n-98-39.pdf

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Part III - Administrative, Procedural and Miscellaneous
Effective Date of Nondiscrimination Regulations for Church Plans
Notice 98-39

I. PURPOSE
This notice extends, until the first day of the first plan
year beginning on or after January 1, 2001, the effective date of
certain nondiscrimination regulations for nonelecting church
plans. Specifically, this notice extends the effective date of
the regulations under §§ 401(a)(4), 401(a)(5), 401(l), and 414(s)
of the Internal Revenue Code. This notice also extends the TRA
‘86 remedial amendment period for such provisions, and other
related administrative relief for nonelecting church plans, until
the last day of the first plan year beginning on or after January
1, 2001.
II. BACKGROUND
A. Church Plans
Section 414(e)(1) of the Code provides in general that the
term "church plan" means a plan established and maintained for
its employees (and their beneficiaries) by a church or by a
convention or association of churches which is exempt from tax
under § 501. Pursuant to § 410(d), a church or convention or
association of churches which maintains any church plan may make
an election under § 410(d) to have certain Code provisions
relating to participation, vesting, and funding, etc., apply to
such church plan (an Aelecting church plan@) as if such
provisions did not contain an exclusion for church plans. A
church plan for which such an election has not been made (a

Anonelecting church plan@) is not subject to these provisions.
Section 1462(b) of the Small Business Job Protection Act of
1996 ("SBJPA") provides that the Secretary of the Treasury may
design nondiscrimination and coverage safe harbors for church
plans.
B. Announcement 95-48 and Notice 96-64
The nondiscrimination requirements under the Code were
substantially changed by the Tax Reform Act of 1986 (ATRA ‘86").
Announcement 95-48, 1995-23 I.R.B. 13, and Notice 96-64, 1996-2
C.B. 229, provided that the regulations under §§ 401(a)(4),
401(a)(5), 401(l) and 414(s) apply for nonelecting church plans
in plan years beginning on or after January 1, 1999. For plan
years beginning before that effective date, nonelecting church
plans must be operated in accordance with a reasonable, good
faith interpretation of these statutory provisions.
The remedial amendment period described in § 401(b) is
generally the period during which a plan may be amended
retroactively to comply with certain plan qualification
requirements. Announcement 95-48 and Notice 96-64 extended the
remedial amendment period under § 401(b) for nonelecting church
plans for certain amendments (ATRA ‘86 remedial amendment
period@) to the last day of the first plan year beginning on or
after January 1, 1999. The amendments to which the TRA ‘86
remedial amendment period applies are those required to comply
with TRA ‘86 and subsequent legislation through the Omnibus
Budget Reconciliation Act of 1993. Announcement 95-48 and Notice
96-64 also provided that, for a nonelecting church plan during
the TRA ‘86 remedial amendment period, the additional
administrative relief provided under Notice 92-36, 1992-2 C.B.

364, would continue to be available.
C. Revenue Procedure 97-41 and Revenue Procedure 98-14
The Uruguay Round Agreements Act of 1994 (AGATT@), SBJPA
(including § 414(u) of the Code and the Uniformed Services
Employment and Reemployment Rights Act of 1994 (AUSERRA@)), and
the Taxpayer Relief Act of 1997 (ATRA ‘97") changed certain
provisions of the Code affecting qualified plans. Rev. Proc. 97-
41, 1997-33 I.R.B. 51, and Rev. Proc. 98-14, 1998-4 I.R.B. 22,
set forth the remedial amendment period for plans for amendments
relating to these statutes. The remedial amendment period for
these statutes generally permits plan amendments to be made
retroactively effective if they are adopted on or before the last
day of the first plan year beginning on or after January 1, 1999,
and they relate to GATT, SBJPA (including § 414(u) and USERRA),
and TRA ‘97 changes that are effective before the first day of
that plan year. (A later remedial amendment period applies for
governmental plans.)
III. EXTENSION OF EFFECTIVE DATE OF NONDISCRIMINATION
REGULATIONS FOR NONELECTING CHURCH PLANS
Under the extension provided by this notice, the regulations
under §§ 401(a)(4), 401(a)(5), 401(l), and 414(s) apply to
nonelecting church plans only for plan years beginning on or
after January 1, 2001. For plan years beginning before this
extended effective date, nonelecting church plans must be
operated in accordance with a reasonable, good faith
interpretation of these sections.
IV. EXTENSION OF REMEDIAL AMENDMENT PERIOD AND ADMINISTRATIVE
RELIEF FOR NONELECTING CHURCH PLANS FOR AMENDMENTS RELATING
TO NONDISCRIMINATION REQUIREMENTS
Under this notice, the TRA ‘86 remedial amendment period for

nonelecting church plans is extended to the last day of the first
plan year beginning on or after January 1, 2001, but only for
amendments required to comply with the nondiscrimination
requirements of §§ 401(a)(4), 401(a)(5), 401(l), and 414(s). The
additional administrative relief provided under Notice 92-36 also
applies to these plans through this extended remedial amendment
period with respect to these nondiscrimination requirements.
This notice does not extend the remedial amendment periods for
any provisions applicable to nonelecting church plans other than
these nondiscrimination requirements.
V. SCOPE AND COMMENTS
The extensions described in this notice are provided in
anticipation of the development of nondiscrimination and coverage
safe harbors for nonelecting church plans to comply with
§§ 401(a)(4), 401(a)(5), 401(l), and 414(s), as described in §
1462(b) of SBJPA. The Treasury and the Service recognize that
certain issues may arise for nonelecting church plans that are
attributable to unique features of churches as sponsoring
employers. Such issues may arise, for instance, in the
interaction of §§ 401(a)(4) and 410(c). The Treasury and the
Service invite specific comments and suggestions regarding the
design of safe harbors for nonelecting church plans.
The extensions provided by this notice do not apply to
electing church plans. The Treasury and the Service do not
presently anticipate the development of safe harbors for electing
church plans under § 1462(b) of SBJPA, but comments are welcome
regarding whether these plans need safe harbors. Furthermore,
this notice does not apply to annuity contracts or other
arrangements maintained by churches pursuant to § 403(b), which

continue to be eligible for the relief described in § VI of
Notice 96-64.
Comments or suggestions in response to this notice should be
addressed to CC:DOM:CORP:R (Notice 98-39), Room 5226, Internal
Revenue Service, POB 7604, Ben Franklin Station, Washington, D.C.
20044. Alternatively, taxpayers may hand-deliver comments
between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (Notice
98-39), Courier’s desk, Internal Revenue Service, 1111
Constitution Ave., N.W., Washington, D.C., or may submit comments
electronically via the IRS internet site at
http://www.irs.ustreas.gov./prod/tax_regs/comments.html
VI. EFFECT ON OTHER DOCUMENTS
Notices 96-64 and 92-36 are modified.
DRAFTING INFORMATION
The principal author of this notice is Diane S. Bloom of the
Employee Plans Division. For further information regarding this
notice, please contact the Employee Plans Division's taxpayer
assistance telephone service at (202) 622-6074 or (202) 622-6075,
between the hours of 1:30 p.m. and 3:30 p.m. Eastern Time, Monday
through Thursday. Ms. Bloom may be reached at (202) 622-6214.
These telephone numbers are not toll-free.