph (k)(4) of this section. (2)Lower matching requirement.Inap- plying the requirement of paragraph (c) of this section in the case of a cash or deferred arrangement, the basic matching formula is modified so that each eligible NHCE must receive the sum of— (i) 100 percent of the employee’s elec- tive contributions that do not exceed 1 per- cent of the employee’s safe harbor com- pensation; and (ii) 50 percent of the employee’s elec- tive contributions that exceed 1 percent of the employee’s safe harbor compensation but that do not exceed 6 percent of the em- ployee’s safe harbor compensation. (3)Modified nonforfeiture requirement. A cash or deferred arrangement described in paragraph (j) of this section will not fail to satisfy the requirements of paragraph (b) or (c) of this section, as applicable, merely because the safe harbor contributions are not qualified nonelective contributions or qualified matching contributions provided that— 2009–12 I.R.B.704March 23, 2009 (i) The contributions are subject to the withdrawal restrictions that apply to QNECs and QMACs, as set forth in §1.401(k)–1(d); and (ii) Any employee who has completed 2 years of service (within the meaning of section 411(a)) has a nonforfeitable right to the account balanceattributable to the safe harbor contributions. (4)Additional notice requirements—(i) In general. A notice satisfies the require- ments of this paragraph (k)(4) only if it includes the additional information de- scribed in paragraph (k)(4)(ii) of this sec- tion and satisfies the timing requirements of paragraph (k)(4)(iii) of this section. (ii)Additional information. A notice satisfies the additional information re- quirement of this paragraph (k)(4)(ii) only if it explains— (A) The level of elective contributions which will be made on the employee’s be- half if the employee does not make an af- firmative election; (B) The employee’s right under the ar- rangement to elect not to have elective contributions made on the employee’s be- half (or to elect to have such contributions made in a different amount or percentage of compensation); and (C) How contributions under the ar- rangement will be invested (including, in the case of an arrangement under which the employee may elect among 2 or more in- vestment options, how contributions will be invested in the absence of an investment election by the employee). (iii)Timing requirements. A notice sat- isfies the timing requirements of this para- graph (k)(4)(iii) only if it is provided suf- ficiently early so that the employee has a reasonable period of time after receipt of the notice to make the elections described under paragraph (k)(4)(ii)(B) and (C) of this section. However, the requirement in the preceding sentence that an employee have a reasonable period of time after re- ceipt of the notice to make an alternative election does not permit a plan to make the default election effective any later than the earlier of— (A) The pay date for the second payroll period that begins after the date the notice is provided; and (B) The first pay date that occurs at least 30 days after the notice is provided. Par. 6. Section 1.401(k)–6 is amended by revising the last sentence in the defini- tion of “qualified matching contributions (QMACs)” to read as follows: §1.401(k)–6 Definitions. ***** Qualifiedmatchingcontribu- tions (QMACs).***Seealso §1.401(k)–2(b)(4)(iii) for a rule providing that a matching contribution does not fail to qualify as a QMAC solely because it is forfeitable under section 411(a)(3)(G) as a result of being a matching contribu- tion with respect to an excess deferral, excess contribution,or excess aggregate contribution, or it is forfeitable under §1.414(w)–1(d)(2). ***** Par. 7. Section 1.401(m)–0 is amended in: 1. The entry for §1.401(m)–2 by— a. Revising §1.401(m)–2(b)(2)(iv)(D). b. Adding an entry for §1.401(m)–2 (b)(4)(iii). c.Revising the entries for §1.401(m)–2(b)(2)(vi)(A) and (b)(2) (vi)(B). d. Adding an entry for §1.401(m)–2 (b)(4)(iii). 2. The entry for §1.401(m)–3 by re- vising the entries for §§1.401(m)–3(a)(1), 1.401(m)–3(a)(2) and 1.401(m)–3(a)(3). The additions and revisions read as fol- lows: §1.401(m)–0 Table of Contents. ***** §1.401(m)–2 ACP Test. ***** (b) * * * (2) * * * (iv) * * * (A)*** ***** (D) Plan years before 2008. (E) Allocable income for recharacter- ized elective contributions. ***** (vi) * * * (A) Corrective distributions for plan years beginning on or after January 1, 2008. (B) Corrective distributions for plan years beginning before January 1, 2008. ***** (4) * * * (iii) Special rule for eligible automatic contribution arrangements. ***** §1.401(m)–3 Safe Harbor Requirements. (a) * * * (1) Section 401(m)(11) safe harbor. (2) Section 401(m)(12) safe harbor. (3) Requirements applicable to safe har- bor contributions. ***** Par. 8. Section 1.401(m)–1 is amended by: 1. Revising paragraph (b)(1)(iii) and adding paragraph (b)(1)(iv). 2. Revising the last sentence of para- graph (b)(4)(iii)(B). 3. Revising the fifth sentence of para- graph (c)(2). The additions and revisions read as fol- lows: §1.401(m)–1 Employee contributions and matching contributions. ***** (b) * * * (1) * * * (iii) The ACP safe harbor provi- sions of section 401(m)(12) described in §1.401(m)–3; or (iv) The SIMPLE 401(k) provisions of sections 401(k)(11) and 401(m)(10) de- scribed in §1.401(k)–4. ***** (4) * * * (iii) * * * (B)Arrangements with inconsistent ACP testing methods.***Similarly,an employer may not aggregate a plan (within the meaning of §1.410(b)–7) that is using the ACP safe harbor provisions of section 401(m)(11) or 401(m)(12) and another plan that is using the ACP test of section 401(m)(2). ***** (c) * * * (2)Plan provision requirement. ***Similarly,aplanthatusesthesafe harbor method of section 401(m)(11) or 401(m)(12), as described in paragraphs (b)(1)(ii) and (b)(1)(iii) of this section, must specify the default percentages that apply for the plan year and whether the safe harbor contribution will be the March 23, 20097052009–12 I.R.B. nonelective safe harbor contribution or the matching safe harbor contribution, and is not permitted to provide that ACP testing will be used if the requirements for the safe harbor are not satisfied. * * * ***** Par. 9. Section 1.401(m)–2 is amended by: 1. Revising the first and second sen- tences of paragraph (a)(5)(iv). 2. Revising paragraph (a)(5)(v). 3. Adding a new sentence at the end of paragraph (a)(6)(ii). 4. Revising paragraphs (b)(2)(iv)(A) and (b)(2)(iv)(D). 5. Removing paragraph (b)(2)(iv)(E). 6.Redesignating paragraph (b)(2)(iv)(F) as paragraph (b)(2)(iv)(E). 7. Revising paragraph (b)(2)(vi)(A). 8. Adding a new sentence to the begin- ning of paragraph (b)(2)(vi)(B). 9. Adding paragraph (b)(4)(iii). The additions and revisions to read as follows: §1.401(m)–2 ACP test. (a)***** (5)***** (iv)Matching contributions taken into account. A plan that satisfies the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for a plan year but nonethe- less must satisfy the requirements of this section because it provides for employee contributions for such plan year is permit- ted to apply this section disregarding all matching contributions with respect to all eligible employees. In addition, a plan that satisfies the ADP safe harbor requirements of §1.401(k)–3 for a plan year using qual- ified matching contributions but does not satisfy the ACP safe harbor requirements of section 401(m)(11) or 401(m)(12) for such plan year is permitted to apply this section by excluding matching contribu- tions with respect to all eligible employ- ees that do not exceed 4 percent (3 1 /2per- cent in the case of a plan that satisfies the ADP safe harbor under section 401(k)(13)) of each employee’s compensation. * * * (v)Treatment of forfeited matching contributions. A matching contribution that is forfeited because the contribution to which it relates is treated as an excess contribution, excess deferral, excess ag- gregate contribution, or default elective contribution that is distributed under sec- tion 414(w), is not taken into account for purposes of this section. ***** (6)***** (ii)Elective contributions taken into ac- count under the ACP test.***Inaddition, for plan years ending on or after Novem- ber 8, 2007, elective contributions which are not permitted to be taken into account for the ADP test for the plan year under §1.401(k)–2(a)(5)(ii), (iii), (v), or (vi) are not permitted to be taken into account for the ACP test. ***** (b)***** (2)***** (iv)Income allocable to excess aggre- gate contributions—(A)General rule.For plan years beginning on or after January 1, 2008, the income allocable to excess ag- gregate contributionsis equal to the alloca- ble gain or loss through the end of the plan year. See paragraph (b)(2)(iv)(D) of this section for rules that apply to plan years beginning before January 1, 2008. ***** (D)Plan years before 2008.Forplan years beginning before January 1, 2008, the income allocable to excess aggre- gate contributions is determined under §1.401(m)–2(b)(2)(iv) (as it appeared in the April 1, 2007, edition of 26 CFR part 1). ***** (vi)Tax treatment of corrective distri- butions—(A)Corrective distributions for plan years beginning on or after January 1, 2008. Except as otherwise provided in this paragraph (b)(2)(vi), for plan years beginning on or after January 1, 2008, a corrective distribution of excess aggregate contributions (and allocable income) is in- cludible in the employee’s gross income in the taxable year of the employee in which distributed. The portion of the distribu- tion that is treated as an investment in the contract and is therefore not subject to tax under section 72 is determined without re- gard to any plan contributions other than those distributed as excess aggregate con- tributions. Regardless of when the correc- tive distribution is made, it is not subject to the early distribution tax of section 72(t). See paragraph (b)(4) of this section for ad- ditional rules relating to the employer ex- cise tax on amounts distributed more than 2 1 /2months (6 months in the case of cer- tain plans that include an eligible auto- matic contribution arrangement within the meaning of section 414(w)) after the end of the plan year. See also §1.402(c)–2, A–4, prohibiting rollover of distributions that are excess aggregate contributions. (B)Corrective distributions for plan years beginning before January 1, 2008. The tax treatment of corrective distri- butions for plan years beginning before January 1, 2008, is determined under §1.401(m)–2(b)(2)(vi) (as it appeared in the April 1, 2007, edition of 26 CFR Part 1). *** (4) * * * (iii)Special rule for eligible auto- matic contribution arrangements.Inthe case of excess aggregate contributions under a plan that includes an eligible au- tomatic contribution arrangement (within the meaning of section 414(w)), 6 months is substituted for 2 1 /2months in paragraph (b)(4)(i) of this section. The additional time described in this paragraph (b)(4)(iii) applies to a distribution of excess aggre- gate contributions for a plan year begin- ning on or after January 1, 2010 only where all the eligible NHCEs and eligible HCEs are covered employees under the el- igible automatic contribution arrangement (within the meaning of §1.414(w)–1(e)(3)) for the entire plan year (or for the portion of the plan year that the eligible NHCEs and eligible HCEs are eligible employees). ***** Par. 10. Section 1.401(m)–3 is amended by: 1. Revising paragraph (a). 2. Revising the first sentences of para- graphs (f)(1) and (j)(3). The revisions read as follows: §1.401(m)–3 Safe harbor requirements. (a)ACP test safe harbor—(1)Section 401(m)(11) safe harbor. Matching contri- butions under a plan satisfy the ACP safe harbor provisions of section 401(m)(11) for a plan year if the plan satisfies the safe harbor contribution requirement of para- graph (b) or (c) of this section for the plan year, the limitations on matching contribu- tions of paragraph (d) of this section, the notice requirement of paragraph (e) of this 2009–12 I.R.B.706March 23, 2009 section, the plan year requirements of para- graph (f) of this section, and the additional rules of paragraphs (g), (h) and (j) of this section, as applicable. (2)Section 401(m)(12) safe harbor. For a plan year beginning on or after January 1, 2008, matching contributions under a plan satisfy the ACP safe harbor provisions of section 401(m)(12) for a plan year if the matching contributions are made with respect to an automatic contribution arrangement described in paragraph §1.401(k)–3(j) that satisfies the safe harbor requirements of §1.401(k)–3, the limitations on matching contributions of paragraph (d) of this section, the no- tice requirement of paragraph (e) of this section, the plan year requirements of paragraph (f) of this section, and the addi- tional rules of paragraphs (g), (h) and (j) of this section, as applicable. (3)Requirements applicable to safe harbor contributions. Pursuant to sections 401(k)(12)(E)(ii) and401(k)(13)(D)(iv), the safe harbor contribution requirement of paragraph (b) or (c) of this section and §1.401(k)–3(k) must be satisfied without regard to section 401(l). The contributions made under paragraphs (b) and (c) of this section and §1.401(k)–3(k) are referred to as safe harbor nonelective contributions and safe harbor matching contributions. ***** (f)Plan year requirement—(1)General rule. Except as provided in this paragraph (f) or in paragraph (g) of this section, a plan will fail to satisfy the requirements of sec- tion 401(m)(11), section 401(m)(12), and this section unless plan provisions that sat- isfy the rules of this section are adopted be- fore the first day of that plan year and re- main in effect for an entire 12-month plan year. * * * ***** (j) * * * (3)Early participation rules. Section401(m)(5)(C)and §1.401(m)–2(a)(1)(iii)(A), which provide an alternative nondiscrimination rule for certain plans that provide for early participation, do not apply for purposes of section 401(m)(11), section 401(m)(12), and this section. * * * ***** Par. 11. Section 1.402(c)–2, A–4, is amended by redesignating paragraph (h) as (j), adding a new paragraph (h), and adding and reserving paragraph (i) to read as follows: §1.402(c)–2 Eligible rollover distributions, questions and answers. ***** A–4*** (h) A distribution that is a permissi- ble withdrawal from an eligible automatic contribution arrangement within the mean- ing of section 414(w). (i) [Reserved]. ***** Par.12.Section1.411(a)–4isamended by revising paragraph (b)(7) to read as fol- lows: §1.411(a)–4 Forfeitures, suspensions, etc. ***** (b) * * * (7)Certain matching contributions. A matching contribution (within the meaning of section 401(m)(4)(A) and §1.401(m)–1(a)(2))is not treated as for- feitable even if under the plan it may be forfeited under §1.401(m)–2(b)(1) be- cause the contribution to which it relates is treated as an excess contribution (within the meaning of §§1.401(k)–2(b)(2)(ii) and 1.401(k)–6), excess deferral (within the meaning of §1.402(g)–1(e)(1)(iii)), ex- cess aggregate contribution (within the meaning of §1.401(m)–5), or a default elective contribution (within the mean- ing of §1.414(w)–1(e)) that is withdrawn in accordance with the requirements of §1.414(w)–1(c). ***** Par. 13. Section 1.414(w)–1 is added to read as follows: §1.414(w)–1 Permissible Withdrawals from Eligible Automatic Contribution Arrangements. (a)Overview. Section 414(w) provides rules under which certain employees are permitted to elect to make a withdrawal of default elective contributions from an eligible automatic contribution arrange- ment. This section sets forth the rules applicable to permissible withdrawals from an eligible automatic contribution arrangement within the meaning of sec- tion 414(w). Paragraph (b) of this section defines an eligible automatic contribution arrangement. Paragraph (c) of this section describes a permissible withdrawal and addresses which employees are eligible to elect a withdrawal, the timing of the withdrawal election, and the amount of the withdrawal. Paragraph (d) of this section describes the tax and other consequences of the withdrawal. Paragraph (e) of this section includes the definitions applicable to this section. (b)Eligible automatic contribution ar- rangement—(1)In general.Aneligible automatic contribution arrangement is an automatic contribution arrangement un- der an applicable employer plan that is intended to be an eligible automatic con- tribution arrangement for the plan year and that satisfies the uniformity requirement under paragraph (b)(2) of this section, and the notice requirement under paragraph (b)(3) of this section. An eligible auto- matic contribution arrangement need not cover all employees who are eligible to elect to have contributions made on their behalf under the applicable employer plan. (2)Uniformity requirement—(i)In gen- eral. An eligible automatic contribution arrangement must provide that the default elective contribution is a uniform percent- age of compensation. (ii)Exception to uniform percent- age requirement. An arrangement does not violate the uniformity requirement of paragraph (b)(2)(i) of this section merely because the percentage varies in a manner that is permitted under §1.401(k)–3(j)(2)(iii), except that the rule of §1.401(k)–3(j)(2)(iii)(B) is applied without regard to whether the arrangement is intended to be a qualified automatic contribution arrangement. (iii)Rules of application. For purposes of this paragraph (b)(2), all automatic con- tribution arrangements that are intended to be eligible automatic contribution arrange- ments within a plan (or within the disag- gregated plan under §1.410(b)–7, in the case of a plan subject to section 410(b)) are aggregated. Thus, for example, if a single plan within the meaning of section 414(l) covering employees in two separate divisions has two different automatic con- tribution arrangements that are intended to be eligible automatic contributions ar- rangements, the two automatic contribu- tion arrangements can constitute eligible automatic contribution arrangements only if the default elective contributions under March 23, 20097072009–12 I.R.B. the arrangements are the same percentage of compensation. However, if the differ- ent automatic contribution arrangements cover employees in portions of the plan that are mandatorily disaggregated under the rules of section 410(b), then there is no requirement to aggregate those auto- matic contribution arrangements under the uniformity requirements of this paragraph (b)(2). (3)Notice requirement—(i)General rule. The notice requirement of this para- graph (b)(3) is satisfied for a plan year if each covered employee is given notice of the employee’s rights and obligations un- der the arrangement. The notice must be sufficiently accurate and comprehensive to apprise the employee of such rights and obligations, and be written in a manner calculated to be understood by the aver- age employee to whom the arrangement applies. The notice must be in writing; however, see §1.401(a)–21 for rules per- mitting the use of electronic media to provide applicable notices. (ii)Content requirement. The no- tice must include the provisions found in §1.401(k)–3(d)(2)(ii) to the extent those provisions apply to the arrangement. A notice is not considered sufficiently accu- rate and comprehensive unless the notice accurately describes— (A) The level of the default elective contributions which will be made on the employee’s behalf if the employee does not make an affirmative election; (B) The employee’s rights to elect not to have default elective contributions made to the plan on his or her behalf or to have a different percentage of compensation or different amount of contribution made to the plan on his or her behalf; (C) How contributions made under the arrangement will be invested in the ab- sence of any investment election by the employee; and (D) The employee’s rights to make a permissible withdrawal, if applicable, and the procedures to elect such a withdrawal. (iii)Timing—(A)General rule.The timing requirement of this paragraph (b)(3)(iii) is satisfied if the notice is pro- vided within a reasonable period before the beginning of each plan year or, in the plan year the employee is first eligible to make a cash or deferred election (or first becomes covered under the automatic contribution arrangement as a result of a change in employment status), within a reasonable period before the employee becomes a covered employee. In addition, a notice satisfies the timing requirements of paragraph (b)(3) of this section only if it is provided sufficiently early so that the employee has a reasonable period of time after receipt of the notice in order to make the election described under paragraph (e)(2)(i) or (e)(2)(ii) of this section. (B)Deemed satisfaction of timing re- quirement. The timing requirement of this paragraph (b)(3)(iii) is satisfied if at least 30 days (and no more than 90 days) be- fore the beginning of each plan year, the notice is given to each employee covered under the automatic contribution arrange- ment for the plan year. In the case of an employee who does not receive the notice within the period described in the previous sentence because the employee becomes eligible to make a cash or deferred elec- tion (or becomes covered under the auto- matic contribution arrangement as a result of a change in employment status) after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the employee be- comes eligible to make a cash or deferred election (or becomes covered under the au- tomatic contribution arrangement as a re- sult of a change in employment status), and no later than the date that affords the employee a reasonable period of time af- ter receipt of the notice to make the elec- tion described under paragraph (e)(2)(i) or (e)(2)(ii) of this section. If it is not prac- ticable for the notice to be provided on or before the date specified in the plan that an employee becomes eligible to make a cash or deferred election, the notice will nonetheless be treated as provided timely if it is provided as soon as practicable af- ter that date and the employee is permitted to elect to defer from all types of compen- sation that may be deferred under the plan earned beginning on that date. (c)Permissible withdrawal—(1)In general. If the plan so provides, any employee who has default elective contri- butions made under the eligible automatic contribution arrangement may elect to make a withdrawal of such contributions (and earnings attributable thereto) in ac- cordance with the requirements of this paragraph (c). An applicable employer plan that includes an eligible automatic contribution arrangement will not fail to satisfy the prohibition on in-service withdrawals under section 401(k)(2)(B), 403(b)(7), 403(b)(11), or 457(d)(1) merely because it permits withdrawals that satisfy the timing requirement of paragraph (c)(2) of this section and the amount requirement of paragraph (c)(3) of this section. (2)Timing—(i)Last date to make elec- tion. A covered employee’s election to withdraw default elective contributions must be made no later than 90 days af- ter the date of the first default elective contribution under the eligible automatic contribution arrangement and must be ef- fective no later thanthedatesetforthin paragraph (c)(2)(iii) of this section. A plan is permitted to set an earlier deadline for making this election, but if a plan provides that a covered employee may withdraw default elective contributions, then the election period for the covered employee must be at least 30 days. (ii)Determination of date of first de- fault elective contribution. For purposes of this paragraph (c)(2), the date of the first default elective contribution is the date that the compensation that is subject to the cash or deferred election would otherwise have been included in gross income. (iii)Latest effective date of the election. The effective date of an election described in this paragraph (c)(2) cannot be after the earlier of— (A) The pay date for the second payroll period that begins after the date the elec- tion is made; and (B) The first pay date that occurs at least 30 days after the election is made. (iv)Special rules—(A)Treatment of periods without default elective contribu- tions. For purposes of determining the date of the first default elective contribution under the eligible automatic contribution arrangement, a plan is permitted to treat an employee who for an entire plan year did not have default elective contributions made under the eligible automatic contri- bution arrangement as if the employee had not had such contributions for any prior plan year as well. (B)Treatment relating to aggregation of arrangements.The determination of whether an election is made no later than 90 days after the date of the first default elective contribution under the eligible automatic contribution arrangement must take into account any other eligible au- 2009–12 I.R.B.708March 23, 2009 tomatic contribution arrangement that is required to be aggregated with the eligible automatic contribution arrangement under the rules of paragraph (b)(2)(iii) of this section. (3)Amount and timing of distribu- tions—(i)In general. A distribution sat- isfies the requirement of this paragraph (c)(3) if the distribution is equal to the amount of default elective contributions made under the eligible automatic contri- bution arrangement through the effective date of the election described in para- graph (c)(2) of this section (adjusted for allocable gains and losses to the date of distribution). If default elective contribu- tions are separately accounted for in the participant’s account, the amount of the distribution will be the total amount in that account. However, if default elective contributions are not separately accounted for under the plan, the amount of the allo- cable gains and losses will be determined under rules similar to those provided under §1.401(k)–2(b)(2)(iv) for the distribution of excess contributions. (ii)Fees. The distribution amount as determined under this paragraph (c)(3) may be reduced by any generally appli- cable fees. However, the plan may not charge a higher fee for a distribution under section 414(w) than would apply to any other distributions of cash. (iii)Date of distribution. The distribu- tion must be made in accordance with the plan’s ordinary timing procedures for pro- cessing distributions and making distribu- tions. (d)Consequences of the with- drawal—(1)Income tax conse- quences—(i)Year of inclusion.The amount of the withdrawal is includible in the eligible employee’s gross income for the taxable year in which the distribution is made. However, any portion of the distribution consisting of designated Roth contributions is not included in an employee’s gross income a second time. The portion of the withdrawal that is treated as an investment in the contract is determined without regard to any plan contributions other than those distributed as a withdrawal of default elective contributions. (ii)No additional tax on early distribu- tions from qualified retirement plans.The withdrawal is not subject to the additional tax under section 72(t). (iii)Reporting. The amount of the with- drawal is reported on Form 1099–R,“Dis- tributions From Pensions, Annuities, Re- tirement or Profit-Sharing Plans, IRAs, In- surance Contracts, etc.,”as described in the applicable instructions. (iv)Disregarded for purposes of section 402(g). The amount of the withdrawal is not taken into account in determining the limitation on elective deferrals under sec- tion 402(g). (2)Forfeiture of matching contribu- tions. In the case of any withdrawal made under paragraph (c) of this section, em- ployer matching contributions with respect to the amount withdrawn that have been allocated to the participant’s account (ad- justed for allocable gains and losses) must be forfeited. A plan is permitted to pro- vide that employer matching contributions will not be made with respect to any with- drawal made under paragraph (c) of this section if the withdrawal has been made prior to the date as of which the match would otherwise be allocated. (3)Consent rules. A withdrawal made under paragraph (c) of this section may be made without regard to any notice or consent otherwise required under section 401(a)(11) or 417. (e)Definitions. Unless indicated other- wise, the following definitions apply for purposes of section 414(w) and this sec- tion. (1)Applicable employer plan.An applicable employer plan means a plan that— (i) Is qualified under section 401(a); (ii) Satisfies the requirements of section 403(b); (iii) Is a section 457(b) eligible govern- mental plan described in §1.457–2(f); (iv) Is a simplified employee pension the terms of which provide for a salary re- duction arrangement described in section 408(k)(6); or (v) Is a SIMPLE described in section 408(p). (2)Automatic contribution arrange- ment. An automatic contribution arrange- ment means an arrangement that provides for a cash or deferred election and which specifies that, in the absence of a covered employee’s affirmative election, a default election applies under which the employee is treated as having elected to have default elective contributions made on his or her behalf under the plan. The default election begins to apply with respect to an eligi- ble employee no earlier than a reasonable period of time after receipt of the notice describing the automatic contribution ar- rangement. This default election ceases to apply with respect to an eligible employee for periods of time with respect to which the employee has an affirmative election that is currently in effect to— (i) Not have any default elective contri- butions made on his or her behalf; or (ii) Have contributions made in a differ- ent amount or percentage of compensation. (3)Covered employee. Covered em- ployee means an employee who is covered under the automatic contribution arrange- ment, determined under the terms of the plan. A plan must provide whether an em- ployee who makes an affirmative election remains a covered employee. If a plan pro- vides that an employee who makes an af- firmative election described in paragraph (e)(2)(i) or (e)(2)(ii) of this section remains a covered employee, then the employee must continue to receive the notice de- scribed in paragraph (b)(3) of this section and the plan may be eligible for the excise tax relief with respect to excess amounts distributed within 6 months after the end of the plan year under section 4979(f)(1). Such an employee will also have the de- fault election reapply if the plan provides that the employee’s prior affirmative elec- tion no longer remains in effect and the employee does not make a new affirmative election. (4)Default elective contributions .De- fault elective contributions means the con- tributions that are made at a specified level or amount under an automatic contribution arrangement in the absence of a covered employee’s affirmative election that are— (i) Contributions described in section 402(g)(3); or (ii) Contributions made to an eligible governmental plan within the meaning of §1.457–2(f) that would be elective contri- butions if they were made under a qualified plan. (f)Effective/applicability date—(1) Statutory effective date. Section 414(w) applies to plan years beginning on or after January 1, 2008. (2)Regulatory effective date. This sec- tion applies to plan years beginning on or after January 1, 2010. For plan years that begin in 2008, a plan must operate in ac- cordance with a good faith interpretation March 23, 20097092009–12 I.R.B. of section 414(w). For this purpose, a plan that operates in accordance with this sec- tion will be treated as operating in accor- dance with a good faith interpretation of section 414(w). PART 54—PENSION EXCISE TAXES. Par. 14. The authority citation for part 54 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 15. Section 54.4979–1, paragraph (c)(1) is revised to read as follows: §54.4979–1 Excise tax on certain excess contributions and excess aggregate contributions. ***** (c)No tax when excess distributed within 2 1 /2months after close of year or additional employer contributions made—(1)General rule. No tax is im- posed under this section on any excess contribution or excess aggregate contribu- tion, as the case may be, to the extent the contribution (together with any income allocable thereto) is corrected before the close of the first 2 1 /2months of the fol- lowing plan year (6 months in the case of a plan that includes an eligible automatic contribution arrangement within the mean- ing of section 414(w)). The extension to 6 months applies to a distribution of excess contributions or excess aggregate contri- butions for a plan year beginning on or after January 1, 2010, only where all the el- igible NHCEs and eligible HCEs (both as defined in §1.401(k)–6 of this Chapter) are covered employees under an eligible auto- matic contribution arrangement within the meaning of section 414(w) for the entire plan year (or the portion of the plan year that the eligible NHCEs and eligible HCEs are eligible employees under the plan)). Qualified nonelective contributions and qualified matching contributions taken into account under §1.401(k)–2(a)(6) of this Chapter or qualified nonelective con- tributions or elective contributions taken into account under §1.401(m)–2(a)(6) of this Chapter for a plan year may permit a plan to avoid excess contributions or excess aggregate contributions, respec- tively, even if made after the close of the 2 1 /2month (or 6 month) period for dis- tributing excess contributions or excess aggregate contributions without the excise tax. See §1.401(k)–2(b)(1)(i) and (5)(i) of this Chapter for methods to avoid excess contributions, and §1.401(m)–2(b)(1)(i) of the Chapter for methods to avoid excess aggregate contributions. ***** LindaE.Stiff, Deputy Commissioner for Services and Enforcement. Approved January 16, 2009. Eric Solomon, Assistant Secretary of theTreasury(TaxPolicy). (Filed by the Office of the Federal Register on February 23, 2009, 8:45 a.m., and published in the issue of the Federal Register for February 24, 2009, 74 F.R. 8200) 2009–12 I.R.B.710March 23, 2009 Part III. Administrative, Procedural, and Miscellaneous Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates Notice 2009–20 This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in ef- fect for plan years beginning before 2008. It also provides guidance on the corpo- rate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this no- tice provides guidance as to the interest rate on 30-year Treasury securities un- der § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the min- imum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007. CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE Sections412(b)(5)(B)(ii)and 412(l)(7)(C)(i), as amended by the Pen- sion Funding Equity Act of 2004 and by the Pension Protection Act of 2006 (PPA), provide that the interest rates used to cal- culate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conser- vatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year. Notice 2004–34, 2004–1 C.B. 848, pro- vides guidelines for determining the cor- porate bond weighted average interest rate and the resulting permissible range of in- terest rates used to calculate current liabil- ity. That notice establishes that the corpo- rate bond weighted average is based on the monthly composite corporate bond rate de- rived from designated corporate bond in- dices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004–34 continues to apply in determining that rate. See Notice 2006–75, 2006–2 C.B. 366. The composite corporate bond rate for February 2009 is 6.83 percent. Pursuant to Notice 2004–34, the Service has de- termined this rate as the average of the monthly yields for the included corporate bond indices for that month. The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below. For Plan Years Beginning inPermissible Range MonthYear Corporate Bond Weighted Average90%to100% March2009 6.355.726.35 YIELD CURVE AND SEGMENT RATES Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding require- ments that apply to single employer plans pursuant to § 412. Section 430(h)(2) spec- ifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined us- ing three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. For plan years beginning in 2008 and 2009, a transitional rule under § 430(h)(2)(G) pro- vides that the segment rates are blended with the corporate bond weighted average as specified above. An election may be made under § 430(h)(2)(G)(iv) to use the segment rates without applying the transi- tional rule. Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, the 24-month average corporate bond seg- ment rates, and the funding transitional segment rates used to compute the tar- get normal cost and the funding target. Pursuant to Notice 2007–81, the monthly corporate bond yield curve derived from February 2009 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of Feb- ruary 2009 are, respectively, 5.24, 7.07, and 7.08. The three 24-month average corporate bond segment rates applica- ble for March 2009 under the election of § 430(h)(2)(G)(iv) are as follows: First Segment Second Segment Third Segment 5.316.54 6.73 March 23, 20097112009–12 I.R.B. The transitional segment rates under § 430(h)(2)(G) applicable for March 2009, taking into account the corporate bond weighted average of 6.35 stated above, are as follows: For Plan Years Beginning in First Segment Second Segment Third Segment 20086.006.416.48 2009 5.66 6.486.60 30-YEAR TREASURY SECURITIES INTEREST RATES Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) defines the appli- cable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury se- curities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income Tax Regulations provides that the applica- ble interest rate for a month is the annual rate of interest on 30-year Treasury secu- rities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin. The rate of interest on 30-year Treasury securities for February 2009 is 3.59 per- cent. The Service has determined this rate as the average of the yield on the 30-year Treasury bond maturing in May 2038 de- termined each day through February 11, 2008, and the yield on the 30-year Trea- sury bond maturing in February 2039 de- termined each day for the balance of the month. Generally for plan years beginning after 2007, § 431 specifies the mini- mum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B)specifies a minimum amount for the full-funding limitation described in section 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the inter- est rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities dur- ing the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The following rates were determined for plan years beginning in the month shown below. For Plan Years Beginning inPermissible Range MonthYear 30-Year Treasury Weighted Average 90%to 105% March2009 4.51 4.064.74 MINIMUM PR ESENT VALUE SEGMENT RA TES Generall y for plan years beginning af- ter Decem ber 31, 2007, the applicable in- terest ra tes under § 417(e)(3)(D) are seg- ment rate s computed without regard to a 24-month a verage. For plan years begin- ning in 200 8 through 2011, the applica- ble inter est rate is the monthly spot seg- ment rate blended with the applicable rate under § 41 7(e)(3)(A)(ii)(II) as in effect for plan y ears beginning in 2007. Notice 2007–81 p rovides guidelines for determin- ing the min imum present value segment rates. Pur suant to that notice, the min- imum pres ent value transitional segment rates det ermined for February 2009, tak- ing into a ccount the February 2009 30-year Treasury rate of 3.59 stated above, are as follows: For Plan Years Beginning in First Segment Second Segment Third Segment 20083.924.294.29 2009 4.25 4.984.99 DRAFTING INFORMATION The principal author of this notice is Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Di- vision. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov. 2009–12 I.R.B.712March 23, 2009 Table I Monthly Yield Curve for January 2009 Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield 0.54.1020.57.1840.57.0760.57.0480.57.03 1.04.3721.07.1741.07.0761.07.0481.07.03 1.54.6321.57.1741.57.0761.57.0481.57.03 2.0 4.89 22.07.1642.07.0762.07.0482.07.03 2.55.1622.57.1642.57.0762.57.0482.57.02 3.05.4123.07.1543.07.0763.07.0483.07.02 3.55.6423.57.1543.57.0763.57.0483.57.02 4.05.8624.07.1444.07.0664.07.0484.07.02 4.56.0624.57.1444.57.0664.57.0484.57.02 5.06.2325.07.1345.07.0665.07.0485.07.02 5.56.3825.57.1345.57.0665.57.0485.57.02 6.06.5126.07.1346.07.0666.07.0486.07.02 6.56.6326.57.1246.57.0666.57.0486.57.02 7.06.7327.07.1247.07.0667.07.0487.07.02 7.56.8127.57.1247.57.0667.57.0387.57.02 8.06.8828.07.1148.07.0668.07.0388.07.02 8.56.9528.57.1148.57.0668.57.0388.57.02 9.0 7.00 29.0 7.11 49.0 7.06 69.0 7.03 89.0 7.02 9.57.0529.57.1149.57.0669.57.0389.57.02 10.0 7.09 30.07.1050.07.0570.07.03 90.0 7.02 10.57.1230.57.1050.57.0570.57.0390.57.02 11.07.1531.07.1051.07.0571.07.03 91.0 7.02 11.57.1731.57.1051.57.0571.57.0391.57.02 12.0 7.19 32.07.1052.07.0572.07.03 92.0 7.02 12.57.2032.5 7.09 52.57.0572.57.0392.57.02 13.07.2133.0 7.09 53.07.05 73.07.03 93.0 7.02 13.57.2233.5 7.09 53.57.0573.57.0393.57.02 14.07.2334.0 7.09 54.07.05 74.07.03 94.0 7.02 14.57.2334.5 7.09 54.57.0574.57.0394.57.02 15.07.2335.0 7.09 55.07.0575.07.0395.07.02 15.57.2335.57.0855.57.0575.57.0395.57.02 16.07.2336.07.0856.07.0576.07.03 96.0 7.02 16.57.2236.57.0856.57.0576.57.0396.57.02 17.07.2237.07.0857.07.0577.07.03 97.0 7.02 17.57.2137.57.0857.57.0477.57.0397.57.02 18. 0 7.2 1 38. 0 7.0 8 58.07.0 4 78. 0 7.0 398.0 7.0 2 18.57.2 0 38.57.0 8 58.57.0 4 78.57.0 3 98. 5 7.0 2 19.0 7.2 039.0 7.0 8 59. 0 7.0 479.0 7.0 399.0 7.0 2 19. 57.19 39. 5 7.0 7 59. 5 7.0 4 79. 5 7.0 3 99. 5 7.0 2 20. 07.19 40. 0 7.0 7 60. 0 7.0 4 80. 0 7.0 3 100 .0 7.0 2 March 23, 20097132009–12 I.R.B. Part IV. Items o fGeneralInterest Suspension of Tax-Exempt Status of an Or ganization Identified Wi th Terrorism Announcemen t 2009–17 I. Purpose This announc ement is a public notice of the suspensi on under section 501(p) of the Internal Rev enue Code of the federal tax exemption of a certain organization that has been des ignated as supporting or en- gaging in te rrorist activity or supporting terrorism. Contributions made to an organ- ization dur ing the period that the organiza- tion’s tax -exempt status is suspended are not deduct ible for federal tax purposes. II. Backgr ound The federa l government has designated a number of organizations as supporting or engaging i n terrorist activity or supporting terrorism under the Immigration and Na- tionalit y Act, the International Emergency Economic Powers Act, and the United Na- tions Par ticipation Act of 1945. Federal law prohi bits most contributions to orga- nization s that have been so designated. Section 5 01(p) of the Code was enacted as part of the Military Family Tax Relief Act of 20 03 (P. L. 108–121), effective Novembe r 11, 2003. Section 501(p)(1) suspend s the exemption from tax un- der sect ion 501(a) of any organization describ ed in section 501(p)(2). An organ- izatio n is described in section 501(p)(2) if the o rganization is designated or oth- erwise individually identified (1) under certai n provisions of the Immigration and Nation ality Act as a terrorist organization or for eign terrorist organization; (2) in or pursu ant to an Executive Order which is relat ed to terrorism and issued under the autho rity of the International Emergency Econo mic Powers Act or section 5 of the Unit ed Nations Participation Act of 1945 for t he purpose of imposing on such or- gani zation an economic or other sanction; or (3 ) in or pursuant to an Executive Order issu ed under the authority of any federal law , if the organization is designated or oth erwise individually identified in or pur- sua nt to the Executive Order as supporting or engaging in terrorist activity (as de- finedintheIm migration and Nationality Act) or suppor ting terrorism (as defined in the Foreign Re lations Authorization Act) and the Execut ive Order refers to section 501(p)(2). Under section 501(p)(3) of the Code, suspension o f an organization’s tax exemp- tion begins o n the date of the first pub- lication of a designation or identification with respect to the organization, as de- scribed abo ve, or the date on which section 501(p) was e nacted, whichever is later. This suspen sion continues until all desig- nations and identifications of the organiza- tion are re scinded under the law or Exec- utive Orde r under which such designation or identif ication was made. Under sect ion 501(p)(4) of the Code, no deducti on is allowed under any pro- vision of t he Internal Revenue Code for any contr ibution to an organization during any perio d in which the organization’s tax exemp tion is suspended under section 501(p). T hus, for example, no charitable contribu tion deduction is allowed under section 170(relatingtotheincometax), section 545(b)(2) (relating to undistributed persona l holding company income), sec- tion 556 (b)(2) (relating to undistributed foreign personal holding company in- come), section 642(c) (relating to chari- table s et asides), section 2055 (relating to the est ate tax), section 2106(a)(2) (relating to the e state tax for nonresident aliens) and sec tion 2522 (relating to the gift tax) for co ntributions made to the organization durin g the suspension period. On Feb ruary 11, 2009, the organiza- tion l isted below was designated under Execu tive Order 13224, entitled “Block- ing Pr operty and Prohibiting Transactions With P ersons Who Commit, Threaten To Comm it, or Support Terrorism.” III. Notice of Suspension and Non- deductibility of Contributions The o rganization whose tax exemption has b een suspended under section 501(p) and t he effective date of such suspension are l isted below. Contributions made to thi s organization during the period of sus- pen sion are not deductible for federal tax pur poses. Tamil Foundat ion, Inc. Cumberland, M D Effective dat e: 2–11–09 IV. Federal Tax Filings An organization whose exempt status has been suspended under section 501(p) does not file Form 990 and is required to file the appropriate Federal income tax re- turns for the taxable periods beginning on the date of the suspension. The organi- zation must continue to file all other ap- propriate federal tax returns, including em- ployment tax returns, and may also have to file federal unemployment tax returns. V. Contact Information For additional information regard- ing the designation or identification of an organization described in section 501(p)(2), contact the Compliance Di- vision at the Office of Foreign Assets Control of the U.S. Treasury Depart- ment at 202–622–2490. Additional in- formation is also available for download from the Office’s Internet Home Page at http://www.treas.gov/offices/enforcement/ofac/ For additional information regarding the suspension of the federal tax exemp- tion of an organization under section 501(p), contact Ward L. Thomas at (202) 283–8913 at the Internal Revenue Service. Section 482: Methods To Determine Taxable Income in Connection With a Cost Sharing Arrangement; Correction Announcement 2009–18 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to final and tempo- rary regulations. SUMM ARY: This document contains corr ections to final and temporary regula- tion s (T.D. 9441, 2009–7 I.R.B. 460) that were published in theFederal Register on M onday, January 5, 2009 (74 FR 340) 2009–12 I.R.B.714March 23, 2009 providing further guidance and clarifica- tion regarding methods under section 482 to determine taxable income in connection with a cost sharing arrangement in order to address issues that have arisen in ad- ministering the current regulations. The temporary regulations affect domestic and foreign entities that enter into cost sharing arrangements described in the temporary regulations. DATES: This correction is effective March 5, 2009, and is applicable on January 5, 2009. FOR FURTHER INFORMATION CONTACT: Kenneth P. Christman, (202) 435–5265 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final and temporary regulations that are the subject of this document are under sections 367 and 482 of the Internal Revenue Code. Need for Correction As published, final and temporary reg- ulations (T.D. 9441) contains errors that may prove to be misleading and are in need of clarification. Correction of Publication Accordingly, the publication of the final and temporary regulations (T.D. 9441), which was the subject of FR Doc. E8–30715, is corrected as follows: 1. On page 346, column 2, in the preamble, under the paragraph heading “4. Acquisition Price and Market Capi- talization Methods—Temp. Treas. Reg. §1.482–7T(g)(5) and (6), third paragraph of the column, line 17, the language “PCT Payor’s, nonroutine contributions” is cor- rected to read “PCT Payee’s, nonroutine contributions”. 2. On page 347, column 1, in the preamble, the language of the paragraph heading “2. Contingent Payments—Temp. Treas. Reg. §1.482–7T(h)(2)(iv) and (v)” is corrected toread “2. Contin- gent Payments—Temp. Treas. Reg. §1.482–7T(h)(2)(iii) and (iv)”. 3. On page 348, column 2, in the pre- amble, under the paragraph heading “Spe- cial Analyses”, last paragraph of the col- umn, line 13, the language “preamble to the cross-reference notice of” is corrected to read “preamble to the cross-referenced notice of”. 4. On page 348, column 3, in the preamble, under the paragraph heading “Drafting Information”, second para- graph of the column, line 2, the language “proposed regulations is Kenneth P.” is corrected to read “temporary regulations is Kenneth P.”. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). (Filed by the Office of the Federal Register on March 4, 2009, 8:45 a.m., and published in the issue of the Federal Register for March 5, 2009, 74 F.R. 9570) Section 482: Methods To Determine Taxable Income in Connection With a Cost Sharing Arrangement; Correction Announcement 2009–19 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correction to notice of pro- posed rulemaking by cross-reference to temporary regulations. SUMMARY: This document contains corrections to a notice of proposed rule- making by cross-reference to temporary regulations (REG–144615–02, 2009–7 I.R.B. 561) that was published in theFed- eral Registeron Monday, January 5, 2009 (74 FR 236) providing further guidance and clarification regarding methods under section 482 to determine taxable income in connection with a cost sharing arrangement in order to address issues that have arisen in administering the current regulations. These temporary regulations potentially affect controlled taxpayers within the meaning of section 482 that enter into cost sharing arrangements as defined therein. FOR FURTHER INFORMATION CONTACT: Kenneth P. Christman, (202) 435–5265 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The correction notice that is the subject of this document is under section 482 of the Internal Revenue Code. Need for Correction As published, the notice of proposed rulemaking by cross-reference to tempo- rary regulations (REG–144615–02) con- tains errors that may prove to be mislead- ing and are in need of clarification. Correction of Publication Accordingly, the publication of the notice of proposed rulemaking by cross-reference to temporary regulations (REG–144615–02), which was the subject of FR Doc. E8–30712, is corrected as follows: 1. On page 236, in the document head- ings, under the caption “ACTION:”, the language “Notice of proposed rulemaking by cross-reference to temporary regula- tions, notice of proposed rulemaking, and notice of public hearing.” is corrected to read “Notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing.”. 2. On page 236, column 3, in the pre- amble, under the paragraph heading “Spe- cial Analyses”, last line of the column, the language “sharing agreements. Few small entities” is corrected to read “sharing ar- rangements. Few small entities”. 3. On page 237, column 1, in the pre- amble, under the paragraph heading “Spe- cial Analyses”, first paragraph of the col- umn, line 2, the language “agreements, as defined by these” is corrected to read “ar- rangements, as defined by these”. 4. On page 237, column 1, in the preamble, under the paragraph heading “Comments and Public Hearing”, third paragraph, line 1, the language “The rules of 26 CFR 601.601(a)(93)” is corrected to read “The rules of 26 CFR 601.601(a)(3)”. §1.482–2 [Corrected] 5.On page 237, column 3, §1.482–2(f)(2), the language “Election March 23, 20097152009–12 I.R.B. to apply paragraph (b) of this section to earlier taxable years.” is corrected to read “Electiontoapplyparagraph (b) to earlier taxable years.”. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). (Filed by the Office of the Federal Register on March 4, 2009, 8:45 a.m., and published in the issue of the Federal Register for March 5, 2009, 74 F.R. 9577) Consolidated Returns; Intercompany Obligations; Correction Announcement 2009–20 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. SUMMARY: This document contains cor- rections to final regulations (T.D. 9442, 2009–6 I.R.B. 434) that were published in theFederal Registeron Monday, Decem- ber 29, 2008 (73 FR 79324) under section 1502 of the Internal Revenue Code pro- viding guidance regarding the treatment of transactions involving obligations be- tween members of a consolidated group. DATES: This correction is effective Feb- ruary 11, 2009, and is applicable on De- cember 29, 2008. FOR FURTHER INFORMATION CONTACT: Frances Kelly, (202) 622–7770 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final regulationsthat are the subject of this document are under section 1502 of the Internal Revenue Code. Need for Correction As published, final regulations (T.D. 9442) contains errors that may prove to be misleading and are in need of clarification. ***** Correction of Publication Accordingly, 26 CFR part 1 is cor- rected by making the following correcting amendments: 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 1.1502–13 is amended as follows: 1. The second sentence of paragraph (g)(3)(i)(B) is revised. 2. Paragraph (g)(3)(i)(B)(1)(vi)isre- vised. 3. Paragraph (g)(7)(ii)Example 4.(ii) is revised. 4. The paragraph title for paragraph (g)(7)(ii)Example 4.(iv)isadded. 5. The sixth sentence of paragraph (g)(7)(ii)Example 5. (i) is revised. §1.1502–13 Intercompany transactions. ***** (g) * * * (3) * * * (i) * * * (B)***Inmakingthisdetermination, if a creditor or debtor realizes an amount in a transaction in which a creditor assigns all or part of its rights under an intercom- pany obligation to the debtor, or a debtor assigns all or part of its obligations under an intercompany obligation to the creditor, the transaction will be treated as an extin- guishment and will be excepted from the definition of “triggering transaction” only if either of the exceptions in paragraphs (g)(3)(i)(B)(5)or(6) of this section apply. *** (1)*** (vi) The stock of the transferee mem- ber (or a higher-tier member other than a higher-tier member of an 80-percent chain that includes the transferor and transferee) is disposed of within 12 months from the assignment of the intercompany obliga- tion, unless at the time of the assignment, the transferor member, transferee member (or in the case of successive section 351 exchanges, each transferor and transferee member) and the debtor member are all in the same 80-percent chain; and all of the stock of the transferee (or in the case of successive section 351 exchanges, the low- est-tier transferee) held by members of the group is disposed of as part of the same plan or arrangement, either directly or in- directly, to persons that are not members of the group. ***** (7) * * * (ii) * * * Example 4. *** (ii)No deemed satisfaction and reissuance.Be- cause the assignment of the B note is an exchange to which section 351 applies and neither S nor B rec- ognize gain or loss, the transaction is not a trigger- ing transaction under paragraph (g)(3)(i)(B)(1)ofthis section, and the note is not treated as satisfied and reissued under paragraph (g)(3)(ii) of this section. ***** (iv)Transferee loss subject to limita- tion.*** ***** Example 5. *** (i)***Thetermsandconditions of the note are not modified in connection with the sales transaction, the transaction does not result in a change in payment expectations, and no amount of income, gain, deduc- tion, or loss is recognized by S, B, or T with respect to the note. ***** Guy Traynor, Acting Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). (Filed by the Office of the Federal Register on March 4, 2009, 8:45 a.m., and published in the issue of the Federal Register for March 5, 2009, 74 F.R. 6828) 2009–12 I.R.B.716March 23, 2009 Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is be- ingextendedtoapplytoavariationofthe fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodi- fied,below). Clarifiedis used in those instances where the language in a prior ruling is be- ing made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare withamplifiedandclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published ruling is not correct and the correct position is beingstatedinanewruling. Supersededdescribes a situation where the new ruling does nothing more than re- state the substance and situation of a previ- ously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same po- sition published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single rul- ing a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new rul- ing does more than restate the substance of a prior ruling, a combination of terms is used. For example,modifiedandsu- persededdescribes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously pub- lished ruling is first modified and then, as modified, is superseded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original rul- ing has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the ad- ditions, and supersedes all prior rulings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The fol lowing abbreviations in current use and for merly used will appear in material publis hedintheBulletin. A—Individual. Acq.—A cquiescence. B—Individual. BE—Beneficiary. BK—Bank . B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cu mulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Coo perative. Ct.D.—Court Decision. CY—County. D—Decede nt. 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—Emp loyer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduc iary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Fo reign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Fed eral Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grante e. GP—General Partner. GR—Grantor. IC—Insura nce Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—No nacquiescence. O—Organization. P—Parent Corporation. PHC—Persona l Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Pa rtnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Re al Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsi diary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Trans feree. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpay er. TR—Trust. TT—Trustee. U.S.C.—Uni ted States Code. X—Corporation. Y—Corporation. Z—Corporat ion. March 23, 2009i2009–12 I.R.B. Numerical Finding List 1 Bulletins 2009–1 through 2009–12 Announcements: 2009-1, 2009-1 I.R.B.242 2009-2, 2009-5 I.R.B.424 2009-3, 2009-6 I.R.B.459 2009-4, 2009-8 I.R.B.597 2009-5, 2009-8 I.R.B.569 2009-6, 2009-9 I.R.B.643 2009-7, 2009-10 I.R.B.663 2009-8, 2009-8 I.R.B.598 2009-9, 2009-9 I.R.B.643 2009-10, 2009-9 I.R.B.644 2009-11, 2009-10 I.R.B.663 2009-12, 2009-11 I.R.B.686 2009-13, 2009-11 I.R.B.686 2009-14, 2009-11 I.R.B.687 2009-15, 2009-11 I.R.B.687 2009-16, 2009-11 I.R.B.691 2009-17, 2009-12 I.R.B.714 2009-18, 2009-12 I.R.B.714 2009-19, 2009-12 I.R.B.715 2009-20, 2009-12 I.R.B.716 Notices: 2009-1, 2009-2 I.R.B.250 2009-2, 2009-4 I.R.B.344 2009-3, 2009-2 I.R.B.250 2009-4, 2009-2 I.R.B.251 2009-5, 2009-3 I.R.B.309 2009-6, 2009-3 I.R.B.311 2009-7, 2009-3 I.R.B.312 2009-8, 2009-4 I.R.B.347 2009-9, 2009-5 I.R.B.419 2009-10, 2009-5 I.R.B.419 2009-11, 2009-5 I.R.B.420 2009-12, 2009-6 I.R.B.446 2009-13, 2009-6 I.R.B.447 2009-14, 2009-7 I.R.B.516 2009-15, 2009-6 I.R.B.449 2009-16, 2009-8 I.R.B.572 2009-17, 2009-8 I.R.B.575 2009-18, 2009-10 I.R.B.648 2009-19, 2009-10 I.R.B.660 2009-20, 2009-12 I.R.B.711 Proposed Regulations: REG-144615-02, 2009-7 I.R.B.561 REG-148568-04, 2009-5 I.R.B.421 REG-160872-04, 2009-4 I.R.B.358 REG-158747-06, 2009-4 I.R.B.362 REG-138326-07, 2009-9 I.R.B.638 REG-143686-07, 2009-8 I.R.B.579 REG-150670-07, 2009-4 I.R.B.378 Proposed Regulations— Continued: REG-113462-08, 2009-4 I.R.B.379 REG-147636-08, 2009-9 I.R.B.641 REG-150066-08, 2009-5 I.R.B.423 Revenue Procedures: 2009-1, 2009-1 I.R.B.1 2009-2, 2009-1 I.R.B.87 2009-3, 2009-1 I.R.B.107 2009-4, 2009-1 I.R.B.118 2009-5, 2009-1 I.R.B.161 2009-6, 2009-1 I.R.B.189 2009-7, 2009-1 I.R.B.226 2009-8, 2009-1 I.R.B.229 2009-9, 2009-2 I.R.B.256 2009-10, 2009-2 I.R.B.267 2009-11, 2009-3 I.R.B.313 2009-12, 2009-3 I.R.B.321 2009-13, 2009-3 I.R.B.323 2009-14, 2009-3 I.R.B.324 2009-15, 2009-4 I.R.B.356 2009-16, 2009-6 I.R.B.449 2009-17, 2009-7 I.R.B.517 2009-18, 2009-11 I.R.B.670 Revenue Rulings: 2009-1, 2009-2 I.R.B.248 2009-2, 2009-2 I.R.B.245 2009-3, 2009-5 I.R.B.382 2009-4, 2009-5 I.R.B.408 2009-5, 2009-6 I.R.B.432 2009-6, 2009-12 I.R.B.694 2009-8, 2009-10 I.R.B.645 Tax Conventions: 2009-5, 2009-8 I.R.B.569 Treasury Decisions: 9434, 2009-4 I.R.B.339 9435, 2009-4 I.R.B.333 9436, 2009-3 I.R.B.268 9437, 2009-4 I.R.B.341 9438, 2009-5 I.R.B.387 9439, 2009-5 I.R.B.416 9440, 2009-5 I.R.B.409 9441, 2009-7 I.R.B.460 9442, 2009-6 I.R.B.434 9443, 2009-8 I.R.B.564 9444, 2009-9 I.R.B.603 9445, 2009-9 I.R.B.635 9446, 2009-9 I.R.B.607 9447, 2009-11 I.R.B.694 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29, 2008. 2009–12 I.R.B.iiMarch 23, 2009 Finding List of Current Actions on Previously Published Items 1 Bulletins 2009–1 through 2009–12 Notices: 99-35 Obsoleted by Notice 2009-15, 2009-6 I.R.B.449 2001-55 Modified by Notice 2009-1, 2009-2 I.R.B.250 2002-27 Modified by Notice 2009-9, 2009-5 I.R.B.419 2005-74 Obsoleted by T.D. 9446, 2009-9 I.R.B.607 2007-26 Modified by Notice 2009-15, 2009-6 I.R.B.449 2007-54 Obsoleted by T.D. 9436, 2009-3 I.R.B.268 2008-11 Obsoleted by T.D. 9436, 2009-3 I.R.B.268 2008-12 Obsoleted by T.D. 9436, 2009-3 I.R.B.268 Rev. Proc. 2009-11, 2009-3 I.R.B.313 2008-13 Obsoleted by T.D. 9436, 2009-3 I.R.B.268 List of forms modified and superseded by Rev. Proc. 2009-11, 2009-3 I.R.B.313 Modified and clarified by Notice 2009-5, 2009-3 I.R.B.309 2008-46 Obsoleted by T.D. 9436, 2009-3 I.R.B.268 Rev. Proc. 2009-11, 2009-3 I.R.B.313 2008-100 Amplified and superseded by Notice 2009-14, 2009-7 I.R.B.516 Proposed Regulations: REG-144615-02 Corrected by Ann. 2009-19, 2009-12 I.R.B.715 REG-149519-03 Withdrawn by Ann. 2009-4, 2009-8 I.R.B.597 Proposed Regulations— Continued: REG-148326-05 Corrected by Ann. 2009-14, 2009-11 I.R.B.687 Revenue Procedures: 2007-17 Superseded by Rev. Proc. 2009-14, 2009-3 I.R.B.324 2007-68 Superseded by Rev. Proc. 2009-17, 2009-7 I.R.B.517 2007-71 Modified by Notice 2009-3, 2009-2 I.R.B.250 2008-1 Superseded by Rev. Proc. 2009-1, 2009-1 I.R.B.1 2008-2 Superseded by Rev. Proc. 2009-2, 2009-1 I.R.B.87 2008-3 Superseded by Rev. Proc. 2009-3, 2009-1 I.R.B.107 2008-4 Superseded by Rev. Proc. 2009-4, 2009-1 I.R.B.118 2008-5 Superseded by Rev. Proc. 2009-5, 2009-1 I.R.B.161 2008-6 Superseded by Rev. Proc. 2009-6, 2009-1 I.R.B.189 2008-7 Superseded by Rev. Proc. 2009-7, 2009-1 I.R.B.226 2008-8 Superseded by Rev. Proc. 2009-8, 2009-1 I.R.B.229 2008-9 Superseded by Rev. Proc. 2009-9, 2009-2 I.R.B.256 2008-17 Obsoleted in part by Rev. Proc. 2009-18, 2009-11 I.R.B.670 2008-61 Superseded by Rev. Proc. 2009-3, 2009-1 I.R.B.107 2008-65 Amplified and supplemented by Rev. Proc. 2009-16, 2009-6 I.R.B.449 Revenue Procedures— Continued: 2008-68 Amplified and superseded by Rev. Proc. 2009-15, 2009-4 I.R.B.356 Revenue Rulings: 65-286 Obsoleted by T.D. 9435, 2009-4 I.R.B.333 76-54 Obsoleted by T.D. 9435, 2009-4 I.R.B.333 92-19 Supplemented by Rev. Rul. 2009-3, 2009-5 I.R.B.382 2008-19 Modified by Rev. Rul. 2009-3, 2009-5 I.R.B.382 Treasury Decisions: 9436 Corrected by Ann. 2009-15, 2009-11 I.R.B.687 9439 Corrected by Ann. 2009-12, 2009-11 I.R.B.686 9441 Corrected by Ann. 2009-18, 2009-12 I.R.B.714 9442 Corrected by Ann. 2009-13, 2009-11 I.R.B.686 Ann. 2009-20, 2009-12 I.R.B.716 1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29, 2008. March 23, 2009iii2009–12 I.R.B. 2009–12 I.R.B.March 23, 2009 March 23, 20092009–12 I.R.B. INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin- tendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select More Topics. Then select Internal Revenue Bulletins. INTERNAL REVENUE BULLETINS ON CD-ROM Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders) or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. 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