Internal Revenue Bulletin 2008-35 (PDF rendition): IRS Notices

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Bulletin No. 200
8-35
September 2, 200
8
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
REG–142680–06, page 565.
Proposed regulations under section 7508A of the Code clarify
rules relating to the postponement of certain tax-related acts
by reason of a Presidentially declared disaster or terroristic or
military action. The regulations clarify the scope of relief under
section 7508A and specify that interest may be suspended dur-
ing the postponement period. These changes are necessary
to reflect changes in the law made by the Victims of Terrorism
Tax Relief Act and current IRS practice.
Notice 2008–71, page 462.
This notice requests comments with respect to possible expan-
sion of regulations section 1.475(a)–4 (safe harbor valuation
regulations) so that financial institutions headquartered outside
the United States can qualify to make the election described in
regulations section 1.475(a)–4(b).
Rev. Proc. 2008–51, page 562.
This procedure provides that the Service will not treat the debt
instrument, issued by a corporation pursuant to a binding finan-
cial commitment obtained from an unrelated lender that satis-
fies certain conditions, as an applicable high yield discount obli-
gation (AHYDO) for purposes of sections 163(e)(5) and 163(i)
of the Code. As a result, no portion of the corporation’s inter-
est deductions attributable to the debt instrument will be disal-
lowed under section 163(e)(5).
EMPLOYEE PLANS
Rev. Proc. 2008–50, page 464.
This procedure updates the comprehensive system of correc-
tion programs for sponsors of retirement plans that are in-
tended to satisfy the requirements of sections 401(a), 403(a),
403(b), 408(k), or 408(p) of the Code, but that have not met
these requirements for a period of time. This system, the Em-
ployee Plans Compliance Resolution System (EPCRS), permits
Plan Sponsors to correct these failures and thereby continue
to provide their employees with retirement benefits on a tax-fa-
vored basis. The components of EPCRS are the Self-Correction
Program (SCP), the Voluntary Correction Program (VCP), and
the Audit Closing Agreement Program (Audit CAP). Rev. Proc.
2006–27 modified and superseded. Rev. Proc. 2007–49,
section 3, modified and superseded.
(Continued on the next page)
Finding Lists begin on page ii.

EXEMPT ORGANIZATIONS
Announcement 2008–79, page 568.
The IRS has revoked its determination that Ohio Taekwondo
Association, Inc., of Cincinnati, OH; The Johnson Foundation
of Sandy, UT; Chaim Ministries, Inc., of Los Alamitos, CA;
Yes I Can of Burlington, NC; Surviving the System, Inc., of
Peoria, AZ; Gravette Medical Center Hospital of Gravette, AR;
D & L Carousel Pre-School of Los Angeles, CA; Christmas
in April of Mobile, AL; Foundation for Life Enhancement of
Dallas, TX; Colgate Residences, Inc., of Houston, TX; Help
Ministries, Inc., of Mesa, AZ; CCC Centers of San Antonio,
TX; Sunlight Ministries, Inc., of Brookhaven, MS; Consumer
Credit Counseling Services of Huntsville, Inc., of Huntsville, AL;
Universal Training Center Nonprofit Corporation of Highland,
CA; and Deep South Community Development Corporation of
Decatur, GA, qualify as organizations described in sections
501(c)(3) and 170(c)(2) of the Code.
ESTATE TAX
T.D. 9414, page 454.
Final regulations under sections 2036 and 2039 of the Code
provide guidance on the portion of property transferred to a
trust or otherwise that is properly includible in the grantor’s
gross estate if the grantor has retained the use of the property
or the right to an annuity, unitrust, or other payment from the
property for life, for any period not ascertainable without ref-
erence to the grantor’s death, or for a period that does not in
fact end before the grantor’s death. Rev. Ruls. 76–273 and
82–105 obsoleted.
ADMINISTRATIVE
REG–142680–06, page 565.
Proposed regulations under section 7508A of the Code clarify
rules relating to the postponement of certain tax-related acts
by reason of a Presidentially declared disaster or terroristic or
military action. The regulations clarify the scope of relief under
section 7508A and specify that interest may be suspended dur-
ing the postponement period. These changes are necessary
to reflect changes in the law made by the Victims of Terrorism
Tax Relief Act and current IRS practice.
September 2, 20082008–35 I.R.B.

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.
2008–35 I.R.B.September 2, 2008

September 2, 20082008–35 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 163.—Interest
If a debt instrument issued by a corporation pur-
suant to a binding financing commitment obtained
from an unrelated lender satisfies certain conditions,
Rev. Proc. 2008–51 provides that the Service will
not treat the debt instrument as an applicable high
yield discount obligation (AHYDO) for purposes of
§§ 163(e)(5) and 163(i) of the Internal Revenue Code.
As a result, no portion of the corporation’s interest
deductions attributable to the debt instrument will
be disallowed under § 163(e)(5). See Rev. Proc.
2008-51, page 562.
Section 2036.—Transfers
With Retained Life Estate
26 CFR 20.2036–1: Transfers with retained life es-
tate.
T.D. 9414
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 20
Gr
antor Retained Interest
T
rusts—Application of
S
ections 2036 and 2039
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations providing guidance on the
portion of property transferred to a trust or
otherwise, that is properly includible in a
grantor’s gross estate under Internal Rev-
enue Code (Code) sections 2036 and 2039
if the grantor has retained the use of the
property or the right to an annuity, uni-
trust, or other payment from such property
for life, for any period not ascertainable
without reference to the grantor’s death, or
for a period that does not in fact end be-
fore the grantor’s death. The final regula-
tions affect estates that are required to file
Form 706,United States Estate (and Gen-
eration-Skipping Transfer) Tax Return.
DATES:Effective Date:These regulations
are effective on July 14, 2008.
Applicability Date:For dates of ap-
plicability, see §20.2036–1(c)(3) and
§20.2039–1(f).
FOR FURTHER INFORMATION
CONTACT: Theresa M. Melchiorre at
(202) 622–3090 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
On June 7, 2007, proposed regulations
(REG–119097–05, 2007–28 I.R.B. 74)
were published in theFederal Register
[72 FR 31487]. The proposed regula-
tions contain proposed amendments to
the Estate Tax Regulations [26 CFR part
20] providing guidance on the portion of
a trust properly includible in a grantor’s
gross estate under sections 2036 and 2039
if the grantor retained the use of property
in the trust or the right to an annuity, uni-
trust, or other payment from the trust for
life, for any period not ascertainable with-
out reference to the grantor’s death, or for
a period that does not in fact end before
the grantor’s death. The trusts that were
the subject of the proposed regulations
include without limitation certain charita-
ble remainder trusts (collectively CRTs)
such as charitable remainder annuity trusts
(CRATs) within the meaning of section
664(d)(1), charitable remainder unitrusts
(CRUTs) within the meaning of section
664(d)(2) or (d)(3), and charitable remain-
der trusts that do not qualify under section
664, as well as other trusts established
by a grantor (collectively GRTs) such as
grantor retained annuity trusts (GRATs),
grantor retained unitrusts (GRUTs), and
various forms of grantor retained income
trusts (GRITs), such asqualified personal
residence trusts (QPRTs) and personal res-
idence trusts (PRTs). A CRT was within
the scope of the proposed regulations
whether or not the CRT met the quali-
fications of section 664(d)(1), (d)(2), or
(d)(3) because either the CRT was created
prior to 1969, there was a defect in the
drafting of the CRT, there was no inten-
tion to qualify the CRT for the charitable
deduction, or for any other reason. A
GRT was within the scope of the proposed
regulations whether or not the grantor’s
retained interest was a “qualified interest”
as defined in section 2702(b).
The proposed regulations incorpo-
rate the guidance provided in Rev. Rul.
76–273, 1976–2 C.B. 268, and Rev. Rul.
82–105, 1982–1 C.B. 133, by proposing
to amend §20.2036–1 to provide that the
portion of the corpus of a CRT and GRT
includible in the decedent’s gross estate
under section 2036 is that portion of the
trust corpus necessary to generate a return
sufficient to provide the decedent’s re-
tained annuity, unitrust, or other payment.
See §601.601(d)(2)(ii)(b). The proposed
regulations provide that, in cases where
both section 2036 and section 2039 could
apply to a retained annuity, unitrust, or
other payment in a CRT or a GRT, sec-
tion 2036 (and therefore, when applicable,
section 2035), rather than section 2039,
will be applied. Accordingly, the pro-
posed regulations also amend §20.2039–1
by providing that section 2039 generally
shall not be applied to an annuity, unitrust,
or other payment retained by a deceased
grantorinaCRTorGRT.
Written comments were received on the
proposed regulations, and a public hear-
ing was held on September 26, 2007. The
proposed regulations, with certain changes
made in response to the written and oral
comments received, are adopted as final
regulations. Although the final regula-
tions provide guidance as to the Code sec-
tion (specifically, section 2036 or 2039) to
be applied in certain circumstances when
each of those sections applies to the same
trust, the final regulations are not to be con-
strued to foreclose the possibility that any
applicable section of the Code (sections
2035 through 2039, or any other section)
properly may be applied in the future by
the IRS in appropriate circumstances be-
yond those described in the final regula-
tions.
Summary of Comments and
Explanation of Provisions
References to the Terms GRAT and GRUT
A commentator recommended that the
terms “GRAT” (grantor retained annu-
ity trust) and “GRUT” (grantor retained
2008–35 I.R.B.454September 2, 2008

unitrust) in the proposed regulations be
replaced with references to §25.2702–3(b)
and (c) because the terms GRAT and
GRUT are not statutory or regulatory
terms in the Code. In response, the final
regulations include both the Treasury Reg-
ulation citations and the terms GRAT and
GRUT.
Application of section 2036 to a retained
interest in a GRAT or a GRUT
A commentator suggested that section
2036 is not applicable to a retained annu-
ity interest in a GRAT to the extent the re-
tained annuity interest is not payable from
trust income. The commentator takes the
position that the retained annuity interest
is payable from principal and/or income,
in kind or in cash, and the size of the an-
nuity payment is not defined in relation
to trust income. Instead, the commenta-
tor suggests that the annuity is defined as
a fraction or percentage of the value of
the GRAT’s original principal, and accord-
ingly, pursuant to section 2033, only the
present value of any unpaid annuity pay-
ments as of a particular date or event, val-
ued using section 7520, should be includi-
ble in the deceased grantor’s gross estate.
The commentator opined that section 2036
includes a portion of the trust in the gross
estate only to the extent that the trust’s in-
come must be used to pay the retained an-
nuity.
Another commentator suggested that
the method in the proposed regulations
for calculating the portion of GRAT or
GRUT corpus includible in the deceased
grantor’s gross estate under section 2036
results in an overstatement of the property
required to produce the retained annuity
because the method calculates the prop-
erty necessary to produce the full dollar
value of a fixed annuity over the actuarial
life expectancy of the decedent as of the
date of death, rather than for the actual
term of years. Instead, the commentator
stated that the method to be applied should
value the retained annuity or unitrust in-
terest, rather than the property in the trust
required to produce the retained interest.
In addition, it has come to the atten-
tion of the IRS and Treasury Department
that certain taxpayers have stated that sec-
tion 2036 should not be applied to an annu-
ity when the actuarial value of the present
value of the remainder interest in the trust
is zero, on the theory that the annuity was
acquired for full and adequate considera-
tion.
The IRS and Treasury Department have
carefully considered these arguments and
analyses. The IRS and Treasury Depart-
ment believe, however, that these posi-
tions are not consistent with the language
of section 2036(a)(1), its legislative his-
tory, and the case law interpreting this sec-
tion, which require the inclusion in the
gross estate of property over which a dece-
dent has retained a “string” (the posses-
sion or enjoyment of, or the right to the
income from the transferred property) for
at least one of the required statutory pe-
riods (hereinafter referred to as a lifetime
interest). This section was enacted in re-
sponse to a concern that a donor might oth-
erwise be able to remove property from the
donor’s gross estate by giving that property
away before death while retaining the use
or benefit of the property. Thus, section
2036 requires inclusion in the gross es-
tate of the property subject to the “string”,
rather than the “string” or retained inter-
est itself. For section 2036 purposes, if
the grantor retains the possession or enjoy-
ment of, or the right to the income from,
the transferred property for life, for any pe-
riod not ascertainable without reference to
the grantor’s death, or for a period which
does not in fact end before the grantor’s
death, the value of the property over which
the grantor retained the interest is includi-
ble in the grantor’s gross estate. The in-
terest retained by the grantor of a GRAT
or GRUT who dies during the term of the
GRAT or GRUT is a retained lifetime in-
terest because the grantor is retaining the
possession or enjoyment of, or the right to
the income from, the transferred property
for one of the statutorily required time pe-
riods. Section 2036(a)(1), accordingly, in-
cludes in the grantor’s gross estate all or
a portion of the corpus of the GRAT or
GRUT. To conclude otherwise would be
to ignore the unambiguous statutory lan-
guage and the intent of section 2036.
This conclusion is supported by the
legislative history and the U.S. Supreme
Court’s interpretation of section 2036 and
its predecessors. SeeCommissioner v.
Church, 335 U.S. 632, 637–638 (1949); 64
Cong. Rec. H10729 (July 10, 1916) (state-
ments of Messrs. Elston and Kitchin);
71 Cong. Rec. S7078–7079 (March 3,
1931) (statement of Senator Smoot); and
71 Cong. Rec. H7198–7199 (March 3,
1931) (statement of Mr. Hawley).
InChurch, the Court interpreted the
possession and enjoyment clause in sec-
tion 811(c) (the predecessor to section
2036) in keeping with its historic inter-
pretation.Church, 335 U.S. at 645. The
Court held that the term “possession and
enjoyment” in section 811(c) includes
in the transferor’s gross estate property
passing at the transferor’s death in which
the transferor has retained any type of
lifetime interest (for example, income,
a life estate, reverter, etc., contingent or
otherwise, expressly stated in the transfer
document or by operation of state law)
that delayed the beneficiaries’ actual use
of the transferred property. The Court
stated, “It thus sweeps into the gross estate
all property the ultimate possession or en-
joyment of which is held in suspense until
the moment of the decedent’s death or
thereafter....Testamentarydispositions
of aninter vivosnature cannot escape
the force of this section by hiding behind
legal niceties contained in devices and
forms created by conveyancers.”Church,
335 U.S. at 646, quotingGoldstone v.
United States, 325 U.S. 687 (1945) and
citingHelvering v. Hallock, 309 U.S.
106 (1940). See, also,Spiegel’s Estate v.
Commissioner, 335 U.S. 701 (1949).
In the Act of Oct. 25, 1949, ch.
720, 63 Stat. 891 (1949) (codified
at 26 USC 811(c)(1949)) (1949 Act),
Congress amended section 811(c) to
include interests retained for a term of
years. H.R. Rep. No. 81–1412 at 9 (1949)
(Conf. Report). The Conference Report
states, in relevant part, that the “income
interests described by section 811(c)(1)(B)
[the predecessor to section 2036] and
by similar language elsewhere in the
conference amendments include reserved
rights to the income from transferred
property and rights to possess or enjoy
non-income-producing property [i.e.
corpus].”Id.at 11.
The IRS and Treasury Department be-
lieve, based upon the broad statutory lan-
guage in section 2036, as well as its leg-
islative history and relevant case law, that
under section 2036, every type of life-
time interest in property (annuity, income,
use or enjoyment of the transferred prop-
erty, etc.) retained for the requisite time
period constitutes the retained possession
and enjoyment of the transferred property
September 2, 20084552008–35 I.R.B.

or the income therefrom, causing inclusion
of the transferred property in the trans-
feror’s gross estate. This is true regardless
of the extent to which the retained interest
is paid from the income or the corpus of
the transferred property. This interpreta-
tion is consistent with the legislative intent
specifically expressedbyCongressinthe
1949 Act’s amendment to section 811(c)
as well as with the Supreme Court’s de-
cision inNortheastern Pennsylvania Na-
tional Bank & Trust Company v. United
States, 387 U.S. 213 (1967). In that case,
the Court held that a bequest to the dece-
dent’s spouse of a fixed monthly stipend,
payable from trust income or corpus, satis-
fied the requirement of section 2056(b)(5)
that the spouse receive all the income from
a specific portion of trust corpus. The spe-
cific portion of corpus qualifying for the
marital deduction was determined by com-
puting the amount of corpus necessary to
produce the guaranteed monthly payment,
assuming a fixed rate of return.
In addition, this interpretation is con-
sistent with the regulations under sec-
tion 662. For trust accounting purposes,
§1.662(a)–2(c) defines the phrase “the
amount of income for the taxable year
required to be distributed currently” to
include any amount required to be paid
out of income or corpus, limited by the
amount of income received by the estate
or trust for the taxable year and not paid,
credited, or required to be distributed to
other beneficiaries for the taxable year.
Thus,anannuityrequiredtobepaidinall
events (whether out of income or corpus)
would qualify as income required to be
distributed currently to the extent there is
income (as defined in section 643(b)) not
paid, credited, or required to be distributed
to other beneficiaries for the taxable year.
If an annuity or a portion of an annuity
is deemed to be income required to be
distributed currently, it is treated in all re-
spects in the same manner as an amount of
taxable income. The phrase “the amount
of income for the taxable year required
to be distributed currently” also includes
any amount required to be paid during
the taxable year in all events (whether out
of income or corpus) pursuant to a court
order or decree or under local law, by a
decedent’s estate as an allowance or award
for the support of the decedent’s widow
or other dependent for a limited period
during the administration of the estate to
the extent there is income (as defined in
section 643(b)) of the estate for the taxable
year not paid, credited, or required to be
distributed to other beneficiaries.
With regard to the commentator’s sug-
gestion that section 2036 applies only to
the extent that the trust principal alone is
insufficient to fully satisfy the annuity pay-
ment, the IRS and Treasury Department
believe that this would condition the es-
tate tax treatment on the nature and per-
formance of the investments selected by
the trustee. The application of section
2036 should not be dependent on either the
trustee’s exercise of his or her discretion
to invest in income or nonincome produc-
ing assets, or the actual performance of the
trust assets.
With regard to the position of certain
taxpayers that the full and adequate con-
sideration exception under section 2036
is satisfied when the present value of the
remainder interest is zero, the IRS and
Treasury Department believe that this ex-
ception to section 2036 does not apply.
There is a significant difference between
thebona fidesale of property to a third
party in exchange for an annuity, and the
retention of an annuity interest in property
transferred to a third party. In thebona
fidesale, there is a negotiation and agree-
ment between two parties, each of whom
is the owner of a property interest before
the sale; each uses his or her own property
to provide consideration to the other in ex-
change for the property interest to be re-
ceived from the other in the sale. When the
transferor retains an annuity or similar in-
terest in the transferred property (as in the
case of a GRAT or GRUT), the transferor
is not selling the transferred property to a
third party in exchange for an annuity be-
cause there is no other owner of property
negotiating or engaging in a sale transac-
tion with the transferor. The transferor, in-
stead, is transferring the property subject
to a retained possession and enjoyment of,
or right to, the income from the property. If
the grantor retains the interest for life, for
any period not ascertainable without ref-
erence to the grantor’s death, or for a pe-
riod that does not in fact end before the
grantor’s death, the property is subject to
inclusion in the grantor’s gross estate un-
der section 2036.
The portion of the GRAT or GRUT
corpus includible in the deceased grantor’s
gross estate is that portion, valued as of
the grantor’s death (or the section 2032
alternate valuation date, if applicable),
necessary to yield that annual annuity,
unitrust, or other payment without reduc-
ing or invading principal. This portion is
determined by using the section 7520 in-
terest rate in effect on the decedent’s date
of death (or on the alternate valuation date,
if applicable). The IRS has interpreted
retained annuity interests under section
2036 in this manner since the enactment of
this section in 1916. See Regulations 37
(revised, 1919), Article 24 at 22 (Revenue
Act of 1918) or Treasury Department,
Treasury Decisions under Internal Rev-
enue Law of the United States, Vol. 21
(Jan.-Dec., 1919), T.D. 2910, Art. 24 at
771; Regulations 37 (revised, January,
1921), Article 24 at 20 (Revenue Act of
1918) or Treasury Department, Treasury
Decisions under Internal Revenue Law
of the United States, Vol. 23 (Jan.-Dec.,
1921), T.D. 3145, Art. 24 at 299; Reg-
ulations 63 (1922 Edition), Article 20 at
21 (Revenue Act of 1921) or Treasury
Department, Treasury Decisions under In-
ternal Revenue Law of the United States,
Vol. 24 (Jan.-Dec., 1922), T.D. 3384, Art.
20 at 1057; Regulations 68 (1924 Edition),
Article 18 at 27 (Revenue Act of 1924) or
Treasury Department, Treasury Decisions
under Internal Revenue Law of the United
States, Vol. 27 (Jan.-Dec., 1925), T.D.
3683, Art. 18 at 107; Regulations 70 (1926
Edition), Article 18 at 25 (Revenue Act of
1926) or Treasury Department, Treasury
Decisions under Internal Revenue Law
of the United States, Vol. 28 (Jan.-Dec.,
1926), T.D. 3918, Art. 18 at 451; and
Regulations 70 (1929 Edition), Article
18 at 27–28 (Revenue Act of 1926). The
IRS confirmed this interpretation in Rev.
Rul. 76–273 and Rev. Rul. 82–105. Al-
though this guidance predates the advent
of GRATs and GRUTs, the analysis and
holdings of this guidance consistently has
been applied to GRATs, GRUTs, and sim-
ilar trust arrangements.
Pooled Income Funds
A commentator requested that the regu-
lations be expanded to discuss their impact
on both newer (under three years old) and
more mature (over three years old) pooled
income funds. The age of the fund deter-
mines the formula to be used to determine
the fund’s rate of return, and thus the value
2008–35 I.R.B.456September 2, 2008

of the charitable gift: funds that are at least
three years old use the highest of the three
last taxable years’ rates of return; funds
that are less than three years old generally
use the highest of the three calendar-year
annual averages of the section 7520 rates
minus 1 percent. See §1.642(c)–6(e)(3)
and (4). This distinction based on the du-
ration of the fund, however, is not relevant
for purposes of determining the amount in-
cluded in the transferor’s gross estate un-
der section 2036 because the retained in-
terest is the right to all of the income,
thus mandating the inclusion of the entire
share of the fund’s corpus attributable to
the transferor. A pooled income fund ex-
ample has been added to the final regula-
tions asExample 5in §20.2036–1(c)(2).
Remainder Interest in Personal Residences
and Farms
A commentator requested that the
regulations be expanded to discuss the
estate tax implications for charitable gifts
of remainder interests in personal resi-
dences and farms. The calculation of the
charitable deduction is beyond the scope
of these final regulations.Example 2
of §20.2036–1(c)(1), however, has been
added in the final regulations to confirm
that, if the transferortransferred a personal
residence to a third person while retaining
the right to use the personal residence for
life or for a term of years, and if the trans-
feror died during that term, the fair market
value of the residence on the date of death
is includible in the transferor’s gross estate
under section 2036.
Alternate Valuation Date
A commentator questioned whether the
proposed regulations imply that the por-
tion of the trust includible in the grantor’s
gross estate when the estate has made a
section 2032 election is to be determined
with reference to the section 7520 rate in
effect on the alternate valuation date. The
commentator has requested an explanation
of why the change in the section 7520 rate
is not a change in value due only to the
mere lapse of time under §20.2032–1(f).
When a section 2032 election is made,
the section 7520 interest rate (but not the
mortality factor) on the alternate valuation
date is used to determine the portion of
trust corpus includible in the grantor’s
gross estate under section 2036. The sec-
tion 7520 interest rate reflects changes due
to market conditions, which is permitted
under section 2032. Mortality factors are
not necessary to determine the portion
of trust corpus includible in the grantor’s
gross estate under section 2036 because
under section 2036 the dispositive factor
is whether the interest was retained for the
requisite statutory period, not the length
of the period remaining at the transferor’s
death. See §20.2032–1(f) in cases where
the mortality factoris applicable and the
alternate valuationmethod under section
2032 is elected.
Alternate Valuation Date Example
A commentator requested an ex-
ample that illustrates how the rules of
§20.2032–1(d) affect the trust’s value and
how required annuity payments made after
the date of death but before the alternate
valuation date affect the estate inclusion
computation. Any such example, which
would properly belong in the regulations
under section 2032, is beyond the scope of
these final regulations.
Examples of CRAT and CRUT for a Term
of Years
A commentator requested that the reg-
ulation be expanded to include examples
or a discussion of the estate tax implica-
tions for a donor who creates a CRAT or
a CRUT for a term of years. In response
to this comment,Examples 1and3of
§20.2036–1(c)(2) are amended in the final
regulations to provide that, if the grantor
instead had retained an interest in a CRAT
or a CRUT for a term of years and had died
during the term, the inclusion under sec-
tion 2036 would be the same as when the
grantor retained an interest for life in the
CRAT or CRUT.
Graduated GRAT Example
A commentator requested that exam-
ples be provided that address a GRAT from
which the grantor receives increasing an-
nuity payments. The commentator sug-
gested two alternative methods for valuing
the annuity and requested that the IRS pro-
vide guidance on the appropriate method.
The IRS and Treasury Department agree
that such an example would be helpful and
appropriate but believe the issue requires
further consideration.
Example illustrating Proposed
§20.2036–1(c)(1)
A commentator recommended that the
example found in §20.2036–1(c)(1)(ii)
illustratingtheprovisionsof
§20.2036–1(c)(1)(i) be changed by re-
placing the reference to D’s spouse (E),
with D’s child (C), to avoid complications
with section 2523. The commentator also
explained that, even if D dies before E, D
has a right at death to more than one-half
of trust income because D has the right to
theentiretrustincomeintheeventEdies
before D. The IRS and Treasury Depart-
ment agree that this example should be
provided in the regulations under section
2036, but believe the issue requires further
consideration.
Proposed Title for §20.2036–1(c)(2)
A commentator suggested that the title
of proposed regulation §20.2036–1(c)(2)
be changed to “Retained annuity, unitrust,
and other income interests in trusts.” This
comment is adopted because this regula-
tion addresses retained interests in trust in-
come and corpus.
Examples 1 and 3 of Proposed
§20.2036–1(c)(2)
A commentator recommended thatEx-
amples 1and3of proposed regulation
§20.2036–1(c)(2) state that, if D’s execu-
tor elects to use the alternate valuation date
and also elects to use the interest rate com-
ponent for either of the two months preced-
ing the alternate valuation date, then un-
der §1.664–2(c) of the Income Tax Regula-
tions, the section 7520 rate and the mortal-
ity table for that month should be used for
purposes of determining: (1) the portion
of trust corpus includible in D’s estate; (2)
the value of C’s continuing annuity inter-
est; and (3) the charitable deduction avail-
able for the portion of the CRAT included
in D’s estate.
The choice as to the monthly interest
rate to be used to determine the portion
of trust corpus includible in D’s estate
and the value of C’s continuing annuity
interest present no issues under section
2036, and are addressed by section 7520.
September 2, 20084572008–35 I.R.B.

Mortality factors, however, generally are
not necessary to determine the portion
of trust corpus includible in the grantor’s
gross estate under section 2036. In cases
where a mortality factor is applicable and
the alternate valuation method under sec-
tion 2032 is elected, taxpayers are directed
to §20.2032–1(f). The calculation of the
charitable deduction is beyond the scope
of these regulations. Accordingly, the
issues raised in this comment will not be
addressed in these final regulations.
Example 1 of Proposed §20.2036–1(c)(2)
A commentator had several com-
ments with respect to this example. The
commentator pointed out that the trust
in the example fails the 10 percent re-
mainder requirement set forth in section
664(d)(1)(D). In response,Example 1has
been modified in the final regulations so
that the trust meets this requirement.
Second, the commentator concluded
that the charitable deduction of $30,024.80
arrived at in the example would be cor-
rect only if it is assumed that the annuity
payments to C were paid entirely from the
portion of the trust that is includible in D’s
gross estate. The commentator suggested
that there is no basis for this assumption,
and that C’s annuity payments are made
from the trust as a whole and should be
allocated between the included and ex-
cluded portion of the trust in proportion
to the relative values of each. This ap-
proach results in a charitable deduction of
$86,683 ($200,000 reduced by two-thirds
of the value of C’s annuity). In response,
it has been determined that it is beyond the
scope of the final regulations to address
the calculation of the charitable deduction.
Accordingly, the charitable deduction cal-
culations inExample 1andExample 3
of §20.2036–1(c)(2) have been removed
from the final regulations.
The commentator requested that the
regulations include a statement that, if
aninter vivosCRAT is properly formed
and subsequently included in the grantor’s
gross estate, the requirements under sec-
tion 664(d) for qualification as a CRAT do
not need to be retested at the time of the
grantor’s death for purposes of determin-
ing whether the grantor’s estate is entitled
to a charitable deduction for the value of
the remainder interest in the CRAT. This
issue is governed by section 664 and is
beyond the scope of the final regulations.
Finally, the commentator suggested
thatExample 1be expanded to include a
right retained by D to revoke C’s annuity
interest or to change the identity of the
charitable remainderman and to confirm
the impact of these retained powers on
the charitable deduction.Example 1in
§20.2036–1(c)(2) is expanded in the final
regulations to include the scenario that D
may revoke C’s annuity interest or change
the identity of the charitable remainder-
man. The example cites to section 2038
for the inclusion of property in the gross
estate on account of such retained powers.
Example 2 of Proposed §20.2036–1(c)(2)
A commentator suggested that the sen-
tence, “No additional contributions were
made to the Trust after D’s transfer at
the creation of the Trust” be removed or
changed to reflect that no additional con-
tributions may be made to a GRAT. In
response, the final regulations adopt this
comment.
A commentator suggested that the ex-
ample address the amount includible in D’s
gross estate when the trust is payable to D’s
estate after D’s death. In response,Exam-
ple 2of §20.2036–1(c)(2) is modified in
the final regulations to provide that the por-
tion of trust corpus includible in D’s estate
under section 2036 is that portion neces-
sary to support D’s retained interest at the
moment before D’s death (calculated as di-
rected in the example). Thus, it is not ma-
terial whether annuity payments are made
to D’s estate after D’s death.
Effect on Other Documents
The following documents are obsolete
as of July 14, 2008.
Rev. Rul. 76–273, 1976–2 C.B. 268.
Rev. Rul. 82–105, 1982–1 C.B. 133.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations and,
because these regulations do not impose
on small entities a collection of informa-
tion requirement, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ingthisregulationwassubmittedtothe
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is Theresa M. Melchiorre, Office of
Chief Counsel, IRS.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 20 is
amended as follows:
PART 20—ESTATE TAX; ESTATES
OF DECEDENTS DYING AFTER
AUGUST 16, 1954
Paragraph 1. The authority citation for
part 20 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 20.2036–1 is amended
by:
1. Revising paragraph (a).
2. Designating the undesignated text
following paragraph (a)(3)(ii) as para-
graph (c)(1)(i) and adding new paragraph
headings.
3. Adding paragraphs(c)(1)(ii), (c)(2),
and (c)(3).
The revisions and additions read as fol-
lows:
§20.2036–1 Transfers with retained life
estate.
(a)In general. A decedent’s gross es-
tate includes under section 2036 the value
of any interest in property transferred by
the decedent after March 3, 1931, whether
in trust or otherwise, except to the extent
that the transfer was for an adequate and
full consideration in money or money’s
worth (see §20.2043–1), if the decedent re-
tained or reserved—
(1) For his life;
(2) For any period not ascertainable
without reference to his death (if the trans-
fer was made after June 6, 1932); or
2008–35 I.R.B.458September 2, 2008

(3) For any period which does not in
fact end before his death:
(i) The use, possession, right to income,
or other enjoyment of the transferred prop-
erty.
*****
(c)Retained or reserved interest—(1)
Amount included in gross estate—(i)In
general.***
(ii)Examples. The application of para-
graph (c)(1)(i) of this section is illustrated
in the following examples:
Example 1.[Reserved].
Example 2. D transferred D’s personal residence
to D’s child (C), but retained the right to use the resi-
dence for a term of years. D dies during the term. At
D’s death, the fair market value of the personal resi-
dence is includible in D’s gross estate under section
2036(a)(1) because D retained the right to use the res-
idence for a period that did not in fact end before D’s
death.
(2)Retained annuity, unitrust, and
other income interests in trusts—(i)In
general. This paragraph (c)(2) applies to
a grantor’s retained use of an asset held
in trust or a retained annuity, unitrust, or
other interest in any trust (other than a
trust constituting an employee benefit)
including without limitation the following
(collectively referred to in this paragraph
(c)(2) as “trusts”): certain charitable re-
mainder trusts (collectively CRTs) such
as a charitable remainder annuity trust
(CRAT) within the meaning of section
664(d)(1), a charitable remainder unitrust
(CRUT) within the meaning of section
664(d)(2) or (d)(3),and any charitable
remainder trust that does not qualify un-
der section 664(d), whether because the
CRT was created prior to 1969, there was
a defect in the drafting of the CRT, there
was no intention to qualify the CRT for
the charitable deduction, or otherwise;
other trusts established by a grantor (col-
lectively GRTs) such as a grantor retained
annuity trust (GRAT) paying out a qual-
ified annuity interest within the meaning
of §25.2702–3(b) of this chapter, a grantor
retained unitrust (GRUT) paying out a
qualified unitrust interest within the mean-
ing of §25.2702–3(c) of this chapter; and
various other forms of grantor retained
income trusts (GRITs) whether or not the
grantor’s retained interest is a qualified
interest as defined in section 2702(b),
including without limitation a qualified
personal residence trust (QPRT) within the
meaning of §25.2702–5(c) of this chap-
ter and a personal residence trust (PRT)
within the meaning of §25.2702–5(b) of
this chapter. If a decedent transferred
property into such a trust and retained or
reserved the right to use such property,
or the right to an annuity, unitrust, or
other interest in such trust with respect to
the property decedent so transferred for
decedent’s life, any period not ascertain-
able without reference to the decedent’s
death, or for a period that does not in fact
end before the decedent’s death, then the
decedent’s right to use the property or the
retained annuity, unitrust, or other inter-
est (whether payable from income and/or
principal) constitutes the retention of the
possession or enjoyment of, or the right
to the income from, the property for pur-
poses of section 2036. The portion of the
trust’s corpus includible in the decedent’s
gross estate for Federal estate tax purposes
is that portion of the trust corpus neces-
sary to provide the decedent’s retained
use or retained annuity, unitrust, or other
payment (without reducing or invading
principal) as determined in accordance
with §20.2031–7 (or §20.2031–7A, if ap-
plicable). The portion of the trust’s corpus
includible in the decedent’s gross estate
under section 2036, however, shall not
exceed the fair market value of the trust’s
corpus at the decedent’s date of death.
(ii)Graduated retained interests.[Re-
served].
(iii)Examples. The application of para-
graphs (c)(2)(i) and (c)(2)(ii) of this sec-
tion are illustrated in the following exam-
ples:
Example 1. (i) Decedent (D) transferred $100,000
to aninter vivostrust that qualifies as a CRAT under
section 664(d)(1). The trust agreement provides for
an annuity of $7,500 to be paid each year to D for D’s
life, then to D’s child (C) for C’s life, with the remain-
der to be distributed upon the survivor’s death to N, a
charitable organization described in sections 170(c),
2055(a), and 2522(a). The annuity is payable to D or
C, as the case may be, annually on each December
31
st
. D dies in September 2006, survived by C who
was then age 40. On D’s death, the value of the trust
assets was $300,000 and the section 7520 interest rate
was 6 percent. D’s executor does not elect to use the
alternate valuation date.
(ii) The amount of corpus with respect to which D
retained the right to the income, and thus the amount
includible in D’s gross estate under section 2036, is
that amount of corpus necessary to yield the annual
annuity payment to D (without reducing or invading
principal). In this case, the formula for determining
the amount of corpus necessary to yield the annual
annuity payment to D is: annual annuity / section
7520 interest rate = amount includible under section
2036. The amount of corpus necessary to yield the
annual annuity is $7,500 / .06 = $125,000. There-
fore, $125,000 is includible in D’s gross estate under
section 2036(a)(1). (The result would be the same
if D had retained an interest in the CRAT for a term
of years and had died during the term. The result
also would be the same if D had irrevocably relin-
quished D’s annuity interest less than 3 years prior to
D’s death because of the application of section 2035.)
If, instead, the trust agreement had provided that D
could revoke C’s annuity interest or change the iden-
tity of the charitable remainderman, see section 2038
with regard to the portion of the trust to be included in
the gross estate on account of such a retained power to
revoke. Under the facts presented, section 2039 does
not apply to include any amount in D’s gross estate by
reason of this retained annuity. See §20.2039–1(e).
Example 2. (i) D transferred $100,000 to a GRAT
in which D’s annuity is a qualified interest described
in section 2702(b). The trust agreement provides for
an annuity of $12,000 per year to be paid to D for a
term of ten years or until D’s earlier death. The annu-
ity amount is payable in twelve equal installments at
the end of each month. At the expiration of the term
of years or on D’s earlier death, the remainder is to be
distributed to D’s child (C). D dies prior to the expi-
ration of the ten-year term. On the date of D’s death,
the value of the trust assets is $300,000 and the sec-
tion 7520 interest rate is 6 percent. D’s executor does
not elect to use the alternate valuation date.
(ii) The amount of corpus with respect to which D
retained the right to the income, and thus the amount
includible in D’s gross estate under section 2036, is
that amount of corpus necessary to yield the annual
annuity payment to D (without reducing or invading
principal). In this case, the formula for determining
the amount of corpus necessary to yield the annual
annuity payment to D is: annual annuity (adjusted
for monthly payments) / section 7520 interest rate =
amount includible under section 2036. The Table K
adjustment factor for monthly annuity payments in
this case is 1.0272. Thus, the amount of corpus neces-
sary to yield the annual annuity is ($12,000 x 1.0272)
/ .06 = $205,440. Therefore, $205,440 is includible
in D’s gross estate under section 2036(a)(1). If, in-
stead, the trust agreement had provided that the annu-
ity was to be paid to D during D’s life and to D’s estate
for the balance of the 10-year term if D died during
that term, then the portion of trust corpus includible
in D’s gross estate would still be as calculated in this
paragraph. It is not material whether payments are
made to D’s estate after D’s death. Under the facts
presented, section 2039 does not apply to include any
amount in D’s gross estate by reason of this retained
annuity. See §20.2039–1(e).
Example 3. (i) In 2000, D created a CRUT within
the meaning of section 664(d)(2). The trust instru-
ment directs the trustee to hold, invest, and reinvest
the corpus of the trust and to pay to D for D’s life,
and then to D’s child (C) for C’s life, in equal quar-
terly installments payable at the end of each calendar
quarter, an amount equal to 6 percent of the fair mar-
ket value of the trust as valued on December 15 of
the prior taxable year of the trust. At the termination
of the trust, the then-remaining corpus, together with
any and all accrued income, is to be distributed to N, a
charitable organization described in sections 170(c),
2055(a), and 2522(a). D dies in 2006, survived by C,
who was then age 55. The value of the trust assets on
D’s death was $300,000. D’s executor does not elect
to use the alternate valuation date and, as a result, D’s
September 2, 20084592008–35 I.R.B.

executor does not choose to use the section 7520 in-
terest rate for either of the two months prior to D’s
death.
(ii) The amount of the corpus with respect to
which D retained the right to the income, and thus
the amount includible in D’s gross estate under sec-
tion 2036(a)(1), is that amount of corpus necessary
to yield the unitrust payments. In this case, such
amount of corpus is determined by dividing the
trust’s equivalent income interest rate by the section
7520 rate (which was 6 percent at the time of D’s
death). The equivalent income interest rate is deter-
mined by dividing the trust’s adjusted payout rate by
the excess of 1 over the adjusted payout rate. Based
on §1.664–4(e)(3) of this chapter, the appropriate
adjusted payout rate for the trust at D’s death is 5.786
percent (6 percent x .964365). Thus, the equivalent
income interest rate is 6.141 percent (5.786 percent
/ (1 - 5.786 percent)). The ratio of the equivalent
interest rate to the assumed interest rate under section
7520 is 102.35 percent (6.141 percent / 6 percent).
Because this exceeds 100 percent, D’s retained pay-
out interest exceeds a full income interest in the trust,
and D effectively retained the income from all the
assets transferred to the trust. Accordingly, because
D retained for life an interest at least equal to the
right to all income from all the property transferred
by D to the CRUT, the entire value of the corpus
of the CRUT is includible in D’s gross estate under
section 2036(a)(1). (The result would be the same if
D had retained, instead, an interest in the CRUT for
a term of years and had died during the term.) Under
the facts presented, section 2039 does not apply to
include any amount in D’s gross estate by reason of
D’s retained unitrust interest. See §20.2039–1(e).
(iii) If, instead, D had retained the right to a uni-
trust amount having an adjusted payout for which
the corresponding equivalent interest rate would have
been less than the 6 percent assumed interest rate of
section 7520, then a correspondingly reduced propor-
tion of the trust corpus would be includible in D’s
gross estate under section 2036(a)(1). Alternatively,
if the interest retained by D was instead only one-half
of the 6 percent unitrust interest, then the amount in-
cluded in D’s estate would be the amount needed to
produce a 3 percent unitrust interest. All of the results
in thisExample 3would be the same if the trust had
been a GRUT instead of a CRUT.
Example 4. During life, D established a 15-year
GRIT for the benefit of individuals who are not
members of D’s family within the meaning of section
2704(c)(2). D retained the right to receive all of the
net income from the GRIT, payable annually, during
the GRIT’s term. D dies during the GRIT’s term. D’s
executor does not elect to use the alternate valuation
date. In this case, the GRIT’s corpus is includible in
D’s gross estate under section 2036(a)(1) because D
retained the right to receive all of the income from
the GRIT for a period that did not in fact end before
D’s death. If, instead, D had retained the right to
receive 60 percent of the GRIT’s net income, then
60 percent of the GRIT’s corpus would have been
includible in D’s gross estate under section 2036.
Under the facts presented, section 2039 does not
applytoincludeanyamountinD’sgrossestateby
reason of D’s retained interest. See §20.2039–1(e).
Example 5. In 2003, D transferred $10X to a
pooled income fund that conforms to Rev. Proc.
88–53,1988–2 C.B. 712 (1988) in exchange for 1 unit
in the fund. D is to receive all of the income from
that 1 unit during D’s life. Upon D’s death, D’s child
(C), is to receive D’s income interest for C’s life. In
2008, D dies. D’s executor does not elect to use the
alternate valuation date. In this case, the fair market
value of D’s 1 unit in the pooled income fund is in-
cludible in D’s gross estate under section 2036(a)(1)
because D retained the right to receive all of the
income from that unit for a period that did not in fact
end before D’s death. See §601.601(d)(2)(ii)(b)of
this chapter.
Example 6. D transferred D’s personal residence
to a trust that met the requirements of a qualified
personal residence trust (QPRT) as set forth in
§25.2702–5(c) of this chapter. Pursuant to the terms
of the QPRT, D retained the right to use the residence
for 10 years or until D’s prior death. D dies before
the end of the term. D’s executor does not elect to
use the alternate valuation date. In this case, the fair
market value of the QPRT’s assets on the date of D’s
death are includible in D’s gross estate under section
2036(a)(1) because D retained the right to use the
residence for a period that did not in fact end before
D’s death.
(3)Effective/applicability dates. Para-
graphs (a) and (c)(1)(i) of this section are
applicable to the estates of decedents dy-
ing after August 16, 1954. Paragraphs
(c)(1)(ii) and (c)(2) of this section apply to
the estates of decedents dying on or after
July 14, 2008.
Par. 3. Section 20.2039–1 is amended
by:
1. Revising paragraph (a).
2. Adding new paragraphs (e) and (f).
The revision and addition reads as fol-
lows:
§20.2039–1 Annuities.
(a)In general. A decedent’s gross es-
tate includes under section 2039(a) and
(b) the value of an annuity or other pay-
ment receivable by any beneficiary by rea-
son of surviving the decedent under cer-
tain agreements or plans to the extent that
the value of the annuity or other payment
is attributable to contributions made by
the decedent or his employer. Sections
2039(a) and (b), however, have no ap-
plication to an amount which constitutes
the proceeds of insurance under a policy
on the decedent’s life. Paragraph (b) of
this section describes the agreements or
plans to which section 2039(a) and (b) ap-
plies; paragraph (c) of this section provides
rules for determining the amount includi-
ble in the decedent’s gross estate; para-
graph (d) of this section distinguishes pro-
ceeds of life insurance; and paragraph (e)
of this section distinguishes annuity, uni-
trust, and other interests retained by a dece-
dent in certain trusts. The fact that an
annuity or other payment is not includi-
ble in a decedent’s gross estate under sec-
tion 2039(a) and (b) does not mean that it
is not includible under some other section
of part III of subchapter A of chapter 11.
However, see section 2039(c) and (d) and
§20.2039–2 for rules relating to the exclu-
sion from a decedent’s gross estate of an-
nuities and other payments under certain
“qualified plans.” Further, the fact that an
annuity or other payment may be includi-
ble under section 2039(a) will not preclude
the application of another section of chap-
ter11withregardtothatinterest.Foran-
nuity interests in trust, see paragraph (e)(1)
of this section.
*****
(e)No application to certain trusts.
Section 2039 shall not be applied to in-
clude in a decedent’s gross estate all or
any portion of a trust (other than a trust
constituting an employee benefit, but in-
cluding those described in the following
sentence) if the decedent retained a right
to use property of the trust or retained an
annuity, unitrust, or other interest in the
trust, in either case as described in section
2036. Such trusts include without limita-
tion the following (collectively referred to
in this paragraph (e) as “trusts”): certain
charitable remainder trusts (collectively
CRTs) such as a charitable remainder an-
nuity trust (CRAT) within the meaning of
section 664(d)(1), a charitable remainder
unitrust (CRUT) within the meaning of
section 664(d)(2) or (d)(3), and any other
charitable remainder trust that does not
qualify under section 664(d), whether be-
cause the CRT was created prior to 1969,
there was a defect in the drafting of the
CRT, there was no intention to qualify the
CRT for the charitable deduction, or other-
wise; other trusts established by a grantor
(collectively GRTs) such as a grantor re-
tained annuity trust (GRAT) paying out a
qualified annuity interest within the mean-
ing of §25.2702–3(b) of this chapter, a
grantor retained unitrust (GRUT) paying
out a qualified unitrust interest within the
meaning of §25.2702–3(c) of this chap-
ter; and various forms of grantor retained
income trusts (GRITs) whether or not the
grantor’s retained interest is a qualified
interest as defined in section 2702(b),
including without limitation a qualified
personal residence trust (QPRT) within the
2008–35 I.R.B.460September 2, 2008

meaning of §25.2702–5(c) of this chap-
ter and a personal residence trust (PRT)
within the meaning of §25.2702–5(b) of
this chapter. For purposes of determin-
ing the extent to which a retained interest
causes all or a portion of a trust to be
included in a decedent’s gross estate, see
§20.2036–1(c)(1), (2), and (3).
(f)Effective/applicability dates.The
first, second, and fourth sentences in para-
graph (a) of this section are applicable to
the estates of decedents dying after August
16, 1954. The fifth sentence of paragraph
(a) of this section is applicable to the es-
tates of decedents dying on or after Octo-
ber 27, 1972, and to the estates of dece-
dents for which the period for filing a claim
for credit or refund of an estate tax over-
payment ends on or after October 27, 1972.
The third, sixth, and seventh sentences of
paragraph (a) and all of paragraph (e) of
this section are applicable to the estates of
decedents dying on or after July 14, 2008.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved July 4, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July 11, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 14, 2008, 73 F.R. 40173)
Section 2039.—Annuities
26 CFR 20.2039–1: Annuities.
Final regulations provide guidance on the portion
of property transferred to a trust or otherwise, that
is properly includible in a grantor’s gross estate un-
der Internal Revenue Code (Code) sections 2036 and
2039 if the grantor has retained the use of the prop-
erty or the right to an annuity, unitrust, or other pay-
ment from such property for life, for any period not
ascertainable without reference to the grantor’s death,
or for a period that does not in fact end before the
grantor’s death. See T.D. 9414, page 454.
September 2, 20084612008–35 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Section 475 Valuation Safe
Harbor
Notice 2008–71
SECTION 1. PURPOSE
This notice requests comments with re-
spect to possible expansion of § 1.475(a)–4
of the Income Tax Regulations (safe harbor
valuation regulations) so that financial in-
stitutions headquartered outside the United
States can qualify to make the election de-
scribed in Treas. Reg. § 1.475(a)–4(b).
SECTION 2. BACKGROUND
On June 12, 2007, the Treasury De-
partment and the Internal Revenue Ser-
vice (Service) published the safe harbor
valuation regulations in the Federal Reg-
ister (T.D. 9328, 2007–27 I.R.B. 1 [72 FR
32172]). For dealers in securities and for
dealers in commodities that elect to mark
to market under section 475(e), those reg-
ulations provide an elective safe harbor for
valuations under section 475. Specifically,
if an eligible taxpayer makes the safe har-
bor election, the values of certain posi-
tions that the taxpayer reports on an eli-
gible financial statement in a manner con-
sistent with the requirements of the safe
harbor valuation regulations are treated as
those positions’ fair market values for pur-
poses of section 475.SeeTreas. Reg.
§ 1.475(a)–4(b).
Any tax regulatory regime that permits
use of values from a financial statement
for tax purposes must ensure that the fi-
nancial accounting regime’s standards that
are used by taxpayers are consistent with
the requirements of applicable sections of
the Internal Revenue Code (Code) (in this
case section 475). The safe harbor valu-
ation regulations are based on the conclu-
sion that use of financial statement values
for tax purposes is justified to the extent
that the taxpayer satisfies certain basic cri-
teria:
1. The financial accounting method
used in the taxpayer’s financial state-
ment must be sufficiently consistent
with what section 475 requires for
taxpurposes(andthereforeisan
“eligible method,”seeTreas. Reg.
§ 1.475(a)–4(d)).
2. The taxpayer’s financial statement
must have sufficientindiciaof re-
liability to ensure that the taxpayer
carefully and consistently follows the
financial accounting method being
used in the statement (and therefore
is an “applicable financial statement,”
seeTreas. Reg. § 1.475(a)–4(h)).
3. The taxpayer’s record keeping and
record production must enable the
Service to verify that the values used
for tax purposes were the same as
the values reported on the financial
statement; and, when the values to be
reportedonthetaxreturnarerequired
to incorporate adjustments to the raw
values in the financial statement, the
taxpayer’s record keeping and record
production must enable the Service to
reconcile the two sets of values.
See generallythepreambletoT.D.9328
(discussing the broad policies underlying
the particular requirements in the safe har-
bor valuation regulations).
Internationally Headquartered Financial
Institutions
Some financial institutions that are
chartered outside of the United States
and are engaged in a trade or business
within the United States (internationally
headquartered financial institutions) have
commented that certain of the require-
ments set forth in the safe harbor valuation
regulations prevent them from using the
safe harbor. The Treasury Department and
the Service are considering expanding the
regulatory safe harbor if the basic crite-
ria above are satisfied and are requesting
comments regarding that expansion.
Two definitions in the current regula-
tions would need to be amended in order
to expand the safe harbor valuation regime
potentially to include internationally head-
quartered financial institutions.
Internationally headquartered financial
institutions generally prepare financial
statements in accordance with the Inter-
national Financial Reporting Standards
(“IFRS”). The definition of “eligible
method” (see Treas. Reg. § 1.475(a)–4(d))
excludes non-U.S.GAAP accounting sys-
tems by including only accounting meth-
ods that determine value in accordance
with U.S. GAAP. Therefore, in order for
internationally headquartered financial
institutions generally to be eligible to use
the safe harbor, the definition of eligible
methodwouldhavetobeamendedto
include IFRS (or more specifically the
version of IFRS the U.S. Securities and
Exchange Commission (SEC) is consider-
ing for adoption).
Second, internationally headquartered
financial institutions generally do not
prepare financial statements that sat-
isfy the current regulatory requirements
for being an “applicable financial state-
ment” (within the meaning of Treas. Reg.
§ 1.475(a)–4(h)). The definition of “ap-
plicable financial statement” requires
preparation of the statement in accordance
with U.S. GAAP and use of the state-
ment in filings with the SEC or with any
agency of the Federal government other
than the Service. Internationally head-
quartered financial institutions generally
file complete, non-U.S.-GAAP-based fi-
nancial statements with a home country
supervisor or market regulator, not with
a Federal agency other than the Service
as required by the safe harbor valuation
regulations. Thus, the home country fi-
nancial statement is not an “applicable
financial statement.” Therefore, in order
for internationally headquartered financial
institutions generally to be eligible to use
the safe harbor, the definition of appli-
cable financial statement would have to
be amended to include non-U.S.-GAAP
financial statements filed with the insti-
tution’s home country regulator or some
other financial statement that is filed by
that taxpayer with other appropriate regu-
latory authorities.
Expansion of the Safe Harbor Valuation
Regulations to Include IFRS
The decision whether to expand the
definition of “eligible method” to in-
clude IFRS (or, more specifically, the
version of IFRS ultimately adopted by
theSEC)willbebasedonthecriteria
identified above that justify use of finan-
cial statement values for tax purposes.
The current regulatory definition of “el-
igible method” attempts to ensure that a
financial statement may serve as the ba-
sis of valuation for tax purposes only if
the accounting method used in that state-
2008–35 I.R.B.462September 2, 2008

ment is sufficiently consistent with the
accounting method that section 475 re-
quires for tax purposes. The definition
of “eligible method,” which requires that
an eligible method be a mark-to-market
method, recognizes that the central dif-
ference between a mark-to-market and
a realization accounting method is that,
under the former but not under the latter,
the taxpayer’s income statement currently
accounts for unrealized changes in value.
Moreover, in crafting the current safe
harbor the Treasury Department and the
Service “concluded that the requirements
and limitations of the safe harbor ensure
sufficient consistency when applied to fi-
nancial statements prepared according to
U.S. GAAP. This conclusion is less clear
when the requirements and limitations are
applied to financialstatements prepared
under other accounting regimes.” T.D.
9328, 2007–27 I.R.B. 1, 5 [72 FR 32172,
32176].
The Treasury Department and the Ser-
vice continue to evaluate the issue of
whether to expand the definition of “el-
igible method” to include IFRS and are
therefore interested in comments on the
differences between U.S. GAAP valuation
standards and those in IFRS, especially
differences between mark-to-market val-
uation under IFRS and under U.S. GAAP
(including whether IFRS permits vol-
untary adoption of alternative valuation
standards).
Understanding these differences is nec-
essary in evaluating whether any IFRS
standards are sufficiently consistent both
with the three criteria described above
that underlie the safe harbor and with the
policies of other sections of the Code and
the Regulations (e.g., section 861 and
Treas. Reg. § 1.882–5) that rely on asset
values determined under section 475. For
example, if a financial accounting method
arrives at a value by including funding
costs (including any management alloca-
tion of expenses) or permits those costs to
be taken into account pursuant to a vol-
untary convention, allowing that method
might significantly erode the policies of
other sections of the Code and the Regu-
lations.
Expansion of “Applicable Financial
Statement”
The decision whether to expand the def-
inition of “applicable financial statement”
likewise will be based on the criteria iden-
tified above that justify the use of financial
statement values for tax purposes. Many
internationally headquartered financial in-
stitutions file a U.S. GAAP-based balance
sheet (a “call report”) with a United States
bank regulator. Some commentators have
urged that this financial statement be per-
mitted to be an “applicable financial state-
ment’ to the extent that the other require-
ments of the regulations are satisfied. This
partial financial statement does not satisfy
the current regulatory requirements of the
safe harbor. In particular, this partial fi-
nancial statement does not contain an in-
come statement and, as a result, changes
in the values of the taxpayer’s positions are
not currently reflected in income. The par-
tial financial statement, therefore, does not
employ an “eligible method,” and so the
values reported on that partial statement
are not eligible to be used in the safe har-
bor. It has been suggested, however, that
when a taxpayer files a U.S. GAAP-based
call report with a U.S. bank regulator and
the values on the call report correspond to
the values on the taxpayer’s home country
IFRS-based financial statements that in-
clude an income statement, these circum-
stances should nevertheless satisfy the def-
inition of an “applicable financial state-
ment” to the extent that the other require-
ments of the regulations are satisfied.
This suggestion raises the question
whether the basic criteria described above
would be satisfied by the combination of a
call report filed witha U.S. regulator and
the reporting party’s home country income
statement. In order for this to be the case,
the mark-to-market method in the home
country income statement would have to
be an eligible method and the filing with
a U.S. regulator would have to give the
statement sufficientindiciaof reliabil-
ity that the financial accounting method
is being carefully and consistently fol-
lowed. In expressing uncertainty whether
non-U.S.-GAAP financial statements sat-
isfy the criteria underlying the regulations,
the preamble to the final regulations asked
a number of questions to solicit public
comment. T.D. 9328, 2007–27 I.R.B. at 5
[72 FR at 32176]. The Treasury Depart-
ment and the Service continue to welcome
answers to those questions.
SECTION 3. REQUEST FOR
COMMENTS
In particular, to aid in the consideration
of whether to expand the safe harbor val-
uation regulations so that internationally
headquartered financial institutions can
make the safe harbor valuation election,
the Treasury Department and the Service
request answers to the following ques-
tions:
1. If the existing regulatory require-
ments discussed above were expanded
to permit internationally headquar-
tered financial institutions to make
the election described in Treas. Reg.
§ 1.475(a)–4(b), are a significant
number of these institutions likely to
make the election?
2. If the safe harbor were expanded to
include circumstances where the val-
ues reported in the U.S. call report of
a foreign bank are the same values
that are reported in a mark-to-market
income statement filed in the bank’s
home country, how will the Service
be able to match the values used for
tax purposes with those on the home
country income statement?
3. What is the relationship between the
call report and the home-country in-
come statement? Are there foreign
currency translation considerations
between the two? How might those
be resolved so that the Service can
effectively and efficiently audit the
records?
4. If the definition of “applicable finan-
cial statement” isexpanded, should
the applicable financial statement be
theonefiledbytheforeignbankwith
its home country bank regulator rather
than with a home country market reg-
ulator (like the SEC)?
5. How, if at all, does mark-to-market
valuation under IFRS take expenses
into account, including funding costs
or any similar amount (e.g.,costof
carry)?
a. Does IFRS allow these amounts
to be taken into account pur-
suant to a voluntary accounting
convention under any circum-
stances?
September 2, 20084632008–35 I.R.B.

b. What regulatory amendments,
if any, should be considered if
those costs are taken into account,
keeping in mind the interaction
of section 475 with other sections
of the Code and Income Tax Reg-
ulations (e.g., section 861 and
Treas. Reg. § 1.882–5)?
6. In what circumstances is section 475
relevant for other purposes of the
Code and in what circumstances do
the policies of other sections of the
Code and the Regulations that rely
on asset values determined under sec-
tion 475 (including those determined
pursuant to an election under Treas.
Reg. § 1.475(a)–4(b)) require special
adjustment to the amount determined
under section 475?
7. Should the definition of “eligible
method” go beyond the accounting
methods that the SEC has accepted?
If so, what is an appropriate (and
administrable) framework for evalu-
ating whether such a method complies
with the basic criteria outlined above?
SECTION 4. INSTRUCTIONS
Comments should be submitted on or
before November 1, 2008, and should
include a reference to Notice 2008–71.
Send submissions to CC:PA:LPD:PR
(Notice 2008–71), Room 5203, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, D.C.
20044. Submissions may be hand-de-
livered Monday through Friday between
the hours of 8:00 a.m. and 4:00 p.m.
to CC:PA:LPD:PR (Notice 2008–71),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20224, or sent electron-
ically via the following email address:
Notice.Comments@irscounsel.treas.gov.
Please include the notice number 2008–71
in the subject line of any electronic
communication. All materials submitted
will be available for public inspection and
copying.
DRAFTING INFORMATION
The principal author of this notice is
Sheila Ramaswamy of the Office of As-
sociate Chief Counsel (International). For
further information regarding this no-
tice, contact Sheila Ramaswamy at (202)
622–3870 (not a toll-free call).
26 CFR 601.202: Closing agreements.
Rev. Proc. 2008–50
TABLE OF CONTENTS
PART I. INTRODUCTION TO EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM
SECTION
1. PURPOSE AND OVERVIEW
.01Purpose........................................................................................... 468
.02General principles underlying EPCRS................................................................ 468
.03Overview.......................................................................................... 468
SECTION 2. EFFECT OF THIS REVENUE PROCEDURE ON PROGRAMS
.01Effe
ct on programs.................................................................................
468
.02Future enhancements............................................................................... 469
PART II. PROGRAM EFFECT AND ELIGIBILITY
SECTION 3. EFFECT OF EPCRS; RELIANCE
.01Effect of EPCRS on retirement plans.................................................................. 470
.0
2
Co
mpliance Statement..............................................................................
47
0
.03Other taxes and penalties........................................................................... 470
.04Reliance.......................................................................................... 470
SECTION 4. PROGRAM ELIGIBILITY
.01EPCRS Programs.................................................................................. 471
.02Effect of examination............................................................................... 471
.03Favorable Letter requirement........................................................................ 471
.04Established practices and procedures................................................................. 471
.05
Correction by plan amendment. ..................................................................... 471
2008–35 I.R.B.464September 2, 2008

.06Availability of correction of Employer Eligibility Failure................................................ 472
.07Availability of correction of a terminated plan......................................................... 472
.08Availability of correction of an Orphan Plan. ......................................................... 472
.09Availability of correction of § 457 plans............................................................... 472
.10Submission for a determination letter................................................................. 472
.11Egregious fai
lures.................................................................................
472
.12Diversion or misuse of plan assets.................................................................... 472
.13Abusive tax avoidance transactions................................................................... 472
PART III. DEFINITIONS, CORRECTION PRINCIPLES, AND RULES OF GENERAL APPLICABILITY
SECTION 5. DEFINITIONS
.01Definitions for Qualified Plans....................................................................... 472
.02Definitions for 403(b) Plans......................................................................... 474
.03Definitions for Orphan Plans........................................................................
475
.04References to Rev. Proc. 2007–44....................................................................
475
.05
SEP..............................................................................................
475
.06SIMPLE
IRA Plan..................................................................................
475
.07Under Examination. ...............................................................................
475
SECTION 6. CORRECTION PRINCIPLES AND RULES OF GENERAL APPLICABILITY
.01Correction principles; rules of general applicability.................................................... 476
.02Correction principles............................................................................... 476
.03Corr
ection of an Employer Eligibility Failure..........................................................
478
.04Correction of a failure to obtain spousal consent....................................................... 478
.05
Submission of a determination letter application....................................................... 478
.06Special rules relating to Excess Amounts.............................................................. 480
.07Rules relating to reporting plan loan failures.......................................................... 481
.08Correction under statute or regulations............................................................... 481
.0
9
Ma
tters subject to excise taxes.......................................................................
48
1
.10Correction for SEPs and SIMPLE IRA Plans.......................................................... 482
.11Confidentiality and disclosure....................................................................... 483
.12No effect on other law. ............................................................................. 483
PART IV. SELF-CORRECTION (SCP)
SECTION7. INGENERAL
SECTION 8. SELF-CORRECTION OF INSIGNIFICANT OPERATIONAL FAILURES
.01Requirements...................................................................................... 483
.02Factors. .......................................................................................... 483
.03Multiple failures................................................................................... 483
.04Examples. ........................................................................................ 483
SECTION 9. SELF-CORRECTION OF SIGNIFICANT OPERATIONAL FAILURES
.01Requirements...................................................................................... 484
.02Correction period.................................................................................. 484
.03Correction by plan amendment. ..................................................................... 484
.04Substantial completion of correction.................................................................. 484
.05
Examples. ........................................................................................ 484
PART V. VOLUNTARY CORRECTION WITH SERVICE APPROVAL (VCP)
SECTION 10. VCP PROCEDURES
.01VCP requirements..................................................................................
485
.02Identification of failures.............................................................................
485
September 2, 20084652008–35 I.R.B.

.03Effect of VCP submission on examination.............................................................
485
.04No concurrent examination activity...................................................................
485
.05
Determination letter application for plan amendments related to a VCP submission........................
485
.06Determination letter applications not related to a VCP submission.......................................
485
.07Processing of submission............................................................................
485
.08Compliance st
atement..............................................................................
487
.09Effect of compliance statement on examination. ....................................................... 487
.10Special rules relating to Anonymous (John Doe) Submissions............................................ 487
.11Special rules relating to Group Submissions........................................................... 487
.12Multiemployer and multiple employer plans........................................................... 488
SECTION 11
. APPLICATION PROCEDURES FOR VCP
.01General rules...................................................................................... 488
.02Streamlined Application procedures.................................................................. 489
.03Submission requirements............................................................................ 489
.04Required documents................................................................................ 490
.05
Date fee due generally.............................................................................. 491
.06Additi
onal fee due for SEPs, SIMPLE IRA Plans and Group Submissions.................................
491
.07Signed submission.................................................................................. 491
.08Power of attorney requirements...................................................................... 491
.09Penalty of perjury statement......................................................................... 491
.10Checklist.......................................................................................... 491
.11Designation....................................................................................... 491
.12Ackn
owledgement letter.............................................................................
491
.13VCP mailing address............................................................................... 491
.14Maintenance of copies of submissions. ............................................................... 491
.15
Assemblingthesubmission......................................................................... 491
SECTION 12. VCP FEES
.0
1
VC
P fees..........................................................................................
49
2
.02VCP fee for Qualified Plans and 403(b) Plans......................................................... 492
.03VCP fee for nonamender failures..................................................................... 492
.04VCP fee for Group Submission....................................................................... 493
.05
VCP fee for SEPs and SIMPLE IRA Plans............................................................. 493
.06VCP fee for egregious or intentional failures........................................................... 493
.07Establishing the number of plan participants.......................................................... 493
PART VI. CORRECTION ON AUDIT (AUDIT CAP)
SECTION 13. DESCRIPTION OF AUDIT CAP
.01Audit CAP requirements. ........................................................................... 493
.02Payment of sanction................................................................................ 493
.03Additional requirements............................................................................. 493
.04Failure to reach resolution. ......................................................................... 493
.05
Effect of closing agreement.......................................................................... 493
.06Other procedural rules.............................................................................. 493
SECTION 14. AUDIT CAP SANCTION
.01Determination of sanction........................................................................... 493
.02Factors considered................................................................................. 494
.03Transferred Assets.................................................................................. 494
.04Fee for nonamenders discovered during the determination letter application process not related to a VCP
submission........................................................................................ 494
2008–35 I.R.B.466September 2, 2008

PART VII. EFFECT ON OTHER DOCUMENTS; EFFECTIVE DATE; PAPERWORK REDUCTION ACT
SECTION 15. EFFECT ON OTHER DOCUMENTS
.01
Rev. Proc. 200
6–27 modified and superseded..........................................................
495
.02Section 3 of Rev. Proc. 2007–49 modified and superseded...............................................
495
SECTION 16. EFFECTIVE DATE
SECTION 17. PAPERWORK REDUCTION ACT
DRAFTING INFORMATION
APPENDIX A: OPERATIONAL FAILURES AND CORRECTION METHODS
.01General rule.......................................................................................
495
.02
Failure to properly provide the minimum top-heavy benefit under § 416 to non-key employees............... 495
.03Failure to satisfy the ADP test set forth in § 401(k)(3), the ACP test set forth in § 401(m)(2), or, for plan years
beginning on or before December 31, 2001,the multiple use test of § 401(m)(9). .......................... 495
.04Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of § 401(a)(30))....... 496
.05
Exclusion of an eligible employee from all contributions or accruals under the plan for one or more plan
years............................................................................................. 496
.06Failure to timely pay the minimum distribution required under § 401(a)(9)................................ 498
.07Failur
e to obtain participant or spousal consent for a distribution subject to the participant and spousal
consen
t rules under §§ 401(a)(11), 411(a)(11), and 417. ...............................................
498
.08Failure to satisfy the § 415 limits in a defined contribution plan.......................................... 498
.09Abandoned Orphan Plans; orphan contracts and other abandoned plan assets. ........................... 499
APPE
NDIX B: CORRECTION METHODS AND EXAMPLES; EARNINGS ADJUSTMENT METHODS AND EXAMPLES
SECTION 1. PURPOSE, ASSUMPTIONS FOR EXAMPLES AND SECTION REFERENCES
.01Purpose........................................................................................... 499
.02Assumptions for Examples. ......................................................................... 499
.03Designated Roth contributions.......................................................................
500
.0
4
Se
ction references..................................................................................
500
SECTION 2. CORRECTION METHODS AND EXAMPLES
.01ADP/ACP Failures.................................................................................
500
.02Exclusion of Otherwise Eligible Employees............................................................
501
.03Vesting Failures....................................................................................
508
.04§ 415 Failures.....................................................................................
509
.05
Correction of Other Overpayment Failures............................................................
511
.06§ 401(a)(17) Failures...............................................................................
511
.07Correction by Amendment...........................................................................
511
SECTION 3. EARNINGS ADJUSTMENT METHODS AND EXAMPLES
.01Earnings Adjustment Methods.......................................................................
512
.02Examples. ........................................................................................
513
APPENDIX C: VCP CHECKLIST
APPENDIX D: SAMPLE FORMAT FOR VCP SUBMISSIONS
APPENDIX E: ACKNOWLEDGEMENT LETTER
APPENDIX F: STREAMLINED VCP SUBMISSION
Schedule1—InterimandCertainDiscretionaryNonamenders ...............................................
530
Schedule2—Nonamenders(otherthanthosetowhichSchedule1applies) ....................................
533
September 2, 20084672008–35 I.R.B.

Schedule3—SEPsandSARSEPs ........................................................................
535
Schedule4—SIMPLEIRAs.............................................................................
542
Schedule5—PlanLoanFailures.......................................................................... 548
Schedule6—EmployerEligibilityFailures ................................................................
553
Schedule7—FailuretoDistributeElectiveDeferralsinExcessofthe§402(g)limit............................
554
Schedule8—FailuretoPayRequiredMinimumDistributionTimelyunder§401(a)(9) .........................
556
Schedule 9 — Correction by Plan Amendment (in accordance with Appendix B)................................
558
SECTION 1. PURPOSE AND
OVERVIEW
.01Purpose. This revenue procedure
updates the comprehensive system of
correction programs for sponsors of retire-
ment plans that are intended to satisfy the
requirements of § 401(a), 403(a), 403(b),
408(k), or 408(p) of the Internal Revenue
Code (the “Code”), but that have not met
these requirements for a period of time.
This system, the Employee Plans Com-
pliance Resolution System (“EPCRS”),
permits Plan Sponsors to correct these
failures and thereby continue to provide
their employees with retirement benefits
on a tax-favored basis. The components
of EPCRS are the Self-Correction Pro-
gram (“SCP”), the Voluntary Correction
Program (“VCP”), and the Audit Closing
Agreement Program (“Audit CAP”).
.02General principles underlying
EPCRS. EPCRS is based on the following
general principles:
•Sponsors and other administrators of
eligible plans should be encouraged to
establish administrative practices and
procedures that ensure that these plans
are operated properly in accordance
with the applicable requirements of
the Code.
•Sponsors and other administrators of
eligible plans should satisfy the appli-
cable plan document requirements of
the Code.
•Sponsors and other administrators
should make voluntary and timely cor-
rection of any plan failures, whether
involving discrimination in favor of
highly compensated employees, plan
operations, the terms of the plan doc-
ument, or adoption of a plan by an
ineligible employer. Timely and effi-
cient correction protects participating
employees by providing them with
their expected retirement benefits, in-
cluding favorable tax treatment.
•Voluntary compliance is promoted by
providing for limited fees for volun-
tary corrections approved by the Ser-
vice, thereby reducing employers’ un-
certainty regarding their potential tax
liability and participants’ potential tax
liability.
•Fees and sanctions should be grad-
uatedinaseriesofstepssothat
there is always an incentive to correct
promptly.
•Sanctions for plan failures identified
on audit should be reasonable in light
of the nature, extent, and severity of the
violation.
•Administration of EPCRS should be
consistent and uniform.
•Sponsors should be able to rely on the
availability of EPCRS in taking correc-
tive actions to maintain the tax-favored
status of their plans.
.03Overview. EPCRS includes the fol-
lowing basic elements:
•Self-correction (SCP). A Plan Sponsor
that has established compliance prac-
tices and procedures may, at any time
without paying any fee or sanction,
correct insignificant Operational Fail-
ures under a Qualified Plan, a 403(b)
Plan, a SEP, or a SIMPLE IRA Plan,
provided the SEP or SIMPLE IRA
Plan is established and maintained on
a document approved by the Service.
In addition, in the case of a Qualified
Plan that is the subject of a favorable
determination letter from the Service
or in the case of a 403(b) Plan, the Plan
Sponsor generally may correct even
significant Operational Failures with-
out payment of any fee or sanction.
•Voluntary correction with Service ap-
proval (VCP). A Plan Sponsor, at any
time before audit, may pay a limited
fee and receive the Service’s approval
for correction of a Qualified Plan,
403(b) Plan, SEP, or SIMPLE IRA
Plan. Under VCP, there are special
procedures for anonymous submis-
sions and group submissions.
•Correctiononaudit(AuditCAP).Ifa
failure (other than a failure corrected
through SCP or VCP) is identified on
audit, the Plan Sponsor may correct
the failure and pay a sanction. The
sanction imposed will bear a reason-
able relationship to the nature, extent,
and severity of the failure, taking into
account the extent to which correction
occurred before audit.
SECTION 2. EFFECT OF THIS
REVENUE PROCEDURE ON
PROGRAMS
.01Effect on programs. This revenue
procedure modifies and supersedes Rev.
Proc. 2006–27, 2006–1 C.B. 945 (as mod-
ified by Rev. Proc. 2007–49, 2007–30
I.R.B. 141), which was the prior consoli-
dated statement of the correction programs
under EPCRS. The modifications to Rev.
Proc. 2006–27 that are reflected in this
revenue procedure include:
•Expanding the definition of a plan
loan failure to include violations of
§ 72(p)(2), regardless of whether the
plan contains language relating to
§ 72(p). (sections 4.01 and 6.07)
•Clarifying that in particular cases the
Service may decline to make available
one or more correction programs under
EPCRS in the interest of sound tax ad-
ministration. (section 4.01(5))
•Expanding the scope of the SCP by: (i)
liberalizing the requirements for deter-
mining whether there was substantial
completion of correction as of the first
date the plan or Plan Sponsor is consid-
ered to be Under Examination and (ii)
expanding the failures for which sam-
ple correction methods are provided.
(sections 4.05(2) and 9.04, Appendix
A .05, and Appendix B 2.02)
•Expanding the correction method with
respect to elective deferrals to include
catch-up contributions under § 414(v)
and plans that provide the opportunity
for an employee to designate all or a
portion of elective deferrals as desig-
nated Roth contributions. (Appendix
A .05, and Appendix B 2.02)
2008–35 I.R.B.468September 2, 2008

•Expanding the correction method for a
failure to include an eligible employee
in a § 401(k) plan to include a situation
in which elective deferral and after-tax
employee contribution elections are
not implemented by the employer or
are implemented in a manner inconsis-
tent with the plan’s terms. (Appendix
A .05 and Appendix B 2.02)
•Revising the requirements for submit-
ting a determination letter application
when correcting certain Qualification
Failures by plan amendment. (sections
6.05, 10.08, and 11.01)
•Clarifying the scope of a compliance
statement issued when correcting cer-
tain Qualification Failures by plan
amendment. (sections 6.05 and 10.08)
•Updating the definition of Excess
Amounts and providing corrections
for Excess Amounts failures, includ-
ing those resulting from the failure
to satisfy the requirements of § 415.
This update includes correction rules
largely similar to the corrections that
were at § 1.415–6(b)(6)(iii) of the In-
come Tax Regulations (as it appeared
in the April 1, 2007 edition of 26 CFR
part 1) prior to amendments made by
the recently finalized regulations un-
der § 415, but with the amount placed
in an unallocated account to be reallo-
cated in lieu of employer contributions
other than elective deferrals. (sections
5.01(3) and 6.06, and Appendix A .08)
•Updating the definition of Favorable
Letter. (section 5.01(4))
•Adding a factor to be considered in
the determination of whether a correc-
tion method is reasonable and appro-
priate. The factor requires considera-
tion of corrections of violations that are
similar to the failure being addressed
by other government agencies. In ap-
propriate cases, for a failure that re-
sults from either the employer having
ceased to exist, the employer no longer
maintaining the plan, or similar rea-
sons, the permitted correction would
be to terminate the plan and distrib-
ute plan assets to participants and ben-
eficiaries in accordance with standards
and procedures substantially similar to
thosesetforthinsection2578.1ofthe
Department of Labor Regulations (re-
lating to abandoned plans). (section
6.02(2)(e)(ii) and Appendix A .09)
•Clarifying that theearnings adjustment
for corrective contributions or distribu-
tions is calculated from the date when
the qualification failure occurred with-
out regard to any extensions provided
under the Code. (section 6.02(4)(e))
•Clarifying that the earnings rate de-
rived from the Department of Labor’s
VFCP Online calculator may be used
to determine the earnings adjustment
applied to corrective contributions,
distributions, allocations, and reallo-
cations if it is not feasible to make a
reasonable estimate of what the actual
investment results would have been.
(section 6.02(5)(a))
•Providing that if the total corrective
distribution due a participant or benefi-
ciary is $75 or less, the Plan Sponsor is
not required to make the corrective dis-
tribution if the reasonable direct costs
of processing and delivering the distri-
bution to the participant or beneficiary
would exceed the amount of the distri-
bution. (section 6.02(5)(b))
•Providing that if the Plan Sponsor at-
tempts to use the IRS’ Letter Forward-
ing Program to locate participants and
the Service declines to implement the
letter forwarding request, then the Plan
Sponsor will use alternate means to
locate missing participants. (section
6.02(5)(d))
•Clarifying that if a Plan Sponsor ei-
ther (i) wants a participant’s deemed
distributiontobereportedonForm
1099–R for the year of correction (in-
stead of the year of the failure) or (ii)
wants relief from reporting a partici-
pant’s loan as a deemed distribution on
Form 1099–R, then it must specifically
request such relief. (sections 6.07(1)
and 6.07(2)(a))
•Clarifying the treatment of amounts
improperly distributed to participants
and beneficiaries under the plan which
are rolled over to IRAs, with respect to
the excise tax under § 4973. (sections
6.03(4) and 6.09(5))
•Clarifying the circumstances under
which a waiver of the excise tax un-
der § 4974 would be considered under
Audit CAP. (section 6.09(2))
•Expanding income and excise taxes
that the Service may exercise discre-
tion to not pursue. (sections 6.09(5)
and 6.09(6))
•Clarifying the scope of a compliance
statement issued with respect to certain
nonamender failures. (sections 6.05
and 10.08)
•Providing for new and expanded
streamlined application procedures for
interim nonamenders and the failure
to implement optional law changes
timely and other nonamenders, cer-
tain SEP, SARSEP and SIMPLE IRA
failures, certain plan loan failures, Em-
ployer Eligibility Failures, § 402(g)
failures, § 401(a)(9) failures, and fail-
ures that involve plan amendment in
accordance with Appendix B 2.07.
(section 11.02, Appendix F)
•Reducing the compliance fee under
certain circumstances for a plan where
the sole failure is the failure of partici-
pant loans to comply with the require-
ments of § 72(p)(2). (section 12.02(3))
•Clarifying that, in the case of a Quali-
fication Failure that is intentional, the
compliance fee under VCP will be de-
termined in accordance with section
12.06. (section 12.06)
•Providing that Audit CAP provisions
apply if the Service identifies a partic-
ipant loan that did not comply with the
requirements of § 72(p)(2) (other than
a loan failure that is corrected in ac-
cordance with SCP or VCP) upon an
Employee Plans or Exempt Organiza-
tions examination of a Qualified Plan
or 403(b) Plan. (sections 13.01 and
14.01)
•Providing a sample application form
for VCP filings. (revised Appendix D)
.02Future enhancements.(1) Future
updates. It is expected that the EPCRS
revenue procedure will continue to be
updated from time to time, including,
as noted above, further improvements to
EPCRS based on comments previously
received. Thus, the Service and Trea-
sury continue to invite further comments
on how to improve EPCRS. Comments
should be sent to:
Internal Revenue Service
Attention: SE:T:EP:RA:VC
1111 Constitution Avenue, NW
Washington, D.C. 20224
(2)Section 401(k) automatic enroll-
ment. Comments are requested for certain
specific issues under EPCRS. First, com-
ments are requested regarding methods
September 2, 20084692008–35 I.R.B.

to correct the failure to implement auto-
matic enrollment with respect to elective
deferrals in a § 401(k) plan that has an
automatic enrollment provision, including
a § 401(k) plan that is designed to be a
qualified automatic contribution arrange-
ment within the meaning of § 401(k)(13),
but no amounts were withheld from the
compensation of an employee who has
made no election. Second, comments are
requested regarding methods to correct
the failure to timely provide a safe harbor
notice under a plan designed to satisfy the
requirements of § 401(k)(12), 401(k)(13),
or 414(w).
(3)Designated Roth contributions.
Comments are also specifically requested
on special issues relating to designated
Roth contributions. For example, com-
ments are requested on whether, if a plan
failed to implement a participant’s election
to have a designated Roth contribution
made on his or her behalf, but instead a
pre-tax elective deferral was made for the
participant with the participant’s compen-
sation reduced accordingly, would it be
an appropriate correction of the failure
for the employer to ask the participant
whether correction should be made by a
transfer of the contribution (with earnings)
to a Roth account and inclusion of the
amount so transferred in the participant’s
compensation in the year of the transfer
(instead of either (i) a similar transfer with
a corrected W–2 for the year of the failure
and the participant having to complete an
amended return for the year of the failure
or (ii) a similar transfer and inclusion of
the amount so transferred in the partic-
ipant’s compensation in the year of the
transfer, but with the employer to make a
grossup payment to the participant to make
the participant whole for the resulting in-
come tax). Comments are also requested
regarding cases in which a plan fails to
notify an employee of his or her right to
elect designated Roth contributions, such
as whether the correction for the failure
described in the preceding sentence should
also be applied in this case or whether
some additional corrective contribution
should be required to reflect the possibility
that a participant’s decision to make an
elective deferral might be affected by the
availability of designated Roth contribu-
tions. See also section .05(3) of Appendix
A and Example 3 of Appendix B, section
2.02(1)(b), for an illustration of correction
for exclusion of otherwise eligible em-
ployees from being able to make elective
deferrals, which applies without regard
to whether the plan only permits pre-tax
elective deferrals or whether the plan also
permits designated Roth elective deferrals.
(4)Section 1101 of the Pension Pro-
tection Act of 2006. (a) Section 1101
of the Pension Protection Act of 2006
(PPA ’06), Public Law 109–280 (120
Stat. 780), grants the Secretary of the
Treasury the full authority to establish
and implement EPCRS and, among other
things, instructs the Secretary to continue
to update and improve EPCRS, giving
special attention to the following: (1)
increasing the awareness and knowledge
of small employers concerning the
availability and use of the program; (2)
taking into account special concerns and
circumstances that small employers face
with respect to compliance and correction
of compliance failures; (3) extending
the duration of the self-correction period
under SCP for significant compliance
failures; (4) expanding the availability to
correct insignificant compliance failures
under SCP during audit; and (5) assuring
that any tax, penalty, or sanction that is
imposed by reason of a compliance failure
is not excessive and bears a reasonable
relationship to the nature, extent, and
severity of the failure.
(b) EPCRS has historically been struc-
tured to achieve the general principles that
are described in section 1.02 of this rev-
enue procedure. This revenue procedure,
like the many predecessor revenue proce-
dures
1
that addressed correction of qualifi-
cation failures, continues to include mod-
ifications that are designed to make the
EPCRS programs more accessible, partic-
ularly with respect to small employers. For
example, Appendix F has been substan-
tially expanded to add additional failures
that commonly occur in plans maintained
by small employers, and significantly re-
duces the burden and cost to an employer
of submitting under the VCP. Various other
changes have been made that will provide
assurance to small employers and other
Plan Sponsors, including expansion of the
standard corrections in Appendices A and
B (such as correction for abandoned plans
and orphan contracts and further expan-
sion of standard correction for qualifica-
tion failures involving the operational fail-
ure to extend elective deferrals to eligi-
ble employees). In addition, eligibility
under SCP has been expanded with re-
spect to employers who discover failures
in their plans and have begun the correc-
tion process. See section 2.01 for a more
thorough list of changes made in this rev-
enue procedure.
PART II. PROGRAM EFFECT AND
ELIGIBILITY
SECTION 3. EFFECT OF EPCRS;
RELIANCE
.01Effect of EPCRS on retirement
plans. For a Qualified Plan, a 403(b)
Plan, a SEP, or a SIMPLE IRA Plan, if the
eligibility requirements of section 4 are
satisfied and the Plan Sponsor corrects a
failure in accordancewith the applicable
requirements of SCP in section 7, VCP
in sections 10 and 11, or Audit CAP in
section 13, the Service will not treat the
plan as failing to meet § 401(a), § 403(b),
§ 408(k), or § 408(p), as applicable. Thus,
for example, if the Plan Sponsor corrects
a failure in accordance with the require-
ments of this revenue procedure, the plan
will not thereby be treated as failing to
satisfy § 401(a), § 403(b), § 408(k), or
§ 408(p), as applicable, for purposes of
applying § 3121(a)(5) (FICA taxes) and
§ 3306(b)(5) (FUTA taxes).
.02Compliance statement.IfaPlan
Sponsor or Eligible Organization receives
a compliance statement under VCP, the
compliance statement is binding upon the
Service and the Plan Sponsor or Eligible
Organization as provided in section 10.09.
.03Other taxes and penalties. See sec-
tion 6.09 for rules relating to other taxes
and penalties.
.04Reliance. Taxpayers may rely on
this revenue procedure, including the relief
described in section 3.01.
1
See: Rev. Proc. 92–89, 1992–2 C.B. 498; Rev. Proc. 93–36, 1993–2 C.B. 474; Rev. Proc. 94–16, 1994–1 C.B. 576 ; Rev. Proc. 94–62,1994–2 C.B. 778; Rev. Proc. 95–24, 1995–1 C.B.
694; Rev. Proc. 96–29, 1996–1 C.B. 693; Rev. Proc. 96–50, 1996–2 C.B. 370; Rev. Proc. 98–22, 1998–1 C.B. 723; Rev. Proc. 99–13, 1999–1 C.B. 409; Rev. Proc. 99–31, 1999–2 C.B.
280; Rev. Proc. 2000–16, 2000–1 C.B. 518; Rev. Proc. 2001–17, 2001–1 C.B. 589; Rev. Proc. 2002–47, 2002–2 C.B. 133; Rev. Proc. 2003–44, 2003–1 C.B. 1051; Rev. Proc. 2006–27,
2006–1 C.B. 945; Rev. Proc. 2007–49, 2007–30 I.R.B. 141.
2008–35 I.R.B.470September 2, 2008

SECTION 4. PROGRAM ELIGIBILITY
.01EPCRS Programs.(1)SCP.SCP
is available only for Operational Failures.
Qualified Plans and 403(b) Plans are eligi-
ble for SCP with respect to significant and
insignificant Operational Failures. SEPs
and SIMPLE IRA Plans are eligible for
SCP only with respect to insignificant Op-
erational Failures.
(2)VCP. Qualified Plans, 403(b) Plans,
SEPs, and SIMPLE IRA Plans are eligible
for VCP. VCP provides general proce-
dures for correction of all Qualification
Failures: Operational, Plan Document,
Demographic, and Employer Eligibility.
VCP also provides general procedures
for the correction of participant loans that
did not comply with the requirements of
§ 72(p)(2).
(3)Audit CAP. Unless otherwise pro-
vided, Audit CAP is available for Qual-
ified Plans, 403(b) Plans, SEPs, and
SIMPLE IRA Plans for correction of all
failures found on examination that have
not been corrected in accordance with
SCP or VCP. Audit CAP also provides
general procedures for the correction of
participant loans that did not comply with
the requirements of § 72(p)(2).
(4)Eligibility for other arrangements.
The Service may extend EPCRS to other
arrangements.
(5)Appropriate use of programs.Ina
particular case, the Service may decline
to make available one or more correction
programs under EPCRS in the interest of
sound tax administration.
.02Effect of examination. If the plan or
Plan Sponsor is Under Examination, VCP
is not available and SCP is only available
as follows: while the plan or Plan Sponsor
is Under Examination, insignificant Op-
erational Failures can be corrected under
SCP; and, if correction of significant oper-
ational failures has been completed or sub-
stantially completed (as described in sec-
tion 9.04) before the plan or Plan Sponsor
is Under Examination, correction of those
failures can be completed under SCP.
.03Favorable Letter requirement.The
provisions of SCP relating to significant
Operational Failures (see section 9) are
available for a Qualified Plan only if the
plan is the subject of a Favorable Letter.
The provisions of SCP relating to insignif-
icant Operational Failures (see section 8)
are available for a SEP but only if the
plan document consists of either (i) a valid
Model Form 5305–SEP or 5305A–SEP
adopted by an employer in accordance
with the instructions on the applicable
form (see Rev. Proc. 2002–10, 2002–1
C.B. 401) or (ii) a prototype SEP that has
a current favorable opinion letter which
has been amended in accordance with
the procedures set forth in Rev. Proc.
2002–10. The provisions of SCP relating
to insignificant Operational Failures (see
section 8) are available for a SIMPLE
IRA Plan but only if the plan document
consists of either (i) a valid Model Form
5305–SIMPLE or 5304–SIMPLE adopted
by an employer in accordance with the in-
structions on the applicable form (see Rev.
Proc. 2002–10) or (ii) a current favorable
opinion letter for a Plan Sponsor that has
adopted a prototype SIMPLE IRA Plan
which has been amended in accordance
with the procedures set forth in Rev. Proc.
2002–10.
.04Established practices and proce-
dures. In order to be eligible for SCP, the
Plan Sponsor or administrator of a plan
must have established practices and pro-
cedures (formal or informal) reasonably
designed to promote and facilitate over-
all compliance with applicable Code re-
quirements. For example, the plan ad-
ministrator of a Qualified Plan that may
be top-heavy under § 416 may include in
its plan operating manual a specific an-
nual step to determine whether the plan
is top-heavy and, if so, to ensure that the
minimum contribution requirements of the
top-heavy rules are satisfied. A plan docu-
ment alone does not constitute evidence of
established procedures. In order for a Plan
Sponsor or administrator to use SCP, these
established procedures must have been in
place and routinely followed, and an Oper-
ational Failure must have occurred through
an oversight or mistake in applying them.
Inaddition,SCPmayalsobeusedinsit-
uations where the Operational Failure oc-
curred because the procedures that were
in place, while reasonable, were not suffi-
cient to prevent the occurrence of the fail-
ure. In the case of a failure that relates to
Transferred Assets or to a plan assumed in
connection with a corporate merger, acqui-
sition, or other similar employer transac-
tion between the Plan Sponsor and spon-
sor of the transferor plan or the prior Plan
Sponsor of an assumed plan, the plan is
considered to have established practices
and procedures for the Transferred Assets
if such practices and procedures are in
effect for the Transferred Assets by the
end of the first plan year that begins after
the corporate merger, acquisition, or other
similar transaction.
.05Correctionbyplanamendment.(1)
Availability of correction by plan amend-
ment in VCP and Audit CAP. A Plan Spon-
sor may use VCP and Audit CAP for a
Qualified Plan to correct Plan Document,
Demographic, and Operational Failures by
a plan amendment, including correcting an
Operational Failure by plan amendment to
conform the terms of the plan to the plan’s
prior operations, provided that the amend-
ment complies with the requirements of
§ 401(a), including the requirements of
§§ 401(a)(4), 410(b), and 411(d)(6). In ad-
dition, a Plan Sponsor may adopt a plan
amendment to reflect the corrective action.
For example, if the plan failed to satisfy
the actual deferral percentage (ADP) test
required under § 401(k)(3) and the Plan
Sponsor must make qualified nonelective
contributions not already provided for un-
der the plan, the plan may be amended
to provide for qualified nonelective con-
tributions. Except as provided in section
6.05, the issuance of a compliance state-
ment does not constitute a determination as
to the effect of any plan amendment on the
qualification of the plan.
(2)Availability of correction by plan
amendment in SCP. A Plan Sponsor may
use SCP for a Qualified Plan to correct an
Operational Failure by a plan amendment
in order to conform the terms of the plan to
the plan’s prior operations only to correct
Operational Failures listed in section 2.07
of Appendix B. These failures must be cor-
rected in accordance with the correction
methods set forth in section 2.07 of Ap-
pendix B. Any plan amendment must com-
ply with the requirements of § 401(a), in-
cluding the requirements of §§ 401(a)(4),
410(b), and 411(d)(6). If a Plan Sponsor
corrects an Operational Failure in accor-
dance with the approved correction meth-
ods under Appendix A or Appendix B, it
may amend the plan to reflect the correc-
tive action. For example, if the plan failed
to satisfy the actual deferral percentage
(ADP) test required under § 401(k)(3) and
the Plan Sponsor makes qualified nonelec-
tive contributions not already provided for
under the plan, the plan may be amended
to provide for qualified nonelective contri-
September 2, 20084712008–35 I.R.B.

butions. SCP is not otherwise available for
a Plan Sponsor to correct an Operational
Failure by a plan amendment.
.06Availability of correction of Em-
ployer Eligibility Failure. SCP is not avail-
able for a Plan Sponsor to correct an Em-
ployer Eligibility Failure.
.07Availability of correction of a ter-
minated plan. Correction of Qualification
Failures in a terminated plan may be made
under VCP and Audit CAP, whether or not
the plan trust is still in existence.
.08Availability of correction of an Or-
phan Plan.AnOrphanPlanthatistermi-
nating may be corrected under VCP and
Audit CAP, provided that the party acting
on behalf of the plan is an Eligible Party,
as defined in section 5.03(2). See section
6.02(2)(e)(ii).
.09Availability of correction of § 457
plans. Submissions relating to § 457(b) el-
igible governmentalplans will be accepted
by the Service on a provisional basis out-
side of EPCRS through standards that are
similar to EPCRS.
.10Submission for a determination let-
ter. In any case in which correction of a
Qualification Failure includes correction
of a Plan Document Failure, Demographic
Failure, or Operational Failure by plan
amendment, a determination letter appli-
cation may be required. See section 6.05.
.11Egregious failures.SCPisnot
available to correct Operational Failures
that are egregious. Egregious failures in-
clude: (a) a plan that has consistently and
improperly covered only highly compen-
sated employees; (b) a plan that provides
more favorable benefits for an owner of
the employer based on a purported collec-
tive bargaining agreement where there has
in fact been no good faith bargaining be-
tweenbona fideemployee representatives
and the employer (see Notice 2003–24,
2003–1 C.B. 853, with respect to welfare
benefit funds); or (c) a defined contribu-
tion plan where a contribution is made
on behalf of a highly compensated em-
ployee that is several times greater than
the dollar limit set forth in § 415(c). VCP
is available to correct egregious failures.
However, egregious failures are subject to
the VCP fees described in section 12.06
and, for purposes of section 12.06, an
egregious failure would include any case
in which the IRS concludes that the parties
controlling the plan recognized that the
action taken would constitute a Qualifica-
tion Failure and the failure either involves
a substantial number of participants or
beneficiaries or involves participants who
are predominantly highly compensated
employees. Audit CAP also is available to
correct egregious failures.
.12Diversion or misuse of plan assets.
SCP, VCP, and Audit CAP are not avail-
able to correct failures relating to the di-
version or misuse of plan assets.
.13Abusive tax avoidance transactions.
(1)Effect on Programs.(a)SCP.Withre-
spect to SCP, in the event that the plan or
the Plan Sponsor has been a party to an
abusive tax avoidance transaction (as de-
fined in section 4.13(2)), SCP is not avail-
able to correct any Operational Failure that
is directly or indirectly related to the abu-
sive tax avoidance transaction.
(b)VCP. With respect to VCP, if the
Service determines that a plan or Plan
Sponsor was, or may have been, a party to
an abusive tax avoidance transaction (as
defined in section 4.13(2)), then the matter
will be referred to the Internal Revenue
Service’s Employee Plans’ Tax Shelter
Coordinator. Upon receiving a response
from the Tax Shelter Coordinator, the Ser-
vice may determine that the plan or the
Plan Sponsor has been a party to an abu-
sive tax avoidance transaction, and that
the failures addressed in the VCP sub-
mission are related to that transaction. In
those situations, the Service will conclude
the review of the submission without is-
suing a compliance statement and will
refer the case for examination. However,
if the Tax Shelter Coordinator determines
that the plan failures are unrelated to the
abusive tax avoidance transaction or that
no abusive tax avoidance transaction oc-
curred, then the Service will continue to
address the failures identified in the VCP
submission, and may issue a compliance
statement with respect to those failures.
In no event may a compliance statement
be relied on for the purpose of concluding
that the plan or Plan Sponsor was not a
party to an abusive tax avoidance transac-
tion. In addition, even if it is concluded
that the failures can be addressed pursuant
to a VCP submission, the Service reserves
the right to make a referral of the abusive
tax avoidance transaction matter for ex-
amination.
(c)Audit CAP and SCP (for plans
Under Examination). For plans Under Ex-
amination, if the Service determines that
the plan or Plan Sponsor was, or may have
been,apartytoanabusivetaxavoidance
transaction, the matter may be referred to
the Internal Revenue Service’s Employee
Plans’ Tax Shelter Coordinator. With
respect to plans Under Examination, an
abusive tax avoidance transaction includes
a transaction described in section 4.13(2)
and any other transaction that the Service
determines was designed to facilitate the
impermissible avoidance of tax. Upon
receiving a response from the Tax Shelter
Coordinator, (i) if the Service determines
that a failure is related to the abusive
tax avoidance transaction, the Service re-
serves the right to conclude that neither
Audit CAP nor SCP is available for that
failure and (ii) if the Service determines
that satisfactory corrective actions have
not been taken with regard to the trans-
action, the Service reserves the right to
conclude that neither Audit CAP nor SCP
is available to the plan.
(2)Abusive tax avoidance transaction
defined. For purposes of section 4.13(1)
(except to the extent otherwise provided in
section 4.13(1)(c)), an abusive tax avoid-
ance transaction means any listed transac-
tion under § 1.6011–4(b)(2) and any other
transaction identified as an abusive trans-
action in the IRS web site entitled “EP
Abusive Tax Transactions.”
PART III. DEFINITIONS,
CORRECTION PRINCIPLES,
AND RULES OF GENERAL
APPLICABILITY
SECTION 5. DEFINITIONS
The following definitions apply for pur-
poses of this revenue procedure:
.01Definitions for Qualified Plans.The
definitions in this section 5.01 apply to
Qualified Plans.
(1)Qualified Plan. The term “Qualified
Plan” means a plan intended to satisfy the
requirements of § 401(a) or § 403(a).
(2)Qualification Failure.Theterm
“Qualification Failure” means any failure
that adversely affects the qualification of a
plan. There are four types of Qualification
Failures: (a) Plan Document Failures; (b)
Operational Failures; (c) Demographic
Failures; and (d) Employer Eligibility
Failures.
(a)Plan Document Failure.Theterm
“Plan Document Failure” means a plan
2008–35 I.R.B.472September 2, 2008

provision (or the absence of a plan pro-
vision) that, on its face, violates the re-
quirements of § 401(a) or § 403(a). Thus,
for example, the failure of a plan to be
amended to reflect a new qualification re-
quirement within the plan’s applicable re-
medial amendment period under § 401(b)
is a Plan Document Failure. In addition,
if a plan has not been timely or prop-
erly amended during an applicable reme-
dial amendment period for adopting good
faith or interim amendments with respect
to disqualifying provisions, as described in
§1.401(b)–1(b)(1) of the Income Tax Reg-
ulations, the plan has a Plan Document
Failure. For purposes of this revenue pro-
cedure, a Plan Document Failure includes
any Qualification Failure that is a violation
of the requirements of § 401(a) or § 403(a)
and that is not an Operational Failure, De-
mographic Failure, or Employer Eligibil-
ity Failure.
(b)Operational Failure. The term “Op-
erational Failure” means a Qualification
Failure (other than an Employer Eligibility
Failure) that arises solely from the failure
to follow plan provisions. A failure to fol-
low the terms of the plan providing for the
satisfaction of the requirements of § 401(k)
and§401(m)isconsideredtobeanOp-
erational Failure. A plan does not have
an Operational Failure to the extent the
plan is permitted to be amended retroac-
tively to reflect the plan’s operations (e.g.,
pursuant to § 401(b)). In the situation
where a Plan Sponsor timely adopted a
good faith or interim amendment which is
not a disqualifying provision as described
in § 1.401(b)–1(b)(1), and the plan was not
operated in accordance with the terms of
such amendment, the plan is considered to
have an Operational Failure.
(c)Demographic Failure.Theterm
“Demographic Failure” means a failure
to satisfy the requirements of § 401(a)(4),
401(a)(26), or 410(b) that is not an Oper-
ational Failure or an Employer Eligibility
Failure. The correction of a Demographic
Failure generally requires a corrective
amendment to the plan adding more
benefits or increasing existing benefits
(cf. § 1.401(a)(4)–11(g)).
(d)Employer Eligibility Failure.The
term “Employer Eligibility Failure” means
the adoption of a plan intended to include
a qualified cash or deferred arrangement
under § 401(k) by an employer that fails to
meet the employer eligibility requirements
to establish a § 401(k) plan. An Employer
Eligibility Failure is not a Plan Document,
Operational, or Demographic Failure.
(3)Excess Amount; Excess Allocations;
Overpayment.(a)Excess Amount.The
term “Excess Amount” means a Qualifica-
tion Failure due to a contribution, alloca-
tion, or similar credit that is made on be-
half of a participant or beneficiary to a plan
in excess of the maximum amount permit-
ted to be contributed, allocated, or credited
on behalf of the participant or beneficiary
under the terms of the plan or that exceeds
a limitation on contributions or allocations
provided in the Code or regulations. Ex-
cess Amounts include: (i) an elective de-
ferral or after-tax employee contribution
that is in excess of the maximum con-
tribution under the plan; (ii) an elective
deferral or after-tax employee contribu-
tion made in excess of the limitation under
§ 415; (iii) an elective deferral in excess
of the limitation of § 402(g); (iv) an ex-
cess contribution or excess aggregate con-
tribution under § 401(k) or § 401(m); (v)
an elective deferral or after-tax employee
contribution that is made with respect to
compensation in excess of the limitation
of § 401(a)(17); and (vi) any other em-
ployer contribution that exceeds a limita-
tion under § 401(a)(17), § 401(m) (but only
with respect to the forfeiture of nonvested
matching contributions that are excess ag-
gregate contributions), § 411(a)(3)(G), or
§ 415. However, an Excess Amount does
not include a contribution, allocation, or
other credit that is made pursuant to a cor-
rection method provided under this rev-
enue procedure for a different Qualifica-
tion Failure. Excess Amounts are limited
to contributions, allocations, or annual ad-
ditions under a defined contribution plan,
after-tax employee contributions to a de-
fined benefit plan, and contributions or al-
locations that are to be made to a sepa-
rate account (with actual earnings) under
a defined benefit plan. See generally sec-
tion 6.06 for the treatment and correction
of certain Excess Amounts.
(b)Excess Allocation.Theterm“Ex-
cess Allocation” means an Excess Amount
for which the Code or regulations do not
provide any corrective mechanism. Ex-
cess Allocations include Excess Amounts
as defined in section 5.01(3)(a) (i), (ii), (v),
and (vi) (except with respect to § 401(m) or
§ 411(a)(3)(G) violations). Excess Alloca-
tions must be corrected in accordance with
section 6.06(2).
(c)Overpayment. The term “Overpay-
ment” means a Qualification Failure due
to a payment being made to a participant
or beneficiary that exceeds the amount
payable to the participant or beneficiary
under the terms of the plan or that ex-
ceeds a limitation provided in the Code or
regulations. Overpayments include both
payments from a defined benefit plan and
payments from a defined contribution plan
(either not made from the participant’s or
beneficiary’s account under the plan or
not permitted to be paid either under the
terms of the plan or under the Code or
regulations). However, an Overpayment
does not include a payment that is made
pursuant to a correction method provided
under this revenue procedure for a differ-
ent Qualification Failure. Overpayments
must be corrected in accordance with sec-
tion 6.06(3).
(4)Favorable Letter. The term “Favor-
able Letter” means, in the case of a Qual-
ified Plan, a current favorable determina-
tion letter for an individually designed plan
(including a volume submitter plan that is
not identical to an approved volume sub-
mitter plan), a current favorable opinion
letter for a Plan Sponsor that has adopted
a master or prototype plan, (standardized
or nonstandardized), or a current favor-
able advisory letter and certification that
the Plan Sponsor has adopted a plan that is
identical to an approved volume submitter
plan. A plan has a current favorable deter-
mination letter, opinion letter, or advisory
letter if (a), (b), (c), or (d) below is satis-
fied:
(a) The plan has a favorable determina-
tion letter, opinion letter, or advisory let-
ter that considers the law changes incorpo-
rated in the Plan Sponsor’s most recently
expired remedial amendment cycle deter-
mined under the provisions of Rev. Proc.
2007–44.
(b) For plans with respect to whom the
initial remedial amendment cycle under
Rev. Proc. 2007–44 has not expired,
the favorable determination letter, opin-
September 2, 20084732008–35 I.R.B.

ion letter, or advisory letter that considers
GUST.
2
(c) The plan is initially adopted or ef-
fective after December 31, 2001, and the
Plan Sponsor timely submits an applica-
tion for a determination letter or adopts an
approved master or prototype plan or vol-
ume submitter plan within the plan’s reme-
dial amendment period under § 401(b).
(d) The plan is terminated prior to the
expiration of the plan’s applicable reme-
dial amendment cycle, determined under
the provisions of Rev. Proc. 2007–44 and
the plan was amended to reflect the provi-
sions of any legislation that was in effect
when the plan was terminated.
(5)Maximum Payment Amount.The
term “Maximum Payment Amount”
means a monetary amount that is approx-
imately equal to the tax the Service could
collect upon plan disqualification and is
the sum for the open taxable years of the:
(a) tax on the trust (Form 1041) (and
any interest or penalties applicable to the
trust return),
(b) additional income tax resulting from
the loss of employer deductions for plan
contributions (and any interest or penalties
applicable to the Plan Sponsor’s return),
(c) additional income tax resulting from
income inclusion for participants in the
plan (Form 1040), including the tax on
plan distributions that have been rolled
over to other qualified trusts (as defined
in § 402(c)(8)(A)) or eligible retirement
plans (as defined in § 402(c)(8)(B)) and
any interest or penalties applicable to the
participants’ returns, and
(d) any other tax that results from a
Qualification Failure that would apply but
for correction under this revenue proce-
dure.
(6)Plan Sponsor; Employer.Theterms
“Plan Sponsor” and “Employer” mean the
employer that establishes or maintains a
Qualified Plan for its employees.
(7)Transferred Assets.Theterm
“Transferred Assets” means plan assets
that were received, in connection with
a corporate merger, acquisition, or other
similar employer transaction, by the plan
in a transfer (including a merger or consol-
idation of plan assets) under § 414(l) from
a plan sponsored by an employer that was
not a member of the same controlled group
as the Plan Sponsor immediately prior to
the corporate merger, acquisition, or other
similar employer transaction. If a transfer
of plan assets related to the same employer
transaction is accomplished through sev-
eral transfers, then the date of the transfer
is the date of the first transfer.
.02Definitions for 403(b) Plans.The
definitions in this section 5.02 apply to
403(b) Plans.
(1)403(b) Plan. The term “403(b)
Plan” means a plan or program intended
to satisfy the requirements of § 403(b).
(2)403(b) Failure. The term “403(b)
Failure” means any Operational, Demo-
graphic, or Employer Eligibility Failure as
defined below.
(a)Operational Failure.Theterm“Op-
erational Failure” means any of the follow-
ing:
(i) A failure to satisfy the requirements
of § 403(b)(12)(A)(ii) (relating to the
availability of salary reduction contribu-
tions);
(ii) A failure to satisfy the requirements
of § 401(m) (as applied to 403(b) Plans
pursuant to § 403(b)(12)(A)(i));
(iii) A failure to satisfy the requirements
of § 401(a)(17) (as applied to 403(b) Plans
pursuant to § 403(b)(12)(A)(i));
(iv) A failure to satisfy the distribution
restrictions of § 403(b)(7) or § 403(b)(11);
(v) A failure to satisfy the incidental
death benefit rules of § 403(b)(10);
(vi) A failure to pay minimum required
distributions under § 403(b)(10);
(vii) A failure to give employees the
right to elect a direct rollover under
§ 403(b)(10), including the failure to give
meaningful notice of such right;
(viii) A failure of the annuity contract
or custodial agreement to provide partici-
pants with a right to elect a direct rollover
under §§ 403(b)(10) and 401(a)(31);
(ix) A failure to satisfy the limit on elec-
tive deferrals under § 403(b)(1)(E);
(x) A failure of the annuity contract or
custodial agreement to provide the limit
on elective deferralsunder §§ 403(b)(1)(E)
and 401(a)(30);
(xi) A failure involving contributions or
allocations of Excess Amounts; or
(xii) Any other failure to satisfy appli-
cable requirements under § 403(b) that (A)
results in the loss of § 403(b) status for the
plan or the loss of § 403(b) status for one or
more custodial account(s) or annuity con-
tract(s) under the plan and (B) is not a De-
mographic Failure, an Employer Eligibil-
ity Failure, or a failure related to contribu-
tions on behalf of individuals who are not
employees of the employer.
(b)Demographic Failure.The
term “Demographic Failure” means a
failure to satisfy the requirements of
§ 401(a)(4), § 401(a)(26), or § 410(b)
(as applied to 403(b) Plans pursuant to
§ 403(b)(12)(A)(i)).
(c)Employer Eligibility Failure.The
term “Employer Eligibility Failure” means
any of the following:
(i) The adoption of a plan intended to
satisfy the requirements of § 403(b) by a
Plan Sponsor that is not a tax-exempt or-
ganization described in § 501(c)(3) or a
public educational organization described
in § 170(b)(1)(A)(ii);
(ii) A failure to satisfy the nontransfer-
ability requirement of § 401(g);
(iii) A failure to initially establish or
maintain a custodial account as required by
§ 403(b)(7); or
(iv) A failure to purchase (initially or
subsequently) either an annuity contract
from an insurance company (unless grand-
fathered under Rev. Rul. 82–102, 1982–1
C.B. 62) or a custodial account from a
regulated investment company utilizing a
bank or an approved non-bank trustee/cus-
todian.
(3)Excess Amount. The term “Excess
Amount” means any amount returned to
ensure that the plan satisfies the require-
ments of §§ 401(a)(30), 415, or 403(b)(2)
(for plan years prior to January 1, 2002).
In addition, the term “Excess Amount” in-
cludes (for all plan years) any distribu-
tions required to ensure that the plan com-
plies with the applicable requirements of
§ 403(b).
(4)Maximum Payment Amount.The
term “Maximum Payment Amount”
means a monetary amount that is approx-
imately equal to the tax the Service could
collect as a result of the 403(b) Failure and
is the sum for the open taxable years of
the:
(a) additional income tax resulting from
income inclusion foremployees or other
participants (Form 1040), including the
2
GUST is an acronym for the UruguayRound Agreements Act (GATT), the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), the Small Business Job
Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA ’97), the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA ’98),and the Community Renewal
Tax Relief Act of 2000 (CRA).
2008–35 I.R.B.474September 2, 2008

tax on distributions that have been rolled
over to other qualified trusts (as defined
in § 402(c)(8)(A)) or eligible retirement
plans (as defined in § 402(c)(8)(B)) and
any interest or penalties applicable to the
participants’ returns, and
(b) any other tax that results from a
403(b) Failure that would apply but for
correction under this revenue procedure.
(5)Plan Sponsor; Employer.Theterms
“Plan Sponsor” and “Employer” mean the
employer that offers a 403(b) Plan to its
employees.
.03Definitions for Orphan Plans.(1)
Orphan Plan. With respect to VCP and
Audit CAP, the term “Orphan Plan” means
any Qualified Plan or other plan with re-
spect to which an “Eligible Party” (de-
fined in section 5.03(2)) has determined
that the Plan Sponsor (a) no longer ex-
ists, (b) cannot be located, or (c) is unable
to maintain the plan. However, the term
“Orphan Plan” does not include any plan
which is subject to Title I of the Employee
Retirement Income Security Act of 1974
(“ERISA”) terminated pursuant to section
2578.1 of the Department of Labor regu-
lations governing the termination of aban-
doned individual account plans.
(2)Eligible Party. The term “Eligible
Party” means:
(a) A court appointed representative
with authority to terminate the plan and
dispose of the plan’s assets;
(b)InthecaseofanOrphanPlanun-
der investigation by the Department of La-
bor, a person or entity who the Department
of Labor determined has accepted respon-
sibility for terminating the plan and dis-
tributing the plan’s assets; or
(c)InthecaseofaQualifiedPlanto
which Title I of ERISA has never applied,
a surviving spouse who is the sole bene-
ficiary of a plan thatprovided benefits to
a participant who was (i) the sole owner
of the business that sponsored the plan and
(ii) the only participant in the plan.
.04References to Rev. Proc. 2007–44.
References in sections 5.01(4), 6.05,
10.05, and 10.08 of this revenue procedure
to Rev. Proc. 2007–44, 2007–28 I.R.B.
54, include any successor revenue proce-
dure (and references to any section thereof
if such references refer to the successor
section in any successor revenue proce-
dure).
.05SEP. The term “SEP” means a plan
intended to satisfy the requirements of
§ 408(k). For purposes of this revenue
procedure, the term SEP also includes a
salary reduction SEP (“SARSEP”) de-
scribed in § 408(k)(6), if applicable.
.06SIMPLE IRA Plan.Theterm
“SIMPLE IRA Plan” means a plan
intended to satisfy the requirements of
§ 408(p).
.07Under Examination.(1)Theterm
“Under Examination” means: (a) a plan
that is under an Employee Plans exami-
nation (that is, an examination of a Form
5500 series or other Employee Plans ex-
amination); (b) a Plan Sponsor that is un-
der an Exempt Organizations examination
(that is, an examination of a Form 990 se-
ries or other Exempt Organizations exam-
ination); or (c) a plan that is under investi-
gation by the Criminal Investigation Divi-
sion of the Internal Revenue Service.
(2) A plan that is under an Employee
Plans examination includes any plan for
which the Plan Sponsor, or a represen-
tative, has received verbal or written
notification from Employee Plans of an
impending Employee Plans examina-
tion, or of an impending referral for an
Employee Plans examination, and also
includes any plan that has been under an
Employee Plans examination and is now
in Appeals or in litigation for issues raised
in an Employee Plans examination. A plan
is considered to be Under Examination
if it is aggregated for purposes of satis-
fying the nondiscrimination requirements
of § 401(a)(4), the minimum participation
requirements of § 401(a)(26), the mini-
mum coverage requirements of § 410(b),
or the requirements of § 403(b)(12), with
any plan that is Under Examination. In
addition, a plan is considered to be Under
Examination with respect to a failure of a
qualification requirement (other than those
described in the preceding sentence) if the
plan is aggregated with another plan for
purposes of satisfying that qualification
requirement (for example, § 401(a)(30),
§ 415, or § 416) and that other plan is
Under Examination. For example, assume
Plan A has a § 415 failure, Plan A is ag-
gregated with Plan B only for purposes of
§ 415, and Plan B is Under Examination.
In this case, Plan A is considered to be Un-
der Examination with respect to the § 415
failure. However, if Plan A has a failure
relating to the spousal consent rules under
§ 417 or the vesting rules of § 411, Plan A
is not considered to be Under Examination
with respect to the § 417 or § 411 failure.
For purposes of this revenue procedure,
the term aggregation does not include con-
sideration of benefits provided by various
plans for purposes of the average benefits
test set forth in § 410(b)(2).
(3) An Employee Plans examination
also includes a case in which a Plan Spon-
sor has submitted any Form 5300, 5307
or 5310 and the Employee Plans agent
notifies the Plan Sponsor, or a represen-
tative, of possible Qualification Failures,
whether or not the Plan Sponsor is offi-
cially notified of an “examination.” This
would include a case where, for example,
a Plan Sponsor has applied for a determi-
nation letter on plan termination, and an
Employee Plans agent notifies the Plan
Sponsor that there are partial termination
concerns. In addition, if, during the re-
view process, the agent requests additional
information that indicates the existence of
a Qualification Failure(s) not previously
identified by the Plan Sponsor, the plan
is considered to be under an Employee
Plans examination. If, in such a case,
the determination letter request under re-
view is subsequently withdrawn, the plan
is nevertheless considered to be under
an Employee Plans examination for pur-
poses of eligibility under SCP and VCP
with respect to those issues raised by the
agent reviewing the determination letter
application. The fact that a Plan Spon-
sor voluntarily submits a determination
letter application does not constitute a
voluntary identification of Qualification
Failures to the Service. In order to be
eligible to perfect a determination letter
application into a VCP submission, the
Plan Sponsor (or the authorized represen-
tative) must identify each Qualification
Failure, in writing, to the reviewing agent
before the agent recognizes the existence
of the Qualification Failure(s) or addresses
the Qualification Failure(s) in commu-
nications with the Plan Sponsor (or the
authorized representative).
(4) A Plan Sponsor that is under an Ex-
empt Organizations examination includes
any Plan Sponsor that has received (or
whose representative has received) verbal
or written notification from Exempt Orga-
nizations of an impending Exempt Organi-
zations examination or of an impending re-
ferral for an Exempt Organizations exami-
nation and also includes any Plan Sponsor
that has been under an Exempt Organiza-
September 2, 20084752008–35 I.R.B.

tions examination and is now in Appeals or
in litigation for issues raised in an Exempt
Organizations examination.
SECTION 6. CORRECTION
PRINCIPLES AND RULES OF
GENERAL APPLICABILITY
.01Correction principles; rules of gen-
eral applicability. The general correction
principles in section 6.02 and rules of gen-
eral applicability in sections 6.03 through
6.11 apply for purposes of this revenue
procedure.
.02Correction principles. Generally, a
failure is not corrected unless full correc-
tion is made with respect to all participants
and beneficiaries, and for all taxable years
(whether or not the taxable year is closed).
Even if correction is made for a closed tax-
able year, the tax liability associated with
that year will not be redetermined because
of the correction. Correction is determined
taking into account the terms of the plan at
the time of the failure. Correction should
be accomplished taking into account the
following principles:
(1)Restoration of benefits. The correc-
tion method should restore the plan to the
position it would have been in had the fail-
ure not occurred, including restoration of
current and former participants and ben-
eficiaries to the benefits and rights they
would have had if the failure had not oc-
curred.
(2)Reasonable and appropriate correc-
tion. The correction should be reasonable
and appropriate for the failure. Depend-
ing on the nature of the failure, there may
be more than one reasonable and appropri-
ate correction for the failure. For Quali-
fied Plans, any correction method permit-
ted under Appendix A or Appendix B is
deemed to be a reasonable and appropri-
ate method of correcting the related Qual-
ification Failure. Any correction method
permitted under Appendix A or Appendix
B applicable to a 403(b) Plan, a SEP, or
a SIMPLE IRA Plan is similarly deemed
to be a reasonable and appropriate method
of correcting the related failure. If a plan
has a different but analogous failure to one
set forth in Appendix A or B (such as the
failure to provide a matching contribution
by a governmental plan that is not sub-
ject to § 401(m)), then the analogous cor-
rection method under Appendix A or B
is generally available to correct any fail-
ure. Whether any other particular correc-
tion method is reasonable and appropriate
is determined taking into account the ap-
plicable facts and circumstances and the
following principles:
(a) The correction method should, to the
extent possible, resemble one already pro-
vided for in the Code, regulations thereun-
der, or other guidance of general applica-
bility. For example,for Qualified Plans
and 403(b) Plans, thecorrection method
set forth in § 1.402(g)–1(e)(2) would be the
typical means of correcting a failure under
§ 402(g).
(b) The correction method should keep
plan assets in the plan, except to the ex-
tent the Code, regulations, or other guid-
ance of general applicability provide for
correction by distribution to participants
or beneficiaries or return of assets to the
Employer. For example, if an excess al-
location (not in excess of the § 415 lim-
its) made under a Qualified Plan was made
for a participant under a plan (other than a
§ 401(k) plan), the excess should be real-
located to other participants or, depending
on the facts and circumstances, used to re-
duce future employer contributions.
(c) The correction method for failures
relating to nondiscrimination should pro-
vide benefits for nonhighly compensated
employees. For example, for Qualified
Plans, the correction method set forth in
§ 1.401(a)(4)–11(g) (rather than meth-
ods making use of the special testing
provisions set forth in § 1.401(a)(4)–8
or § 1.401(a)(4)–9), would be the typ-
ical means of correcting a failure to
satisfy nondiscrimination requirements.
Similarly, the correction of a failure to
satisfy the requirements of § 401(k)(3),
§ 401(m)(2), or § 401(m)(9) (relating to
nondiscrimination), solely by distributing
excess amounts to highly compensated
employees would not be the typical means
of correcting such a failure.
(d) The correction method should not
violate another applicable specific re-
quirement of § 401(a) or § 403(b) (for
example, § 401(a)(4), § 411(d)(6), or
§ 403(b)(12), as applicable), § 408(k)
for SEPs, or § 408(p) for SIMPLE IRA
Plans, or a parallel requirement in Part 2
of Subtitle B of Title I of ERISA (for plans
that are subject to Part 2 of Subtitle B of
Title I of ERISA). If an additional failure
is nevertheless created as a result of the
use of a correction method in this revenue
procedure, then that failure also must be
corrected in conjunction with the use of
that correction method and in accordance
with the requirements of this revenue pro-
cedure.
(e)(i) If a correction method is one
which another government agency has
authorized with respect to a violation of
legal requirements within its interpretive
authority and that correction relates to
a violation for which there is a failure
to which this revenue procedure applies,
then the Service may take the correction
method of the other governmental agency
into account for purposes of this revenue
procedure.
(ii) Thus, if the plan is subject to
ERISA, for a failure that results from ei-
ther the employer having ceased to exist,
the employer no longer maintaining the
plan, or similar reasons, the permitted
correction is to terminate the plan and
distribute plan assets to participants and
beneficiaries in accordance with standards
and procedures substantially similar to
those set forth in section 2578.1 of the
Department of Labor Regulations (relat-
ing to abandoned plans). This correction
must satisfy four conditions. First, the
correction must comply with standards
and procedures substantially similar to
those set forth in section 2578.1 of the De-
partment of Labor Regulations (relating to
abandoned plans). Second, the qualified
termination administrator, based on plan
records located andupdated in accordance
with the Department of Labor Regulations,
must have reasonably determined whether,
and to what extent, the survivor annuity
requirements of §§ 401(a)(11) and 417 ap-
ply to any benefit payable under the plan
and takes reasonable steps to comply with
those requirements (if applicable). Third,
each participant and beneficiary must have
been provided a nonforfeitable right to his
or her accrued benefits as of the date of
deemed termination under the Department
of Labor Regulations, subject to income,
expenses, gains, and losses between that
date and the date of distribution. Fourth,
participants and beneficiaries must receive
notification of their rights under § 402(f).
In addition, notwithstanding correction
under this revenue procedure, the Service
reserves the right to pursue appropriate
remedies under the Internal Revenue Code
against any party who is responsible for
the plan, such as the Plan Sponsor, plan
2008–35 I.R.B.476September 2, 2008

administrator, or owner of the business,
even in its capacity as a participant or ben-
eficiary under the plan. See, also, section
.09(1) of Appendix A for parallel rules for
plans that are not subject to ERISA.
(iii) Similarly, in the case of a violation
of the fiduciary standards imposed by Part
4 of Subtitle B of Title I of ERISA, cor-
rection under the Voluntary Fiduciary Cor-
rection Program established by the Depart-
ment of Labor (at 71 FR 20262) for a fidu-
ciary violation for which there is a sim-
ilar failure under this revenue procedure
would generally be taken into account as
correction under this revenue procedure.
(See also section 7.3(b) of the Department
of Labor’s Voluntary Fiduciary Correction
Program under which correction of a de-
faulted participant loan that provides for
repayment in accordance with § 72(p)(2)
requires only submission of the correction
under VCP and inclusion of the VCP com-
pliance statement (with proof of any re-
quired corrective payment).)
(3)Consistency requirement.Gen-
erally, where more than one correction
method is available to correct a type of
Operational Failurefor a plan year (or
where there are alternative ways to apply a
correction method), the correction method
(or one of the alternative ways to apply
the correction method) should be applied
consistently in correcting all Operational
Failures of that type for that plan year.
Similarly, earnings adjustment methods
generally should be applied consistently
with respect to corrective contributions or
allocations for a particular type of Opera-
tional Failure for a plan year. In the case
of a Group Submission, the consistency
requirement applies on a plan by plan ba-
sis.
(4)Principles regarding corrective al-
locations and corrective distributions.The
following principles apply where an ap-
propriate correction method includes the
use of corrective allocations or corrective
distributions:
(a) Corrective allocations under a de-
fined contribution plan should be based
upon the terms of the plan and other appli-
cable information at the time of the failure
(including the compensation that would
have been used under the plan for the pe-
riod with respect to which a corrective al-
location is being made) and should be ad-
justed for earnings (including losses) and
forfeitures that would have been allocated
to the participant’s account if the failure
had not occurred. However, a corrective
allocation is not required to be adjusted
for losses. See section 3 of Appendix B
for additional information on calculation
of earnings for corrective allocations.
(b) A corrective allocation to a partici-
pant’s account because of a failure to make
a required allocation in a prior limitation
year is not considered an annual addition
with respect to the participant for the limi-
tation year in which the correction is made,
but is considered an annual addition for
the limitation year to which the corrective
allocation relates. However, the normal
rules of § 404, regarding deductions, ap-
ply.
(c) Corrective allocations should come
only from employer nonelective contribu-
tions (including forfeitures if the plan per-
mits their use to reduce employer contribu-
tions).
(d) In the case of a defined benefit plan,
a corrective distribution for an individual
should be increased to take into account
the delayed payment, consistent with the
plan’s actuarial adjustments.
(e) In the case of a defined contribution
plan, a corrective contribution or distribu-
tion should be adjusted for earnings (in-
cluding losses) from the date of the failure
(determined without regard to any Code
provision which permits a corrective con-
tribution or distribution to be made at a
later date).
(5)Special exceptions to full correc-
tion. In general, a failure must be fully
corrected. Although the mere fact that cor-
rection is inconvenient or burdensome is
not enough to relieve a Plan Sponsor of the
need to make full correction, full correc-
tion may not be required in certain situa-
tions because it is unreasonable or not fea-
sible. Even in these situations, the correc-
tion method adopted must be one that does
not have significant adverse effects on par-
ticipants and beneficiaries or the plan, and
that does not discriminate significantly in
favor of highly compensated employees.
The exceptions described below specify
those situations in which full correction is
not required.
(a)Reasonable estimates. If either (i)
it is possible to make a precise calcula-
tion but the probable difference between
the approximate and the precise restora-
tion of a participant’s benefits is insignif-
icant and the administrative cost of deter-
mining precise restoration would signifi-
cantly exceed the probable difference or
(ii) it is not possible to make a precise cal-
culation (for example, where it is impos-
sible to provide plan data), reasonable es-
timates may be used in calculating appro-
priate correction. If it is not feasible to
make a reasonable estimate of what the ac-
tual investment results would have been,
a reasonable interest rate may be used.
For this purpose, the interest rate used by
the Department of Labor’s Voluntary Fidu-
ciary Correction Program Online Calcula-
tor (“VFCP Online Calculator”) is deemed
to be a reasonable interest rate. The VFCP
Online Calculator can be found on the web
athttp://www.dol.gov/ebsa/calculator.
(b)Delivery of small benefits.Iftheto-
tal corrective distribution due a participant
or beneficiary is $75 or less, the Plan Spon-
sor is not required to make the corrective
distribution if the reasonable direct costs
of processing and delivering the distribu-
tion to the participant or beneficiary would
exceed the amount of the distribution. This
section 6.02(5)(b) does not apply to correc-
tive contributions.
(c)Recovery of small Overpayments.
Generally, if the total amount of an Over-
payment to a participant or beneficiary is
$100 or less, the Plan Sponsor is not re-
quired to seek the return of the Overpay-
ment from the participant or beneficiary.
The Plan Sponsor is not required to notify
the participant or beneficiary that the Over-
payment is not eligible for favorable tax
treatment accorded to distributions from
Qualified Plans (and, specifically, is not el-
igible for tax-free rollover).
(d)Locating lost participants. Reason-
able actions must be taken to find all cur-
rent and former participants and beneficia-
ries to whom additional benefits are due,
but who have not been located after a mail-
ing to the last known address. In general,
such actions include use of the Internal
Revenue Service Letter Forwarding Pro-
gram (see Rev. Proc. 94–22, 1994–1 C.B.
608) or the Social Security Administration
Employer Reporting Service. A plan will
notbeconsideredtohavefailedtocorrect
a failure due to the inability to locate an in-
dividual if either of these programs is used;
provided that, if the individual is later lo-
cated, the additional benefits are provided
to the individual at that time. The Internal
Revenue Service Letter Forwarding Pro-
gram may not be used to locate participants
September 2, 20084772008–35 I.R.B.

in order to collect amounts owed to the
plan. On occasion, the Internal Revenue
Service may decline to perform the letter
forwarding request, even if additional ben-
efits are due to participants. In such a sit-
uation, it is expected that the Plan Spon-
sor will take other reasonable actions to lo-
cate participants to whom additional bene-
fits are due.
(e)Small Excess Amounts. Generally, if
the total amount of an Excess Amount with
respect to the benefit of a participant or
beneficiary is $100 or less, the Plan Spon-
sor is not required to distribute or forfeit
such Excess Amount. However, if the Ex-
cess Amount exceeds a statutory limit, the
participant or beneficiary must be notified
that the Excess Amount, including earn-
ings, is not eligible for favorable tax treat-
ment accorded to distributions from Quali-
fied Plans (and, specifically, is not eligible
for tax-free rollover). See section 6.06(1)
for such notice requirements.
(f)Orphan Plans. The Service retains
the discretion to determine under VCP and
Audit CAP whether full correction will be
required in a terminating Orphan Plan.
(6)Correction principle for loan fail-
ures. In the case of a loan failure corrected
in accordance with section 6.07(2)(b) or
(c) and section 6.07(3), the participant is
generally responsible for paying the cor-
rective payment. However, with respect
to the failure listed in section 6.07(3), the
employer should pay a portion of the cor-
rection payment on behalf of the partici-
pant equal to the interest that accumulates
as a result of such failure — generally de-
termined at a rate equal to the greater of the
plan loan interest rate or the rate of return
under the plan.
(7)Correction for exclusion of employ-
ees for elective deferrals or after-tax em-
ployee contributions. If a Qualified Plan
has an Operational Failure that consists of
excluding an employee that should have
been eligible to make an elective deferral
under a cash or deferred arrangement or an
after-tax employee contribution, the em-
ployer should contribute to the plan on be-
half of the excluded employee an amount
that makes up for the value of the lost op-
portunity to the employee to have a por-
tion of his or her compensation contributed
to the plan accumulated with earnings tax
free in the future. This correction princi-
ple applies solely to this limited circum-
stance. It does not, for example, extend
to the correction of a failure to satisfy a
nondiscrimination test,e.g., the ADP test
pursuant to § 401(k)(3) and the ACP test
pursuant to § 401(m)(2). Specific meth-
ods and examples to correct this failure are
provided in Appendix A .05 and Appendix
B 2.02. Similarly, the methods and exam-
ples provided for correcting this failure do
not extend to other failures. Thus, the cor-
rection methods and the examples in Ap-
pendix A .05 and Appendix B 2.02 cannot,
for example, be used to correct ADP/ACP
failures.
(8)Reporting. Any corrective distribu-
tions from the plan should be properly re-
ported.
.03Correction of an Employer Eligibil-
ity Failure. (1) The permitted correction of
an Employer Eligibility Failure is the ces-
sation of all contributions (including elec-
tive deferrals and after-tax employee con-
tributions) beginning no later than the date
the application under VCP is filed. Pur-
suant to VCP correction, the assets in such
a plan are to remain in the trust, annuity
contract, or custodial account and are to be
distributed no earlier than the occurrence
of one of the applicable distribution events,
e.g., for 403(b) Plans, an event described
in § 403(b)(7) (to the extent the assets are
held in custodial accounts) or § 403(b)(11)
(for those assets invested in annuity con-
tracts that would be subject to § 403(b)(11)
restrictions if the employer were eligible).
(2) Cessation of contributions is not
required if continuation of contributions
would not be an Employer Eligibility
Failure (for example, with respect to a
tax-exempt employer that may maintain a
§ 401(k) plan after 1996).
(3) A plan that is corrected through
VCP is treated as subject to all of the re-
quirements and provisions of § 401(a) for
a Qualified Plan, § 403(b) for a 403(b)
Plan, § 408(k) for a SEP, and § 408(p)
for a SIMPLE IRA Plan (including Code
provisions relating to rollovers). There-
fore, the Plan Sponsor must also correct
all other failures inaccordance with this
revenue procedure.
(4) If correction is accomplished under
VCP in accordance with the requirements
of this section 6.03, then any rollovers
made from the plan pursuant to a dis-
tributable event are deemed to have been
made from a qualified trust for the pur-
pose of determining whether the amounts
qualify as an eligible rollover distribution
under § 402(c) or an annuity contract that
satisfies the requirements of § 403(b)(1)
for the purpose of determining whether
the amounts qualify as an eligible rollover
amount under § 403(b)(8), including the
determination of excess contributions that
are subject to the § 4973 excise tax.
.04Correction of a failure to obtain
spousal consent. (1) Normally, the correc-
tion method under VCP for a failure to ob-
tain spousal consent for a distribution that
is subject to the spousal consent rules un-
der §§ 401(a)(11) and 417 is similar to the
correction method described in Appendix
A .07. The Plan Sponsor must notify the
affected participant and spouse (to whom
the participant was married at the time of
the distribution), so that the spouse can
provide spousal consent to the distribution
actually made or the participant may re-
pay the distribution and receive a qualified
joint and survivor annuity.
(2)(a) As alternatives to the correction
method in section 6.04(1), correction for
a failure to obtain spousal consent may
be made under either section 6.04(2)(b) or
section 6.04(2)(c).
(b) In the event that spousal consent to
the prior distribution is not obtained (e.g.,
because the spouse chooses not to con-
sent, the spouse does not respond to the
notice, or the spouse cannot be located),
the spouse is entitled to a benefit under the
plan equal to the portion of the qualified
joint and survivor annuity that would have
been payable to the spouse upon the death
of the participant had a qualified joint and
survivor annuity been provided to the par-
ticipant under the plan at the annuity start-
ing date for the prior distribution. Such
spousal benefit must be provided if a claim
is made by the spouse.
(c) In the event that spousal consent
to the prior distribution is not obtained,
the plan may offer the spouse the choice
between (i) the survivor annuity benefit
described in section 6.04(2)(b) or (ii) a
single-sum payment equal to the actuar-
ial present value of that survivor annu-
ity benefit (calculated using the applica-
ble interest rate and mortality table under
§417(e)(3)). Anysuchsingle-sumpay-
ment is treated in the same manner as a dis-
tribution under § 402(c)(9) for purposes of
rolling over the payment to an IRA or other
eligible retirement plan.
.05Submission of a determination let-
ter application.(1)In general. This sec-
2008–35 I.R.B.478September 2, 2008

tion 6.05 sets forth the situations in which a
determination letter application is required
to be submitted as part of the correction
of a Qualification Failure if the correction
includes a plan amendment. If a determi-
nation letter is required under this section
6.05, then, unless otherwise specified in
this revenue procedure, the provisions of
Rev. Proc. 2007–44 will apply. Thus,
for example, in the case of an ongoing in-
dividually designed plan, a determination
letter application will be reviewed with re-
spect to all items of the Cumulative List
(as defined in Rev. Proc. 2007–44) that
would apply to the remedial amendment
cycle during which the determination let-
ter is filed. Notwithstanding any other part
of this section 6.05, a determination let-
ter is not required if the correction by plan
amendment is achieved through the adop-
tion of an amendment that is designated as
a model amendment by the Service or the
adoption of a prototype or volume submit-
ter plan with an opinion or advisory letter
as provided in Rev. Proc. 2008–6, 2008–1
I.R.B. 192, on which the Plan Sponsor has
reliance.
(2)Determination letter application re-
quired.(a)VCP and Audit CAP.(i)Ade-
termination letter application is required
for a determination of whether the plan
document, including the corrective amend-
ment, complies with the qualification re-
quirements of § 401(a) if the Plan Spon-
sor submits the failure under VCP or cor-
rects the failure under Audit CAP during
an on-cycle year or in connection with
a plan termination. An “on-cycle year”
means the last 12 months of the plan’s re-
medial amendment cycle set forth in Rev.
Proc. 2007–44.
(ii) A determination letter application
is required to correct a nonamender fail-
ure under VCP or Audit CAP, whether
or not the plan is submitted under VCP
or corrected under Audit CAP during an
on-cycle year. For this purpose, the term
“nonamender failure” means a failure to
amend the plan to correct a disqualifying
provision, described in §1.401(b)–1(b)
within the applicable remedial amend-
ment period. In general, a disqualifying
provision includes a provision in the plan
document that violates a qualification re-
quirement of the Code or the absence of
a provision that causes the plan to fail
to satisfy a qualification requirement of
the Code. A disqualifying provision also
includes any provision designated by the
Commissioner as a disqualifying provi-
sion under §1.401(b)–1(b)(3).
(b)SCP. In the case of any correction
of an Operational Failure through plan
amendment under SCP that is permitted
under section 4.05(2) of this revenue pro-
cedure, a Plan Sponsor must submit a de-
termination letter application for the plan,
including the corrective plan amendment,
by the end of the plan’s next on-cycle year,
or if earlier, in connection with the plan’s
termination. The determination letter ap-
plicationshouldbemailedtotheaddress
provided in the instructions of the appli-
cable Form 5300, 5307 or 5310. As part
of the determination letter submission, the
cover letter must identify the amendment
as a corrective amendment under SCP. In
addition, the Plan Sponsor must include
in the cover letter to the application: (1) a
statement that neither the plan nor the Plan
Sponsor has been a party to an abusive tax
avoidance transaction (as defined in sec-
tion 4.13(2) of this revenue procedure); or
(2) a brief identification of any abusive tax
avoidance transaction to which the plan or
the Plan Sponsor has been a party.
(3)Determination Letter application
not required.(a)Failure to adopt timely
interim amendments or amendments re-
quired to implement optional law changes.
If on any date during an off-cycle year
that is prior to the plan’s on-cycle year,
a Plan Sponsor submits a failure under
VCP or corrects a failure under Audit CAP
to adopt timely interim amendments or
timely amendments to the plan to imple-
ment optional law changes, then a deter-
mination letter application is not required
and should not be submitted with the VCP
submission or as part of the correction of
the failure under Audit CAP. For purposes
of this revenue procedure, interim amend-
ments are interim amendments within the
meaning of section 5.01 of Rev. Proc.
2007–44. For purposes of this revenue
procedure, an optional law change refers
to a law change implemented at the Plan
Sponsor’s discretion. An example of an
optional law provision is § 414(v) of the
Code, which sets forth the provisions
relating to catch-up contributions. The
issuance of a compliance statement or
closing agreement results in the corrective
amendments being treated as if they had
been adopted timely for the purpose of de-
termining the availability of the extended
remedial amendment period described in
Rev. Proc. 2007–44. However, the is-
suance of such a compliance statement
or closing agreement does not constitute
a determination as to whether the plan
amendment complies with the change in
qualification requirement. Thus, in order
to ensure that the corrective amendment
adopted for this failure complies with the
change in qualification requirement, the
Plan Sponsor should include the corrective
amendment along with the compliance
statement or closingagreement, with its
application for a determination letter dur-
ing the plan’s on-cycle year or if earlier,
in connection with the plan’s termination.
The provisions of this section 6.05(3)(a)
are applicable only if the VCP application
setting forth the interim or optional law
change failure is submitted, or the Audit
CAP correction is made, prior to the plan’s
first on-cycle year following the date by
which the amendment for the interim or
optional law change should have been
adopted pursuant to section 5.05 of Rev.
Proc. 2007–44.
(b)Operational or Demographic Fail-
ures corrected through plan amendment
under VCP and Audit CAP. If, during an
off-cycle year, a Plan Sponsor submits an
Operational or Demographic Failure under
VCP or corrects such a failure under Audit
CAP, then a determination letter applica-
tion is not required and should not be sub-
mitted with the VCP submission or as part
of the correction of the failure under Au-
dit CAP. If the plan amendment is accepted
as a proper correction for either an Op-
erational Failure or a Demographic Fail-
ure, the compliance statement under VCP
or closing agreement issued under Audit
CAP constitutes a determination on the ef-
fect of the plan amendment on the quali-
fication of the plan; however, the compli-
ance statement issued under VCP is sub-
ject to the condition that the amendment
be submitted as part of a separate determi-
nation letter submission during the plan’s
next on-cycle year, or if earlier, in connec-
tion with the plan’s termination, and that
a favorable determination letter be issued
with respect to the plan. The determina-
tion letter application should be mailed to
the address listed in the instructions of the
applicable Form 5300, 5307 or 5310 and
should include a copy of the related com-
pliance statement or closing agreement. A
Plan Sponsor that corrects an Operational
September 2, 20084792008–35 I.R.B.

Failure or Demographic Failure through
a plan amendment under Audit CAP dur-
ing an off-cycle year should also include a
copy of the closing agreement when sub-
mitting a determination letter application
during the plan’s next on-cycle year, or if
earlier, in connection with the plan’s termi-
nation.
(4)Determination letter applications
optional under EPCRS. A Plan Sponsor
may submit a determination letter appli-
cation with respect to the correction of
failures through plan amendment prior to
the plan’s on-cycle year if the plan would
be given the same priority as an on-cycle
filing pursuant to sections 14.02 and 14.03
of Rev. Proc. 2007–44, relating to certain
new plans, terminating plans, and off-cy-
cle applications submitted in accordance
with published guidance issued by the Ser-
vice specifying such submission, and in
the case of urgent business need. Determi-
nation letter requests submitted pursuant
to this section 6.05(4) must contain a writ-
ten justification as to the eligibility of the
plan under section 14.02 or 14.03 of Rev.
Proc. 2007–44 and this section 6.05(4).
In the case of urgent business need, the
Service will consider such requests based
on the facts and circumstances.
(5)Internal Revenue Service discre-
tion. Notwithstanding any other provision
of section 6.05 of this revenue procedure,
the Service reserves the right to require
the submission of a determination letter
application with respect to any amend-
ment proposed or adopted to correct any
Qualification Failure under VCP or Audit
CAP.
.06Special rules relating to Ex-
cess Amounts.(1)Treatment of Excess
Amounts. Except as otherwise provided
in section 6.02(5)(c), a distribution of
an Excess Amount is not eligible for the
favorable tax treatment accorded to dis-
tributions from Qualified Plans (such as
eligibility for tax-free rollover). Thus,
forexample,ifsuchadistributionwas
contributed to an individual retirement
arrangement (IRA), the contribution is not
a valid rollover contribution for purposes
of determining the amount of excess con-
tributions (within the meaning of § 4973)
to the individual’s IRA. A distribution of
an Excess Amount is generally treated
in the manner described in section 3 of
Rev. Proc. 92–93, 1992–2 C.B. 505, re-
lating to the corrective disbursement of
elective deferrals. The distribution must
be reported on Form 1099–R for the year
of distribution with respect to each par-
ticipant or beneficiary receiving such a
distribution. Except as otherwise provided
in section 6.02(5)(c), where an Excess
Amount has been or is being distributed,
the Plan Sponsor must notify the recipient
that (a) an Excess Amount has been or will
be distributed and (b) an Excess Amount
is not eligible for favorable tax treatment
accorded to distributions from Qualified
Plans (and, specifically, is not eligible for
rollover).
(2)Correction of Excess Allocations.
In general, an Excess Allocation, as de-
fined in section 5.01(3)(a) of this revenue
procedure, is corrected in accordance with
the Reduction of Account Balance Cor-
rection Method set forth in this paragraph.
Under this method, the account balance of
an employee who received an Excess Allo-
cation is reduced by the Excess Allocation
(adjusted for earnings). If the Excess Allo-
cation would have been allocated to other
employees in the year of the failure had
the failure not occurred, then that amount
(adjusted for earnings) is reallocated to
those employees in accordance with the
plan’s allocation formula. If the improp-
erly allocated amount would not have
been allocated to other employees absent
the failure, that amount (adjusted for earn-
ings) is placed in a separate account that is
not allocated on behalf of any participant
or beneficiary (an unallocated account)
established for the purpose of holding Ex-
cess Allocations, adjusted for earnings,
to be used to reduce employer contribu-
tions (other than elective deferrals) in the
current year or succeeding year(s). While
such amounts remain in the unallocated
account, the employer is not permitted to
make contributions to the plan other than
elective deferrals. Excess Allocations that
are attributable to elective deferrals or
after-tax employee contributions, (along
with earnings attributable thereto) must be
distributed to the participant. For quali-
fication purposes, an Excess Allocation
that is corrected pursuant to this paragraph
is disregarded for purposes of § 402(g),
§ 415, the actual deferral percentage test
of § 401(k)(3), and the actual contribution
percentage test of § 401(m)(2). If an Ex-
cess Allocation resulting from a violation
of § 415 consists of annual additions attrib-
utable to both employer contributions and
elective deferrals or after-tax employee
contributions, then the correction of the
Excess Allocation is completed by first
distributing the unmatched employee’s
after-tax contributions (adjusted for earn-
ings) and then the unmatched employee’s
elective deferrals (adjusted for earnings).
If any excess remains, and is attributable
to either elective deferrals or after-tax
employee contributions that are matched,
the excess is apportioned first to after-tax
employee contributions with the associ-
ated matching employer contributions and
then to elective deferrals with the asso-
ciated matching employer contributions.
Any matching contribution or nonelec-
tive employer contribution (adjusted for
earnings) which constitutes an Excess Al-
location is then forfeited and placed in an
unallocated account established for the
purpose of holding Excess Allocations to
be used to reduce employer contributions
in the current year and succeeding year(s).
Such unallocated account is adjusted for
earnings. While such amounts remain in
the unallocated account, the employer is
not permitted to make contributions (other
than elective deferrals) to the plan.
(3)Correction of Overpayment failures.
An Overpayment from a defined benefit
plan is corrected in accordance with the
rules in section 2.04(1) of Appendix B. An
Overpayment from a defined contribution
plan is corrected in accordance with the
Return of Overpayment method set forth
in this paragraph. Under this method, the
employer takes reasonable steps to have
the Overpayment, plus appropriate interest
from the date of the distribution to the date
of the repayment, returned by the partici-
pant or beneficiary to the plan. To the ex-
tent the amount returned to a defined con-
tribution plan is less than the Overpayment
adjusted for earnings at the plan’s earnings
rate, then the employer or another person
must contribute the difference to the plan.
The Overpayment, adjusted for earnings at
the plan’s earnings rate to the date of the re-
payment, is to be placed in an unallocated
account, as described in section 6.06(2),
to be used to reduce employer contribu-
tions (other than elective deferrals) in the
current year and succeeding year(s) (or if
the amount would have been allocated to
other eligible employees who were in the
plan for the year of the failure if the fail-
ure had not occurred, then that amount is
reallocated to the other eligible employ-
2008–35 I.R.B.480September 2, 2008

ees in accordance with the plan’s alloca-
tion formula). In addition, the employer
must notify the employee that the Over-
payment was not eligible for favorable tax
treatment accorded to distributions from
Qualified Plans (and, specifically, was not
eligible for tax-free rollover).
.07Rules relating to reporting plan
loan failures.(1)General rule for loans.
Unless correction is made in accordance
with this section 6.07(2) or (3), a deemed
distribution under § 72(p)(1) in connec-
tion with a failure relating to a loan to
a participant made from a plan must be
reported on Form 1099–R with respect to
the affected participant and any applicable
income tax withholding amount that was
required to be paid in connection with the
failure (see § 1.72(p)–1, Q&A–15) must
be paid by the employer. As part of VCP,
the deemed distribution may be reported
on Form 1099–R with respect to the af-
fected participant for the year of correction
(instead of the year of the failure. The
relief of reporting the participant’s loan as
a deemed distribution on Form 1099–R
in the year of correction, as described in
the preceding sentence, applies only if the
Plan Sponsor specifically requests such
relief.
(2)Special rules for loans.(a)In gen-
eral. The correction methods set forth
in section 6.07(2)(b) and (c) and section
6.07(3) are available for plan loans that do
not comply with one or more requirements
of § 72(p)(2) and are corrected through
VCP. The correction methods described
in section 6.07(2)(b) and (c) and section
6.07(3) are not available if the maximum
period for repayment of the loan pursuant
to § 72(p)(2)(B) has expired. The Service
reserves the right to limit the use of the cor-
rection methods listed in section 6.07(2)(b)
and (c) and section 6.07(3) to situations
that it considers appropriate; for example,
where the loan failure is caused by em-
ployer action. A deemed distribution cor-
rected under section 6.07(2)(b) or (c) or
under section 6.07(3) is not required to be
reported on Form 1099–R and repayments
made by correction under sections 6.07(2)
and 6.07(3) do not result in the affected
participant having additional basis in the
plan for purposes of determining the tax
treatment of subsequent distributions from
the plan to the affected participant. The
relief from reporting the participant’s loan
as a deemed distribution on Form 1099–R,
as described in the preceding sentence, ap-
plies only if the Plan Sponsor specifically
requests such relief and provides an expla-
nation supporting the request.
(b)Loans in excess of § 72(p)(2)(A).
A failure to comply with plan provi-
sions requiring that loans comply with
§ 72(p)(2)(A) may be corrected by a cor-
rective repayment to the plan based on the
excess of the loan amount over the max-
imum loan amount under § 72(p)(2)(A).
In the event that loan repayments were
made in accordance withthe amortization
schedule for the loan before correction,
such prior repayments may be applied (i)
solely to reduce the portion of the loan that
did not exceed the maximum loan amount
under § 72(p)(2)(A) (so that the correc-
tive repayment would equal the original
loan excess plus interest thereon), (ii) to
reduce the loan excess to the extent of the
interest thereon, with the remainder of the
repayments applied to reduce the portion
of the loan that did not exceed the maxi-
mum loan amount under § 72(p)(2)(A) (so
that the corrective repayment would equal
the original loan excess), or (iii)pro rata
against the loan excess and the maximum
loan amount under § 72(p)(2)(A) (so that
the corrective repayment would equal the
outstanding balance remaining on the orig-
inal loan excess on the date that corrective
repayment is made). After the correc-
tive payment is made, the loan may be
reformed to amortize the remaining prin-
cipal balance as of the date of repayment
over the remaining period of the original
loan. This is permissible as long as the
recalculated payments over the remaining
period would not cause the loan to violate
the maximum duration permitted under
§ 72(p)(2)(B). The maximum duration is
determined from the date the original loan
was made. In addition, the amortization
payments determined for the remaining
period must comply with the level amorti-
zation requirements of § 72(p)(2)(C).
(c)Loan terms that do not satisfy
§ 72(p)(2)(B) or (C). For a failure of
loan repayment terms to provide for a
repayment schedule that complies with
§ 72(p)(2)(B) or (C), the failure may be
corrected by a reamortization of the loan
balance in accordance with § 72(p)(2)(C)
over the remaining period that is the
maximum period that complies with
§ 72(p)(2)(B) measured from the original
date of the loan.
(d)No requirement for plan provisions.
This section 6.07 also applies even if the
plan does not require loans to satisfy the
requirements of § 72(p)(2). However, to
correct the ERISA fiduciary violations
associated with the failures described in
section 6.07(2)(b), (c) and section 6.07(3)
under the Department of Labor’s Volun-
tary Fiduciary Correction Program, the
plan must contain plan provisions requir-
ing that loans comply with § 72(p)(2)(A),
(B) and (C).
(3)Defaulted loans.Afailuretore-
pay the loan in accordance with the loan
terms where the terms satisfy § 72(p)(2)
may be corrected by (i) a lump sum repay-
ment equal to the additional repayments
that the affected participant would have
made to the plan if there had been no fail-
ure to repay the plan, plus interest accrued
on the missed repayments, (ii) reamortiz-
ing the outstanding balance of the loan, in-
cluding accrued interest, over the remain-
ing payment schedule of the original term
of the loan or the period remaining had the
loan been amortized over the maximum
period that complies with § 72(p)(2)(B),
measured from the original date of the
loan, or (iii) any combination of (i) or (ii).
.08Correction under statute or regula-
tions. Generally, none ofthe correction
programs are available to correct failures
that can be corrected under the Code and
related regulations. For example, as a gen-
eral rule, a Plan Document Failure that is
a disqualifying provision for which the re-
medial amendment period under § 401(b)
has not expired can be corrected under pro-
visions of the Code through retroactive re-
medial amendment.
.09Matters subject to excise taxes or
other penalties. (1) Except as provided
in this revenue procedure, the correction
programs are not available for events for
which the Code provides tax consequences
other than plan disqualification (such as
the imposition of an excise tax or addi-
tional income tax). For example, funding
deficiencies (failures to make the required
contributions to a plan subject to § 412),
prohibited transactions, and failures to file
the Form 5500 series cannot be corrected
under this revenue procedure.
(2)AspartofVCPandAuditCAP,
if a failure involves the failure to satisfy
the minimum required distribution re-
quirements of § 401(a)(9), in appropriate
cases, the Service will waive the excise
September 2, 20084812008–35 I.R.B.

tax under § 4974 applicable to plan par-
ticipants. The waiver will be included in
the compliance statement or in the closing
agreement in the case of Audit CAP. Un-
der VCP, the Plan Sponsor, as part of the
submission, must request the waiver and,
in cases where the participant subject to
the excise tax is either an owner-employee
as defined in § 401(c)(3) or a 10% owner
of a corporation, the Plan Sponsor must
also provide an explanation supporting the
request. See section 12.02(2) relating to
the applicable compliance fee for certain
§ 401(a)(9) failures. Under Audit CAP, the
Plan Sponsor must make a specific request
forwaiveroftheexcisetaxunder§4974.
The Plan Sponsor should also provide an
explanation supporting the request for a
waiver. Upon reviewing the request, the
reasons for the failure, and other facts or
circumstances of the case under examina-
tion, the Service will determine whether it
is appropriate to approve the waiver of the
excise tax as part of the closing agreement
negotiated under Audit CAP.
(3)AspartofVCP,ifthefailurein-
volves a correction that requires the Plan
Sponsor to make a plan contribution that
is not deductible, in appropriate cases, the
Service will not pursue the excise tax un-
der § 4972 on such nondeductible contri-
butions. The Plan Sponsor, as part of the
submission must request the relief and pro-
vide an explanation supporting the request.
(4)AspartofVCP,ifafailurere-
sults in excess contributions as defined in
§ 4979(c) or excess aggregate contribu-
tions as defined in § 4979(d) under a plan,
the Service will not pursue the excise tax
under § 4979 in appropriate cases,e.g.,
where correction is made for any case in
which the ADP test was timely performed
but, due to reliance on inaccurate data, re-
sulted in an insufficient amount of excess
elective deferrals having been distributed
to HCEs. The Plan Sponsor, as part of
the submission, must request the relief
and provide an explanation supporting the
request.
(5) Subject to section 6.03(4), as part of
VCP, in appropriate cases, the Service will
not pursue the excise tax under § 4973 re-
lating to excess contributions made to IRA
(including either an individual retirement
account (as defined in§ 408(a)) or an in-
dividual retirement annuity (as defined in
§ 408(b)) under any of the following cir-
cumstances:
(a) As part of the proposed correction
for Overpayments, the participant or bene-
ficiary (“recipient”) removes the Overpay-
ment (plus earnings) from the recipient’s
IRA and returns that amount to the plan;
(b) As part of the proposed correction
for Excess Amounts, the recipient removes
the Excess Amount (plus earnings) from
the recipient’s IRA and reports that amount
(reduced by any applicable after-tax em-
ployee contribution) as a taxable distri-
bution for the year in which the Excess
Amount (plus earnings) is removed from
the recipient’s IRA. The amount removed
will generally be taxed in a manner that
is similar to the manner in which the cor-
rective disbursement of elective deferrals
is taxed, as described in section 3 of Rev.
Proc. 92–93; or
(c) In the case of an Overpayment that
was not made pursuant to a distributable
event, the Plan Sponsor, as part of the
submission, must request relief from the
§ 4973 excise tax and provide an explana-
tion supporting the request.
(6) As part of VCP, in appropriate
cases, the Service will not pursue the 10%
additional income tax under § 72(t) (or
will pursue only a portion thereof) if, as
part of the proposed correction for Over-
payments that were not made pursuant
to a distributable event, the participant
or beneficiary (“recipient”) removes the
amount improperly distributed and rolled
over (plus earnings) from the recipient’s
IRA and returns that amount to the plan.
In appropriate cases, as a condition for
not pursuing all or a portion of the ad-
ditional tax, the Service may require
the Plan Sponsor to pay an additional
fee under VCP not in excess of the 10%
additional income tax under § 72(t). The
Plan Sponsor, as part of the submission,
must request the relief and provide an ex-
planation supporting the request.
.10Correction for SEPs and SIMPLE
IRA Plans.(1)Correction for SEPs and
SIMPLE IRA Plans generally. Generally,
the correction for a SEP or a SIMPLE
IRA Plan is expected to be similar to the
correction required for a Qualified Plan
with a similar Qualification Failure (i.e.,
Plan Document Failure, Operational Fail-
ure, Demographic Failure and Employer
Eligibility Failure).
(2)Special correction for SEPs and
SIMPLE IRA Plans. In any case in which
correction under section 6.10(1) is not fea-
sible for a SEP or SIMPLE IRA Plan or in
any other case determined by the Service
in its discretion (including failures relating
to §§ 402(g), 415, and 401(a)(17), failures
relating to deferral percentages, discon-
tinuance of contributions to a SARSEP
or SIMPLE IRA Plan, and retention of
Excess Amounts for cases in which there
has been no violation of a statutory limi-
tation with respect to a SEP or SIMPLE
IRA Plan), the Service may provide for a
different correction. See section 12.05(2)
for a special fee that may apply in such a
case.
(3)Correction of failure to satisfy defer-
ral percentage test. If the failure involves
a violation of the deferral percentage test
under § 408(k)(6)(A)(iii) applicable to a
SARSEP, the failure may be corrected in
either one of the following ways:
(a) The Plan Sponsor may make contri-
butions that are 100% vested to all eligi-
ble nonhighly compensated employees (to
the extent permitted by § 415) necessary
to raise the deferral percentage needed to
pass the test. This amount may be calcu-
lated as the same percentage of compensa-
tion (regardless of the terms of the SEP).
(b) The Plan Sponsor may effect dis-
tribution of excess contributions, adjusted
for earnings through the date of correc-
tion, to highly compensated employees
to correct the failure. The Plan Sponsor
must also contribute to the SEP an amount
equaltothetotalamountdistributed.This
amount must be allocated to (i) current
employees who were nonhighly compen-
sated employees in the year of the failure,
(ii) current nonhighly compensated em-
ployees who were nonhighly compensated
employees in the year of the failure, or (iii)
employees (both current and former) who
were nonhighly compensated employees
in the year of the failure.
(4)Treatment of undercontributions to
a SEP or a SIMPLE IRA Plan.(a)Make-up
contributions; earnings. The Plan Spon-
sor should correct undercontributions to a
SEP or a SIMPLE IRA Plan by contribut-
ing make-up amounts that are fully vested,
adjusted for earnings from the date of the
failure to the date of correction.
(b)Earnings adjustment methods.In-
sofar as SEP and SIMPLE IRA Plan assets
are held in IRAs, there is no earnings rate
under the SEP or SIMPLE IRA Plan as a
whole. If it is not feasible to make a rea-
sonable estimate of what the actual invest-
2008–35 I.R.B.482September 2, 2008

ment results would have been, a reasonable
interest rate may be used.
(5)Treatment of Excess Amounts under
a SEP or a SIMPLE IRA Plan.(a)Distri-
bution of Excess Amounts. For purposes
of section 6.10, an Excess Amount is an
amount contributed on behalf of an em-
ployee that is in excess of an employee’s
benefit under the plan, or an elective defer-
ral in excess of the limitations of §§ 402(g)
or 408(k)(6)(A)(iii). If an Excess Amount
is attributable to elective deferrals, the
Plan Sponsor may effect distribution of
the Excess Amount, adjusted for earnings
through the date of correction, to the af-
fected participant. The amount distributed
to the affected participant is includible
in gross income in the year of distribu-
tion. The distribution is reported on Form
1099–R for the year of distribution with
respect to each participant receiving the
distribution. In addition, the Plan Spon-
sor must inform affected participants that
the distribution of an Excess Amount is
not eligible for favorable tax treatment
accorded to distributions from a SEP or
a SIMPLE IRA Plan (and, specifically, is
not eligible for tax-free rollover). If the
Excess Amount is attributable to employer
contributions, the Plan Sponsor may ef-
fect distribution of the employer Excess
Amount, adjusted for earnings through the
date of correction, to the Plan Sponsor.
The amount distributed to the Plan Spon-
sor is not includible in the gross income of
the affected participant. The Plan Sponsor
is not entitled to a deduction for such em-
ployer Excess Amount. The distribution
is reported on Form 1099–R issued to the
participant indicating the taxable amount
as zero.
(b)Retention of Excess Amounts.Ifan
Excess Amount is retained in the SEP or
SIMPLE IRA Plan under section 6.10(5), a
special fee, in addition to the VCP submis-
sion fee, will apply. See section 12.05(2)
for the special fee. The Plan Sponsor is
not entitled to a deduction for an Excess
Amount retained in the SEP or SIMPLE
IRA Plan. In the case of an Excess Amount
retained in a SEP that is attributable to a
§ 415 failure, the Excess Amount, adjusted
for earnings through the date of correction,
must reduce affected participants’ applica-
ble § 415 limit for the year following the
year of correction (orfor the year of cor-
rection if the Plan Sponsor so chooses),
and subsequent years, until the excess is
eliminated.
(c)De minimis Excess Amounts.Ifthe
totalExcessAmountinaSEPorSIMPLE
IRA Plan, whether attributable to elec-
tive deferrals or employer contributions,
is $100 or less, the Plan Sponsor is not
required to distribute the Excess Amount
and the special fee described in section
12.05(2) does not apply.
.11Confidentiality and disclosure.Be-
cause each correction program relates di-
rectly to the enforcement of the Code qual-
ification requirements, the information re-
ceived or generated by the Service under
the program is subject to the confidential-
ity requirements of § 6103 and is not a
written determination within the meaning
of § 6110.
.12No effect on other law. Correction
under these programs has no effect on the
rights of any party under any other law, in-
cluding Title I of ERISA. The Department
of Labor maintains a Voluntary Fiduciary
Correction Program under which certain
ERISA fiduciary violations may be cor-
rected. The Department of Labor also
maintains a Delinquent Filer Voluntary
Compliance Program under which certain
failures to comply with the annual report-
ing requirements (Form 5500 series) under
ERISA may be corrected.
PART IV. SELF-CORRECTION (SCP)
SECTION7.INGENERAL
The requirements of this section 7 are
satisfied with respect to an Operational
Failure if the Plan Sponsor of a Qualified
Plan, a 403(b) Plan, a SEP, or a SIMPLE
IRA Plan satisfies the requirements of sec-
tion 8 (relating to insignificant Operational
Failures) or, in the case of a Qualified Plan
ora403(b)Plan,section9(relatingtosig-
nificant Operational Failures).
SECTION 8. SELF-CORRECTION
OF INSIGNIFICANT OPERATIONAL
FAILURES
.01Requirements. The requirements of
this section 8 are satisfied with respect to
an Operational Failure if the Operational
Failure is corrected and, given all the facts
and circumstances, theOperational Failure
is insignificant. This section 8 is available
for correcting an insignificant Operational
Failure even if the plan or Plan Sponsor is
Under Examination and even if the Oper-
ational Failure is discovered on examina-
tion.
.02Factors. The factors to be consid-
ered in determining whether or not an Op-
erational Failure under a plan is insignif-
icant include, but are not limited to: (1)
whether other failures occurred during the
period being examined (for this purpose, a
failure is not considered to have occurred
more than once merely because more than
one participant is affected by the failure);
(2) the percentage of plan assets and con-
tributions involved in the failure; (3) the
number of years the failure occurred; (4)
the number of participants affected rela-
tive to the total number of participants in
the plan; (5) the number of participants af-
fected as a result of the failure relative to
the number of participants who could have
been affected by the failure; (6) whether
correction was made within a reasonable
time after discovery of the failure; and (7)
the reason for the failure (for example, data
errors such as errors in the transcription
of data, the transposition of numbers, or
minor arithmetic errors). No single factor
is determinative. Additionally, factors (2),
(4), and (5) should not be interpreted to ex-
clude small businesses.
.03Multiple failures. In the case of a
plan with more than one Operational Fail-
ure in a single year, or Operational Failures
that occur in more than one year, the Oper-
ational Failures are eligible for correction
under this section 8 only if all of the Op-
erational Failures are insignificant in the
aggregate. Operational Failures that have
been corrected underSCPinsection9and
VCP in sections 10 and 11 are not taken
into account for purposes of determining
if Operational Failures are insignificant in
the aggregate.
.04Examples. The following examples
illustrate the application of this section 8.
It is assumed, in each example, that the el-
igibility requirements of section 4 relating
to SCP (for example, the requirements of
section 4.04 relating to established prac-
tices and procedures) have been satisfied
and that no Operational Failures occurred
other than the Operational Failures identi-
fied below.
Example 1: In 1991, Employer X established Plan
A, a profit-sharing plan that satisfies the requirements
of § 401(a) in form. In 2005, the benefits of 50 of the
250 participants in Plan A were limited by § 415(c).
September 2, 20084832008–35 I.R.B.

However, when the Service examined Plan A in 2008,
it discovered that, during the 2005 limitation year,
the annual additions allocated to the accounts of 3 of
these employees exceeded the maximum limitations
under § 415(c). Employer X contributed $3,500,000
to the plan for the plan year. The amount of the ex-
cesses totaled $4,550. Under these facts, because the
number of participants affected by the failure relative
to the total number of participants who could have
been affected by the failure, and the monetary amount
of the failure relative to the total employer contribu-
tion to the plan for the 2005 plan year, are insignif-
icant, the § 415(c) failure in Plan A that occurred in
2005 would be eligible for correction under this sec-
tion 8.
Example 2: ThefactsarethesameasinExam-
ple 1, except that the failure to satisfy § 415 occurred
during each of the 2005 and 2007 limitation years. In
addition, the three participants affected by the § 415
failure were not identical each year. The fact that the
§ 415 failures occurred during more than one limita-
tion year did not cause the failures to be significant;
accordingly, the failures are still eligible for correc-
tion under this section 8.
Example 3: ThefactsarethesameasinExam-
ple 1, except that the annual additions of 18 of the 50
employees whose benefits were limited by § 415(c)
nevertheless exceeded the maximum limitations un-
der § 415(c) during the 2005 limitation year, and the
amount of the excesses ranged from $1,000 to $9,000,
and totaled $150,000. Under these facts, taking into
account the number of participants affected by the
failure relative to the total number of participants who
could have been affected by the failure for the 2005
limitation year (and the monetary amount of the fail-
ure relative to the total employer contribution), the
failure is significant. Accordingly, the § 415(c) fail-
ure in Plan A that occurred in 2005 is ineligible for
correction under this section 8 as an insignificant fail-
ure.
Example 4: Employer J maintains Plan C, a
money purchase pension plan established in 1992.
The plan document satisfies the requirements of
§ 401(a). The formula under the plan provides for an
employer contribution equal to 10% of compensa-
tion, as defined in the plan. During its examination
of the plan for the 2005 plan year, the Service discov-
ered that the employee responsible for entering data
into the employer’s computer made minor arithmetic
errors in transcribing the compensation data with
respect to 6 of the plan’s 40 participants, resulting in
excess allocations to those 6 participants’ accounts.
Under these facts, the number of participants affected
by the failure relative to the number of participants
that could have been affected is insignificant, and
the failure is due to minor data errors. Thus, the
failure occurring in 2005 would be insignificant and
therefore eligible for correction under this section 8.
Example 5: Public School maintains for its 200
employees a salary reduction 403(b) Plan (the “Plan”)
that satisfies the requirements of § 403(b). The busi-
ness manager has primary responsibility for admin-
istering the Plan, in addition to other administrative
functions within Public School. During the 2005 plan
year, a former employee should have received an ad-
ditional minimum required distribution of $278 un-
der § 403(b)(10). Another participant received an im-
permissible hardship withdrawal of $2,500. Another
participant made elective deferrals of which $1,000
was in excess of the § 402(g) limit. Under these
facts, even though multiplefailures occurred in a sin-
gle plan year, the failures will be eligible for correc-
tion under this section 8 because in the aggregate the
failures are insignificant.
SECTION 9. SELF-CORRECTION
OF SIGNIFICANT OPERATIONAL
FAILURES
.01Requirements. The requirements of
this section 9 are satisfied with respect to
an Operational Failure (even if significant)
if the Operational Failure is corrected and
the correction is either completed or sub-
stantially completed(in accordance with
section 9.04) by the last day of the correc-
tion period described in section 9.02.
.02Correction period.(1)End of cor-
rection period. The last day of the cor-
rection period for an Operational Failure
is the last day of the second plan year fol-
lowing the plan year for which the failure
occurred. However, in the case of a failure
to satisfy the requirements of §§ 401(k)(3),
401(m)(2), or 401(m)(9), the correction
period does not end until the last day of
the second plan year following the plan
year that includes the last day of the addi-
tional period for correction permitted un-
der §§ 401(k)(8) or 401(m)(6). If a 403(b)
Plan does not have a designated plan year,
the plan year is deemed to be the calendar
year for purposes of this section 9.02.
(2)Extension of correction period for
Transferred Assets. In the case of an Op-
erational Failure that relates only to Trans-
ferred Assets, or to a plan assumed in con-
nection with a corporate merger, acquisi-
tion or other similar employer transaction,
the correction period does not end until
the last day of the first plan year that be-
gins after the corporate merger, acquisi-
tion, or other similar employer transaction
between the Plan Sponsor and the sponsor
of the transferor plan or the prior sponsor
of an assumed plan.
(3)Effect of examination. The correc-
tion period for an Operational Failure that
occurs for any plan year ends, in any event,
on the first date the plan or Plan Sponsor
is Under Examination for that plan year
(determined without regard to the second
sentence of section 9.02). (But see section
9.04 for special rules permitting comple-
tion of correction after the end of the cor-
rection period.)
.03Correctionbyplanamendment.
In order to complete correction by plan
amendment (as permitted under section
4.05), the appropriate determination let-
ter application must be submitted before
the end of the plan’s applicable remedial
amendment period described in Rev. Proc.
2007–44.
.04Substantial completion of correc-
tion. Correction of an Operational Failure
is substantially completed by the last day
of the correction period only if the require-
ments of either paragraph (1) or (2) are sat-
isfied.
(1) The requirements of this paragraph
(1) are satisfied if:
(a) during the correction period, the
Plan Sponsor is reasonably prompt in
identifying the Operational Failure, formu-
lating a correction method, and initiating
correction in a manner that demonstrates
a commitment to completing correction of
the Operational Failure as expeditiously
as practicable, and
(b) within 120 days after the last day
of the correction period, the Plan Sponsor
completes correction of the Operational
Failure.
(2) The requirements of this paragraph
(2) are satisfied if:
(a) during the correction period, correc-
tion is completed with respect to 65% of
all participants affected by the Operational
Failure, and
(b) thereafter, the Plan Sponsor com-
pletes correction of theOperational Failure
with respect to the remaining affected par-
ticipants in a diligent manner.
.05Examples. The following examples
illustrate the application of this section 9.
It is assumed, in each example, that the el-
igibility requirements of section 4 relating
to SCP have been met.
Example 1: Employer Z established a qualified
definedcontributionplanin2003andreceiveda
favorable determination letter. During 2007, while
doing a self-audit of the operation of the plan for the
2006 plan year, the plan administrator discovered
that, despite the practicesand procedures established
by Employer Z with respect to the plan, several
employees eligible to participate in the plan were
excluded from participation. The administrator also
found that for 2006 Operational Failures occurred
because the elective deferrals of additional employ-
ees exceeded the § 402(g) limit and Employer Z
failed to make the required top-heavy minimum
contribution. In addition, during the review of the
administration for the 2006 year, it was found that the
plan administrator intended to implement correction
for the failure to satisfy the ADP test (as described in
§ 401(k)(3)) for the 2005 plan year. During the 2008
plan year, the Plan Sponsor made QNECs on behalf
of the excluded employees, distributed the excess
2008–35 I.R.B.484September 2, 2008

deferrals to the affected participants, and made a
top-heavy minimum contribution to all participants
entitled to that contribution for the 2006 plan year.
Each corrective contribution and distribution was
credited with earnings at a rate appropriate for the
plan from the date the corrective contribution or
distribution should have been made to the date of
correction. The failed ADP test for 2005 was cor-
rected by making corrective contributions, adjusted
for earnings, on behalf of nonhighly compensated
employees using the method described in Appendix
A .03 of this revenue procedure. Under these facts,
the Plan Sponsor has corrected the ADP test failure
for the 2005 plan year and the Operational Failures
for the 2006 plan year within the correction period
and thus satisfied the requirements of this section 9.
Example 2: Employer A established a qualified
defined contribution plan, Plan A, in 1993 and has
received a favorable determination letter for the ap-
plicable law changes. In April 2007, Employer A
purchased all of the stock of Employer B, a wholly-
owned subsidiary of Employer C. Employees of Em-
ployer B participated in Plan C, a qualified defined
contribution plan sponsored by Employer C. Follow-
ing Employer A’s review of Plan C, Employer A and
Employer C agreed that Plan A would accept a trans-
fer of plan assets from Plan C attributable to the ac-
count balances of the employees of Employer B who
had participated in Plan C. As part of this agreement,
Employer C represented to Employer A that Plan C
is tax qualified. Employers A and C also agreed that
such transfer would be inaccordance with § 414(l)
and§1.414(l)–1andaddressedissuesrelatedtocosts
associated with the transfer. Following the transac-
tion, the employees of Employer B began participa-
tion in Plan A. Effective July 1, 2007, Plan A ac-
cepted the transfer of plan assets from Plan C. After
the transfer, Employer A determined that all the par-
ticipants in one division of Employer B had been in-
correctly excluded from allocation of the profit shar-
ing contributions for the 2002 and 2003 plan years.
During 2008, Employer A made corrective contribu-
tions on behalf of the affected participants. The cor-
rective contributions were credited with earnings at a
rate appropriate for the plan from the date the correc-
tive contribution should have been made to the date of
correction and Employer A otherwise complied with
the requirements of SCP. Under these facts, Employer
A has, within the correction period, corrected the Op-
erational Failures for the 2002 and 2003 plan years
with respect to the assets transferred to Plan A, and
thus satisfied the requirements of this section 9.
PART V. VOLUNTARY CORRECTION
PROGRAM WITH SERVICE
APPROVAL (VCP)
SECTION 10. VCP PROCEDURES
.01VCP requirements. The require-
ments of this section 10 are satisfied with
respect to failures submitted in accordance
with the requirements of this section 10
if the Plan Sponsor pays the compliance
fee required under section 12 and imple-
ments the correctiveactions and satisfies
any other conditions in the compliance
statement described in section 10.08.
.02Identification of failures.VCPis
not based upon an examination of the plan
by the Service. Only the failures raised by
the Plan Sponsor or failures identified by
the Service in processing the application
are addressed under VCP, and only those
failures are covered by a VCP compliance
statement. The Service will not make any
investigation or finding under VCP con-
cerning whether there are failures.
.03Effect of VCP submission on exam-
ination. Because VCP does not arise out
of an examination, consideration under
VCP does not preclude or impede (under
§ 7605(b) or any administrative provisions
adopted by the Service) a subsequent ex-
amination of the Plan Sponsor or the plan
by the Service with respect to the taxable
year (or years) involved with respect to
matters that are outside the compliance
statement. However, a Plan Sponsor’s
statements describing failures are made
only for purposes of VCP and will not be
regarded by the Service as an admission
of a failure for purposes of any subsequent
examination. See section 5.07 for the def-
inition of Under Examination.
.04No concurrent examination activity.
Except in unusual circumstances, a plan
that has been properly submitted under
VCP will not be examined while the sub-
mission is pending. Notwithstanding the
above, a plan that is eligible for a Group
Submission under section 10.11 may be
examined while the Group Submission is
pending with respect to issues not identi-
fied in the Group Submission at the time
such plan comes Under Examination. In
addition, if it is determined that either
the plan or the Plan Sponsor was, or may
have been a party to an abusive tax avoid-
ance transaction (asdefined under section
4.13(2)), the Service may authorize the
examination of the plan, even if a sub-
mission pursuant to VCP is pending. This
practice regarding concurrent examina-
tions does not extend to other plans of the
Plan Sponsor. Thus, any plan of the Plan
Sponsor that is not pending under VCP
could be subject to examination.
.05Determination letter application for
plan amendments related to a VCP sub-
mission. In any case in which a determi-
nation letter may be submitted pursuant to
section 6.05, the Plan Sponsor must sub-
mit a copy of the amendment, the appropri-
ate determination letter application form
(i.e., Form 5300, 5307 or 5310) , and the
appropriate user fee concurrently and to
the same address as the VCP submission.
Pursuant to section 12.03 of Rev. Proc.
2007–44, in the case of individually de-
signed plans, a restated plan generally will
be required. The user fee for the deter-
mination letter application and the fee for
the VCP submission must be submitted on
separate checks made payable to the U.S.
Treasury. See section 11.13 for the VCP
mailing address.
.06Determination letter applications
not related to a VCP submission.(1)
The Service may process a determina-
tion letter application submitted under the
determination letter program (including
an application requested on Form 5310)
concurrently with a VCP submission for
the same plan. However, issuance of the
determination letter in response to an ap-
plication made on a Form 5310 will be
suspended pending the closure of the VCP
submission.
(2) A submission of a plan under the de-
termination letter program does not consti-
tute a submission under VCP. If the Plan
Sponsor discovers a Qualification Failure,
the Qualification Failure may not be cor-
rected as part of the determination letter
process. The Plan Sponsor may use SCP
and VCP instead, as applicable. If the Ser-
vice in connection with a determination
letter application discovers a Qualification
Failure, the Service may issue a closing
agreement with respect to the failures iden-
tified or, if appropriate, refer the case to
Employee Plans Examinations. In either
case, the fee structure in section 12 relat-
ing to VCP, will not apply. Except as pro-
vided in section 10.06(3), the sanction in
section 14.01 relating to Audit CAP will
apply. See section 5.07(3) for a descrip-
tion of when a plan submitted for a deter-
mination letter is considered to be Under
Examination.
(3)IftheServiceinconnectionwitha
determination letter application discovers
the plan has not been amended timely for
tax legislation changes, the fee structure in
section 14.04 will apply.
.07Processing of submission.(1)
Screening of submission. Upon receipt
of a submission under VCP, the Service
will review whether the eligibility require-
ments of section 4 and the submission
requirements of section 11 are satisfied.
September 2, 20084852008–35 I.R.B.

(2)Eligibility of submission. If, at any
stage of the review process, the Service
determines that a VCP submission is se-
riously deficient or that the application of
VCP would be inappropriate or impracti-
cable, the Service reserves the right to re-
turn the submission without contacting the
Plan Sponsor. If no substantive processing
of the case has occurred, the Service will
refund the compliance fee submitted with
the request.
(3)Review of submission. Once the
Service determines that the submission is
complete under VCP, the Service will con-
tact the Plan Sponsor or the Plan Sponsor’s
representative to discuss the proposed cor-
rections and the plan’s administrative pro-
cedures.
(4)Additional information required.If
additional information is required, a Ser-
vice representative will generally contact
thePlanSponsororthePlanSponsor’s
representative and explain what is needed
to complete the submission. The Plan
Sponsor will have 21 calendar days from
the date of this contact to provide the re-
quested information. If the information is
not received within 21 days, the matter will
be closed, the compliance fee will not be
returned, and the case may be referred to
Employee Plans Examinations. Any re-
quest for an extension of the 21-day time
period must be made in writing within the
21-day time period and must be approved
by the Service (by theapplicable group
manager).
(5)Additional failures discovered after
initial submission. (a) A Plan Sponsor that
discovers additional unrelated Qualifica-
tion or 403(b) Failures after its initial sub-
mission may request that such failures be
added to its submission. However, the Ser-
vice retains the discretion to reject the in-
clusion of such failures if the request is
not timely (for example, if the Plan Spon-
sor makes its request when processing of
the submission is substantially complete)
or the application of VCP would be inap-
propriate or impracticable.
(b) If the Service discovers an unrelated
Qualification or 403(b) Failure while the
request is pending, the failure generally
will be added to the failures under con-
sideration. However, the Service retains
the discretion to determine that a failure is
outside the scope of the voluntary request
for consideration because the Plan Spon-
sor did not voluntarily bring it forward. In
this case, if the additional failure is signif-
icant, all aspects of the plan may be exam-
ined and the rules pertaining to Audit CAP
will apply.
(6)Conference right.IftheServiceini-
tially determines that it cannot issue a com-
pliance statement because the parties can-
not agree upon correction or a change in
administrative procedures, the Plan Spon-
sor (generally through the Plan Sponsor’s
representative) will be contacted by the
Service representative and offered a con-
ference with the Service. The conference
can be held either in person or by telephone
and must be held within 21 calendar days
of the date of contact. The Plan Sponsor
will have 21 calendar days after the date of
the conference to submit additional infor-
mation in support of the submission. Any
request for an extension of the 21-day time
period must be made in writing within the
21-day time period and must be approved
by the Service (by the applicable group
manager). Additional conferences may be
held at the discretion of the Service.
(7)Failure to reach resolution.Ifthe
Service and the Plan Sponsor cannot reach
agreement with respect to the submission,
the matter will be closed, the compliance
fee will not be returned, and the case may
be referred to Employee Plans Examina-
tions. In the case of an Anonymous Sub-
mission that fails to reach resolution under
this revenue procedure, the Service will re-
fund 50% of the applicable VCP fee. See
section 12 for the VCP fee.
(8)Issuance of compliance statement.
If agreement is reached, the Service will
send to the Plan Sponsor a compliance
statement specifying the corrective action
required. If the original submission is
subsequently materially modified, then,
unless the Plan Sponsor has submitted a
penalty of perjury statement with respect
to such subsequent modifications, the
Plan Sponsor will be required to sign the
compliance statement. In such case, the
Service will send to the Plan Sponsor an
unsigned compliance statement specifying
the corrective action required. Within 30
calendar days of the date the compliance
statement is sent, a Plan Sponsor must sign
the compliance statement and return it and
any compliance fee required to be paid at
the time that the compliance statement is
signed (see section 11.05). The Service
will then issue a signed copy of the compli-
ance statement to the Plan Sponsor. If the
Plan Sponsor does not sign the compliance
statement and send it to the Service (with
a compliance fee, if applicable) within 30
calendar days, the plan may be referred to
Employee Plans Examinations.
(9)Timing of correction.ThePlan
Sponsor must implement the specific cor-
rections and administrative changes set
forth in the compliance statement within
150 days of the date of the compliance
statement. Any request for an extension
of this time period must be made prior
to the expiration of the correction period
in writing and must be approved by the
Service. Correction of the failure to adopt
timely interim amendments or amend-
ments relating to the implementation of
optional law changes, as described in sec-
tion 6.05(3)(a), must be made by the date
of the submission. That is, the application
should include the executed amendments
that would correct this failure.
(10)Modification of compliance state-
ment. Once the compliance statement has
been issued (based on the information pro-
vided), the Plan Sponsor cannot request a
modification of the compliance terms ex-
cept by a new request for a compliance
statement. However, if the requested mod-
ification is minor and is postmarked within
the correction period provided for in the
compliance statement, the compliance fee
will be equal to the lesser of one-half of
the original compliance fee or $1,500. The
request should be sent to the VCP mail-
ing address provided for in section 11.13.
The request should include a letter explain-
ing the modification, a copy of the original
compliance statement, a copy of the origi-
nal application and if applicable any other
pertinent correspondence relating to the is-
suance of the original compliance state-
ment, and a check for the compliance fee
payable to the U.S. Treasury.
(11)Verification. Once the compliance
statement has been issued, the Service
may require verification that the correc-
tion methods have been complied with and
that any plan administrative procedures
required by the compliance statement have
been implemented. This verification does
not constitute an examination of the books
and records of the employer or the plan
(within the meaning of § 7605(b)). If the
Service determines that the Plan Sponsor
did not implement the corrections and pro-
cedures within the stated time period, the
2008–35 I.R.B.486September 2, 2008

plan may be referred to Employee Plans
Examinations.
.08Compliance statement.(1)General
description of compliance statement.The
compliance statement issued for a VCP
submission addresses the failures iden-
tified, the terms of correction, including
any revision of administrative procedures,
and the time period within which pro-
posed corrections must be implemented,
including any changes in administrative
procedures. The compliance statement
also provides that the Service will not treat
the plan as failing to satisfy the applica-
ble requirements of the Code on account
of the failures described in the compli-
ance statement if the conditions of the
compliance statement are satisfied. With
respect to a failure to amend a plan timely
for interim amendments, or optional law
changes, as described in section 6.05(3)
of this revenue procedure, the issuance
of a compliance statement will result in
the corrective amendments being treated
as if they had been adopted timely for
the purpose of determining the availabil-
ity of the extended remedial amendment
period currently described in Rev. Proc.
2007–44. However, the issuance of such a
compliance statement does not constitute
a determination as to whether the interim
amendment or othercorrective amend-
ment to reflect the implementation of
optional law changes, as drafted, complies
with the change in qualification require-
ment. The compliance statement will not
make any determination on whether the
corrective amendment conforms the terms
of the plan to the plan’s prior operations,
and whether the amendment complies
with the requirements of § 401(a), in-
cluding the requirements of §§ 401(a)(4),
410(b), and 411(d)(6). Where current pro-
cedures are inadequate for operating the
plan in conformance with the applicable
requirements of the Code, the compliance
statement will be conditioned upon the
implementation of stated administrative
procedures. The Service may prescribe
appropriate administrative procedures in
the compliance statement.
(2)Compliance statement conditioned
upon timely correction. The compliance
statement is conditioned on (i) there being
no misstatement or omission of material
facts in connection with the submission
and (ii) the implementation of the specific
corrections and satisfaction of any other
conditions in the compliance statement.
(3)Authority delegated. Compliance
statements (including relief from any ex-
cise tax or other penalty as provided under
section 6.09) are authorized to be signed
by managers within Employee Plans Rul-
ings and Agreements, under the Tax Ex-
empt and Government Entities Operating
Division of the Service.
.09Effect of compliance statement on
examination. The compliance statement is
binding upon both the Service and the Plan
Sponsor or Eligible Organization (as de-
fined in section 10.11(2)) with respect to
the specific tax matters identified therein
for the periods specified, but does not pre-
clude or impede an examination of the plan
by the Service relating to matters outside
the compliance statement, even with re-
spect to the same taxable year or years to
which the compliance statement relates.
.10Special rules relating to Anony-
mous (John Doe) Submissions.(1)The
Anonymous Submission procedure in
this section 10.10 permits submission
of Qualified Plans, 403(b) Plans, SEPs,
and SIMPLE IRA Plans under VCP
without initially identifying the applicable
plan(s), the Plan Sponsor(s), or the
Eligible Organization. The requirements
of this revenue procedure relating to VCP,
including sections 10, 11, and 12, apply to
these submissions. However, information
identifying the plan or the Plan Sponsor
may be redacted (and the power of attorney
statement and the penalty of perjury
statement need not be included with the
initial submission). In addition, if a
determination letter application will be
requested as part of the submission, the
determination letter application should not
be submitted until the time all identifying
information is provided to the Service. For
purposes of processing the submission, the
state of the Plan Sponsor must be identified
in the initial submission. All anonymous
submissions must be numbered or labeled
on the first page of the VCP submission
by the Plan Sponsor or its representative
to facilitate identification and tracking of
the submission. The identification number
should be unique to the submission
and should not be used with respect to
any other anonymous submission of the
Plan Sponsor or representative. Once
the Service and the plan representative
reach agreement with respect to the
submission, the Service will contact the
plan representative in writing indicating
the terms of the agreement. The Plan
Sponsor will have 21 calendar days from
the date of the letter of agreement to
identify the plan and Plan Sponsor. If
the Plan Sponsor does not submit the
identifying material (including the power
of attorney statement and the penalty of
perjury statement) within 21 calendar days
of the letter of agreement, the matter will
be closed and the compliance fee will not
be returned.
(2) Notwithstanding section 10.04, un-
til the plan(s) and Plan Sponsor(s) are iden-
tified to the Service, a submission under
this subsection does not preclude or im-
pede an examination of the Plan Sponsor
or its plan(s). Thus, a plan submitted un-
der the Anonymous Submission procedure
that comes Under Examination prior to the
date the plan(s) and Plan Sponsor(s) identi-
fying materials are received by the Service
will no longer be eligible under VCP.
.11Special rules relating to Group Sub-
missions.(1)General rules.AnEligible
Organization may submit a VCP request
for a Qualified Plan, a 403(b) Plan, a SEP,
or a SIMPLE IRA Plan under a Group Sub-
mission for Plan Document, Operational
and Employer Eligibility Failures. If a
sponsor of a master or prototype plan sub-
mits failures with respect to more than one
master or prototype plan, each plan will be
treated as a separate submission and a sep-
arate fee must be submitted for each pro-
totype plan. Similarly, if a Volume Sub-
mitter practitioner submits failures with re-
spect to more than one Volume Submitter
plan, each plan will be treated as a sepa-
rate submission and a separate fee must be
submitted for each specimen plan.
(2)Eligible Organizations. For pur-
poses of a Group Submission, the term
“Eligible Organization” means either (a)
a Sponsor (as that term is defined in sec-
tion 4.07 of Rev. Proc. 2005–16, 2005–1
C.B. 674) of a master or prototype plan,
(b) a Volume Submitter practitioner, as
that term is defined in section 13.04 of
Rev. Proc. 2005–16, (c) an insurance
company or other entity that has issued
annuity contracts or provides services
with respect to assets for 403(b) Plans,
or (d) an entity that provides its clients
with administrative services with respect
to Qualified Plans, 403(b) Plans, SEPs,
or SIMPLE IRA Plans. An Eligible
September 2, 20084872008–35 I.R.B.

Organization is not eligible to make a
Group Submission unless the failures in
their submission result from a systemic
error involving the Eligible Organization
that affects at least 20 plans and that
result in at least 20 plans implementing
correction. If, at any time before the
Service issues the compliance statement,
the number of plans falls below 20, the
Eligible Organization must notify the
Service that it is no longer eligible to make
a Group Submission (and the compliance
fee may be retained).
(3)Special Group Submission proce-
dures. (a) In general, a Group Submission
is subject to the same procedures as any
VCP submission in accordance with sec-
tions 10 and 11, except that the Eligible
Organization is responsible for perform-
ing the procedural obligations imposed on
the Plan Sponsor under sections 10 and 11.
See section 11.02(15) for a special sub-
mission requirement with respect to Group
Submissions.
(b) The Eligible Organization must pro-
vide notice to all Plan Sponsors of the
plans included in the Group Submission.
The notice must be provided at least 90
days before the Eligible Organization pro-
vides the Service with the information re-
quired in section 10.11(3)(c). The purpose
of the notice is to provide each Plan Spon-
sor with information relating to the Group
Submission request. The notice should ex-
plain the reason for the Group Submis-
sion and inform the Plan Sponsor that the
Plan Sponsor’s plan will be included in the
Group Submission unless the Plan Spon-
sor responds within the 90-day period to
exclude the Plan Sponsor’s plan from the
Group Submission.
(c) When an Eligible Organization re-
ceives an unsigned compliance statement
on the proposed correction and agrees to
the terms of the compliance statement, the
Eligible Organization must return to the
Service within 120 calendar days not only
the signed compliance statement and any
additional compliance fee under section
12.05, but also a list containing (i) the em-
ployers’ tax identification numbers for the
Plan Sponsors of the plans to which the
compliance statement may be applicable,
(ii) the plans by name, plan number, type
of plan, and number of plan participants,
(iii) a certification that each Plan Sponsor
received notice of the Group Submission,
and (iv) a certification that each Plan Spon-
sor timely filed the Form 5500 series re-
turn for each plan. This list can be submit-
ted at any stage of the submission process
provided that the requirements of section
10.11(3)(b) have been satisfied. Appli-
cants are encouraged to submit the list on
a computer disk in Microsoft Word. Only
those plans for which correction is actu-
ally made within 240 calendar days of the
date of the signed compliance statement
(or within such longer period as may be
agreed to by the Service at the request of
the Eligible Organization) will be covered
by the compliance statement.
(d) Notwithstanding section 4.02, if
a Plan Sponsor of a plan that is eligible
to be included in the Group Submission
and has not elected to be excluded from
the Group Submission pursuant to section
10.11(3)(b) is notified of an impending
Employee Plans examination after the
Eligible Organization filed the Group Sub-
mission application, the Plan Sponsor’s
plan will be included in the Group Submis-
sion. However, with respect to such plan,
the Group Submission will not preclude
or impede an examination of the plan with
respect to any failures not identified in the
Group Submission application at the time
the plan comes Under Examination.
.12Multiemployer and multiple em-
ployer plans. (1) In the case of a multiem-
ployer or multiple employer plan, the plan
administrator (rather than any contribut-
ing or adopting employer) must request
consideration of the plan under VCP. The
request must be with respect to the plan,
rather than a portion of the plan affecting
any particular employer.
(2)IfaVCPsubmissionforamulti-
employer or multiple employer plan has
failures that apply to fewer than all of the
employers under the plan, the plan admin-
istrator may choose to have the compli-
ance fee (in section 12) or sanction (in sec-
tion 14) calculated separately for each em-
ployer based on the assets attributable to
that employer, rather than being attribut-
able to the assets of the entire plan. Thus,
the plan administrator may choose to ap-
ply the provisions of this paragraph where
the failure is attributable in whole or in part
to data, information, actions, or inactions
that are within the control of the employ-
ers rather than the multiemployer or mul-
tiple employer plan (such as attribution in
whole or in part to the failure of a employer
to provide the plan administrator with full
and complete information).
SECTION 11. APPLICATION
PROCEDURES FOR VCP
.01General rules. The requirements of
this section 11 are satisfied if the request
for a compliance statement from the Ser-
vice under VCP satisfies the informational
and other requirements of this section 11.
In general, a request under VCP consists of
a letter from the Plan Sponsor (which may
be a letter from the Plan Sponsor’s repre-
sentative) or Eligible Organization (or rep-
resentative) to the Service that contains a
description of the failures, a description of
the proposed methods of correction, and
other procedural items set forth in this sec-
tion 11. Appendix D and Appendix F of
this revenue procedure are provided to as-
sist the applicant in satisfying these re-
quirements. Applicants are encouraged to
use Appendix D or Appendix F, as applica-
ble. If the Streamlined Application proce-
dures described in section 11.02 are used,
the applicant should use Appendix F and
related schedules; otherwise, the applica-
tion should be made in accordance with the
provisions of section 11.03, using the for-
matoutlinedinAppendixD.
The Appendix D and Appendix F for-
mats for the application should not be
modified. Also, since the application may
form part of a document that is executed
by the Service, the application itself (as
distinguished from any cover letter or
other supplemental letters that the appli-
cant may provide) should not be submitted
under the letterhead of the Plan Sponsor
or the Plan Sponsor’s authorized represen-
tative. The application also contains an
Enforcement Resolution section (Part VII
of Appendix D and Part IV of Appendix
F). The applicant should complete only
Parts I through VI, and Parts I through
III, of Appendix D and Appendix F, re-
spectively. The Enforcement Resolution
(Part VII of Appendix D and Part IV of
Appendix F) may only be completed by
the Service. The application must include
the Enforcement Resolution section. If
the application is acceptable as submitted,
the Service may execute the Enforcement
Resolution page to indicate its approval
of the submission. In such a situation, the
executed Enforcement Resolution will be
2008–35 I.R.B.488September 2, 2008

made part of the compliance statement for
the submission.
.02Streamlined Application proce-
dures. (1) If all of the Qualification
Failures the Plan Sponsor proposes to cor-
rect through VCP are described in section
11.02(3) and the Plan Sponsor proposes
to correct such failures using a correction
method provided in the Appendix F sched-
ules, then the submission should be made
pursuant to those streamlined procedures.
A Streamlined Application pursuant to
this section consists of the Appendix F, the
appropriate schedule(s) for the failure(s)
(as described in section 11.02(3)), and
all other documents required as indicated
on the applicable schedule. The Service
reserves the right to request additional
informationinconnectionwithitspro-
cessing of the Streamlined Application.
The failure to provide the information re-
quired in the format provided in Appendix
F may result in a delay in the processing
of the submission. If only certain failures
contained in the submission are described
in section 11.02(3) (or one or more of the
proposed corrections is not a method set
forth in the Appendix F schedules), then
thesubmissionmaybemadepursuantto
the Streamlined Application Procedures,
to the extent applicable, and using the gen-
eral rules of this section 11 to the extent
the Streamlined Application procedures
are not applicable.
(2) The Streamlined Application proce-
dure in Appendix F should not be used if
any of its provisions (including the fail-
ure, correction of thefailure, or the Plan
Sponsor’s representation) do not apply to
the Plan or Plan Sponsor. In such circum-
stance, a VCP submission should be made
in accordance with the provisions of sec-
tion 11.03 and Appendix D of this revenue
procedure.
(3) The failures eligible for the Stream-
lined Application procedure and the appli-
cable Appendix F schedules are described
as follows:
(a)Schedule 1: If the Plan Sponsor
failed to adopt timely (i) interim amend-
ments described in section 6.05(2) or
(ii) amendments required to reflect the
changed operation of the plan on account
of the Plan Sponsor’s decision to imple-
ment optional law changes described in
section 6.05(3)(b) of this revenue pro-
cedure, the Plan Sponsor should submit
Appendix F, Schedule 1.
(b)Schedule 2: If the Plan Sponsor
failedtotimelyadoptamendmentstocom-
ply with required legislative or regulatory
changes (other than those described in
(3)(a)), the Plan Sponsor should submit
Appendix F, Schedule 2.
(c)Schedule 3: If the Plan is a SEP or a
SARSEP and experienced one or more of
the failures shown on Appendix F, Sched-
ule 3, and if the Plan Sponsor proposes
to correct such failure(s) by using the
method(s) provided on such schedule, the
Plan Sponsor should submit Appendix F,
Schedule 3.
(d)Schedule 4: If the Plan is a SIMPLE
IRA and experienced one or more of the
failures shown on Appendix F, Schedule 4,
and if the Plan Sponsor proposes to correct
such failure(s) by using the method(s) pro-
vided on such schedule, the Plan Sponsor
should submit Appendix F, Schedule 4.
(e)Schedule 5: If the Plan Sponsor
failed to administer the loans in accor-
dance with the provisions of § 72(p)(2),
the failure solely relates to employees who
are neither key employees (as defined in
§ 416(i)(1)) nor self-employed individ-
uals (as defined in § 401(c)(1)(B)), the
Plan Sponsor should submit Appendix F,
Schedule 5.
(f)Schedule 6: If the Plan Sponsor
failed to satisfy the criteria for an em-
ployer to sponsor either a 403(b) Plan, or
a § 401(k) plan, the Plan Sponsor should
submit Appendix F, Schedule 6.
(g)Schedule 7: If the plan failed to dis-
tribute elective deferrals made in excess of
the § 402(g) limit, and the Plan Sponsor
proposes to correct such failure using the
method described in Appendix A, section
.04, the Plan Sponsor should submit Ap-
pendix F, Schedule 7.
(h)Schedule 8: If the plan failed to
make required minimum distributions
pursuant to § 401(a)(9), and proposes to
correct such failure using the method de-
scribedinAppendixA,section.06,then
the Plan Sponsor should submit Appendix
F, Schedule 8.
(i)Schedule 9: The Plan Sponsor
should submit Appendix F, Schedule 9 if
thePlanexperiencedoneormoreofthe
following failures:
1. § 401(a)(17) failure being corrected
using the method described in Appendix B,
section 2.07(1)(a);
2. Hardship distribution failure being
corrected using the method described in
Appendix B, section 2.07(2)(a);
3. Loans permitted in operation but
not permitted by Plan document being cor-
rected using the method described in Ap-
pendix B, section 2.07(2)(a); or
4. Early inclusion of otherwise eligi-
ble employee(s) being corrected using the
method described in Appendix B, section
2.07(3)(a).
(4) An applicant may prepare a submis-
sion that includes one or more of the sched-
ules in Appendix F. The inclusion of multi-
ple schedules set forth in Appendix F does
not affect the fee for the submission, as de-
termined in accordance with section 12.02.
.03Submission requirements.Iftheap-
plication includes failures and corrections
that are not addressed in Appendix F, then
the submission should be made in accor-
dance with the format provided in Appen-
dix D. The application should include the
following:
(1)Identifying information for the ap-
plicant. This would include, the name and
Employer Identification Number (EIN)
of the applicant. (Note: Social Security
Numbers are not acceptable. An appli-
cant can obtain an EIN by calling (800)
829–4933. An application for an EIN
can also be made online by accessing
www.irs.govandtyping“HowtoApply
for an EIN” in its search engine.)
(2)Identifying information for the
Plan. A statement identifying the type
of plan submitted (e.g., Qualified Plan,
403(b) Plan, SEP, or SIMPLE IRA Plan).
In addition, if the submission involves a
Qualified Plan, the statement should also
identify the type of Qualified Plan being
submitted (e.g., Defined Benefit, Money
Purchase, Profit Sharing, or Stock Bonus,
and 401(k) or ESOP).
(3)Plan Data. Information relating to
the number of plan participants determined
in accordance with section 12.07 and the
total amount of plan assets as of the most
recent 5500 filing (or, if not filed, the most
recent data available to the Plan Sponsor)
prior to the filing of this VCP submission.
(4)Type of Submission.Whereap-
plicable, the application should identify
whether the submission is a Group Sub-
mission, an Anonymous Submission, a
nonamender submission, a multiemployer
or multiple employer plan submission, or
an Orphan Plan submission.
September 2, 20084892008–35 I.R.B.

(5)Identification of Failures.Acom-
plete description of the failures, the years
in which the failures occurred, including
closed years (that is, years for which the
statutory period has expired), and the num-
ber of employees affected by each failure.
(6)Explanation. An explanation of
how and why the failures arose, including
a description of the administrative proce-
dures applicable to the failures in effect at
the time the failures occurred.
(7)Proposed Method of Correction.A
detailed description of the method for cor-
recting the failures that the Plan Spon-
sor has implemented or proposes to imple-
ment. Each step of the correction method
must be described in narrative form. The
description must include the specific in-
formation needed to support the suggested
correction method. This information in-
cludes, for example, the number of em-
ployees affected and the expected cost of
correction (both of which may be approxi-
mated if the exact number cannot be deter-
mined at the time of the request), the years
involved, and calculations or assumptions
the Plan Sponsor used to determine the
amounts needed for correction.
(8)Earnings or actuarial adjustments.
A description of the methodology that will
be used to calculate earnings or actuar-
ial adjustments on any corrective contribu-
tions or distributions (indicating the com-
putation periods and the basis for deter-
mining earnings or actuarial adjustments,
in accordance with section 6.02(4)).
(9)Computations. Specific calcula-
tions for each affected employee or a rep-
resentative sample of affected employees.
The sample calculations must be sufficient
to demonstrate each aspect of the correc-
tion method proposed. For example, if a
Plan Sponsor requests a compliance state-
ment with respect to a failure to satisfy the
contribution limits of § 415(c) and pro-
poses a correction method that involves
elective deferrals (whether matched or un-
matched) and matching contributions, the
Plan Sponsor must submit calculations il-
lustrating the correction method proposed
with respect to each type of contribution.
As another example, with respect to a fail-
ure to satisfy the ADP test in § 401(k)(3),
the Plan Sponsor must submit the ADP
test results both before the correction and
after the correction.
(10)Former employees or beneficia-
ries. The method that will be used to lo-
cate and notify former employees and ben-
eficiaries, or an affirmative statement that
no former employees or beneficiaries were
affected by the failures or will be affected
by the correction.
(11)Change in administrative proce-
dures. A description of the measures that
have been or will be implemented to en-
sure that the same failures will not recur.
(12)Request for excise relief (§§ 4972,
4973, 4974 or 4979) or income tax relief
under §72(t). If relief is sought, a specific
request for relief should be included in
the submission, along with explanations,
where applicable, supporting such request.
(13)Loan failures and income tax re-
porting relief. A specific request for re-
lief needs to be made if the applicant ei-
ther wants relief from reporting a corrected
participant loan as a deemed distribution or
wants to report the loan as a deemed distri-
bution in the year of correction instead of
the year in which the deemed distribution
occurred.
(14)Under Examination statement.A
statement that, to the best of the Plan Spon-
sor’s knowledge, neither the plan nor the
Plan Sponsor is Under Examination.
(15)Abusive tax avoidance transaction
statement. A statement that neither the
plan nor the Plan Sponsor has been a party
to an abusive tax avoidance transaction
(as defined in section 4.13(2)) or a brief
identification of any abusive tax avoidance
transaction to which the plan or the Plan
Sponsor has been a party.
(16)Transferred Assets.Ifasubmis-
sion includes a failure that relates to Trans-
ferred Assets and the failure occurred prior
to the transfer, a description of the transac-
tion (including the dates of the employer
change and the plan transfer).
(17)Unrelated determination letter ap-
plication requests. A statement (if applica-
ble) that the plan is currently being consid-
ered in a determination letter application
that is not related to the VCP application.
If the request for a determination letter is
made while a request for consideration un-
der VCP is pending, the Plan Sponsor must
update the VCP request to add this infor-
mation.
(18)403(b) Plans only. In the case of
a 403(b) Plan submission, a statement that
the Plan Sponsor has contacted all other
entities involved with the plan and has
been assured of cooperation in implement-
ing the applicable correction, to the extent
necessary. For example, if the plan’s fail-
ure is the failure to satisfy the requirements
of § 403(b)(1)(E) regarding elective defer-
rals, the Plan Sponsor must, prior to mak-
ing the VCP application, contact the in-
surance company or custodian with con-
trol over the plan’s assets to assure coop-
eration in effecting a distribution of the
excess deferrals and the earnings thereon.
An application under VCP must also con-
tain a statement as to the type of employer
(e.g., a tax-exempt organization described
in § 501(c)(3)) submitting the VCP appli-
cation.
(19)Group Submissions only.AGroup
Submission must be signed by the Eligi-
ble Organization or the Eligible Organi-
zation’s authorized representative and ac-
companied by a copy of the relevant por-
tions of the plan document(s). In addi-
tion, a Group Submission must include a
separate page for each affected Plan Spon-
sor that provides the Plan Sponsor’s name,
EIN, plan name, and failure(s).
(20)Orphan Plans only. If the plan is
an Orphan Plan, whether relief from the
VCP application fee or correction is being
requested, and the supporting rationale for
such relief.
.04Required documents. A VCP sub-
mission must be accompanied by the fol-
lowing documents:
(1)Plan document. A copy of the entire
plan document or the relevant portions of
the plan document. For example, in a case
involving an improper exclusion of eligi-
ble employees from a profit-sharing plan
with a cash or deferred arrangement, rele-
vant portions of the plan document include
the eligibility, allocation, and cash or de-
ferred arrangement provisions of the ba-
sic plan document (and the adoption agree-
ment, if applicable), along with applica-
ble definitions in the plan. If the plan is
a 403(b) Plan and a plan document is not
available, a written description of the plan
should be submitted, with sample salary
reduction agreements if relevant. In the
case of a SEP and a SIMPLE IRA Plan, the
entire plan document should be submitted.
(2)Determination letter application.In
any case in which correction of a Qualifi-
cation Failure is made by plan amendment,
as permitted under section 4.05, other than
the adoption of an amendment designated
by the Service as a model amendment or
the adoption of a prototype or volume sub-
mitter plan for which the Plan Sponsor has
2008–35 I.R.B.490September 2, 2008

reliance on the plan’s opinion or advisory
letter as provided in Rev. Proc. 2008–6,
2008–1 I.R.B. 192, and the Plan Spon-
sor is submitting a determination letter re-
quest as permitted under section 6.05, the
Plan Sponsor must submit a copy of the
plan document in restated form, the appro-
priate application form (i.e., Form 5300,
5307 or 5310), the appropriate user fee
concurrently and to the same address as the
VCP submission, and the most recent ver-
sion of the Form 8717,User Fee for Em-
ployee Plan Determination, Opinion, and
Advisory Letter Request. Pursuant to sec-
tion 12.04 of Rev. Proc. 2007–44, ef-
fective as of July 9, 2007, Form 6406,
Short Form Application for Determination
for Minor Amendment of Employee Benefit
Plan,maynotbeusedtoapplyforadeter-
mination letter. An application submitted
with this form will no longer be accepted
by the Service. The user fee for the deter-
mination letter application and the fee for
the VCP submission must be submitted on
separate checks made payable to the U.S.
Treasury. See section 11.13 for the VCP
mailing address.
.05Date fee due generally. Except as
provided in sections 11.06 and 12.02(4),
the VCP fee under section 12 and, if ap-
plicable, the determination letter user fee
must be included with the submission. The
VCP fee and the determination letter user
fee must be submitted on separate checks
made payable to the U.S. Treasury. If
the appropriate fees are not included in
the submission, the submission will be re-
turned.
.06Additional fee due for SEPs,
SIMPLE IRA Plans, and Group
Submissions. In the case of a SEP,
a SIMPLE IRA Plan, or a Group
Submission, the initial fee described
in section 12.02, 12.04, or 12.05 must
be included in the submission and any
additional fee is due at the time the
compliance statement is signed by the
Plan Sponsor and returned to the Service,
or when agreement has been reached
between the Service and the Plan Sponsor
regarding correction of the failure(s).
.07Signed submission. The submission
must be signed by the Plan Sponsor or the
Plan Sponsor’s authorized representative.
.08Power of attorney requirements.To
sign the submission or to appear before
the Service in connection with the sub-
mission, the Plan Sponsor’s representa-
tive must comply with the requirements of
section 9.02(11) and (12) of Rev. Proc.
2008–4, 2008–1 I.R.B. 121, and submit
Form 2848,Power of Attorney and Dec-
laration of Representative. A Form 2848
that designates a representative not quali-
fied to sign Part II of the Form 2848,e.g.,
an unenrolled return preparer, will not be
accepted. A Plan Sponsor may authorize
an individual, such as an unenrolled return
preparer, to inspect or receive confiden-
tial information using Form 8821,Tax In-
formation Authorization. (See Form 8821
and Instructions.) However, see section
10.10 for special rules relating to Anony-
mous Submissions.
.09Penalty of perjury statement.The
following declaration must accompany
a request and any factual information or
change in the submission at a later time:
“Under penalties of perjury, I declare
that I have examined this submission,
including accompanying documents,
and, to the best of my knowledge and
belief, the facts presented in support
of this submission are true, correct,
and complete.”The declaration must be
signed by the Plan Sponsor, not the Plan
Sponsor’s representative.
.10Checklist. The Service will be able
to respond more quickly to a VCP request
if the request is carefully prepared and
complete. The checklist in Appendix C is
designed to assist Plan Sponsors and their
representatives in preparing a submission
that contains the information and docu-
ments required under this revenue proce-
dure. Except as otherwise provided in
the checklist, the checklist in Appendix C
must be completed, signed, and dated by
the Plan Sponsor or the Plan Sponsor’s rep-
resentative. A photocopy of this checklist
may be used.
.11Designation. The letter to the Ser-
vice should indicate in the upper right hand
corner of the letter the type of plan submit-
ted under VCP–a Qualified Plan, 403(b)
Plan, SEP, or SIMPLE IRA Plan. In addi-
tion, if the submission is a Group Submis-
sion, an Anonymous Submission, a non-
amender submission, a multiemployer or
multiple employer plan submission, or an
Orphan Plan submission, the letter should
so indicate.
.12Acknowledgement letter.TheSer-
vice will acknowledge receipt of a VCP
submission if the Plan Sponsor or the Plan
Sponsor’s representative completes the
Acknowledgement Form in Appendix E
and includes it in the submission. A sepa-
rate Appendix E Acknowledgement Form
should be included for each plan submit-
ted. A photocopy of Appendix E may be
used.
.13VCP mailing address.AllVCP
submissions and accompanying determi-
nation applications, if applicable, should
be mailed to:
Internal Revenue Service
Attention: SE:T:EP:RA:VC
P.O. Box 27063
Washington, D.C. 20038–7063
.14Maintenance of copies of submis-
sions. Plan Sponsors and their represen-
tatives should maintain copies of all cor-
respondence submitted to the Service with
respect to their VCP requests.
.15Assembling the submission.The
Service will be able to process a submis-
sion more quickly if the submission pack-
age contains all of the items required by the
Appendix C checklist and is assembled in
the following order:
1. If applicable, Form 8717,User Fee
for Employee Plan Determination, Opin-
ion, and Advisory Letter Request,andthe
check for the determination letter user fee
made payable to the U.S. Treasury.
2. Determination letter application (i.e.,
Form 5300, 5307, or 5310), if applicable.
3. Completed and signed Appendix C
checklist.
4. A submission signed by the Plan
Sponsor or Plan Sponsor’s authorized
representative, with a check for the VCP
fee made payable to the U.S. Treasury
attached to the front of the submission
letter. The submission should include the
following information (see section 11.15,
paragraph 5, for instructions relating to
applications submitted in the Appendix D
or Appendix F format):
•Type of plan (or group of plans) being
submitted.
•Description of the failures (if the fail-
ures relate to Transferred Assets, in-
clude a description of the related em-
ployer transaction).
•An explanation of how and why the
failures arose.
•Description of the method for cor-
recting failures, including earnings
methodology (if applicable) and sup-
porting computations (if applicable).
September 2, 20084912008–35 I.R.B.

•Description of the method used to lo-
cate or notify former employees or
beneficiaries affected by the failures
or corrections. If no former employ-
ees or beneficiaries are affected by the
failures or corrections, then the letter
should affirmatively state that position
when addressing this issue.
•Description of the administrative pro-
cedures that have been or will be im-
plemented to ensure that the failures do
not recur.
•Whether a request is being made in or-
der for participant loans corrected un-
der this revenue procedure to not be
treated as deemed distributions under
§72(p) and the supporting rationale for
such request. Alternatively, whether a
request is being made for participant
loans corrected underthis revenue pro-
cedure to be treated as deemed distri-
butions under §72(p) in the year of cor-
rection.
•Whether relief is being requested from
imposition of the excise taxes under
§§ 4972, 4973, 4974, or 4979, or
the 10% additional income tax under
§ 72(t), and the supporting rationale
for such relief.
•IftheplanisanOrphanPlan,whether
relief from the VCP application fee is
being requested, and the supporting ra-
tionale for such relief.
•A statement specifying whether the
plan is being considered in an unre-
lated determination letter application
(if applicable).
•A statement that the plan is not Under
Examination.
•A statement that the Plan Sponsor is
not under an Exempt Organizations ex-
amination.
•A statement that neither the plan nor
the Plan Sponsor has been a party to an
abusive tax avoidance transaction (as
defined in section 4.13(2)) or a brief
identification of any abusive tax avoid-
ance transaction to which the plan or
the Plan Sponsor has been a party.
•Penalty of perjury statement.
5. If the VCP application is submitted
using either the Appendix F or the Appen-
dix D format, the application should in-
clude a completed Appendix F or Appen-
dix D, and any information/enclosures, in-
cluding any related schedules. In addition,
the application should include a separate
Enforcement Resolution page.
6. Appendix E acknowledgement letter.
7.Power of Attorney (Form 2848)
orTax Information Authorization(Form
8821), if applicable.
8. Copy of opinion or determination
letter (if applicable).
9. Relevant plan document language or
plan document (if applicable).
10. Any other items that may be rele-
vant to the submission.
SECTION 12. VCP FEES
.01VCP fees. The compliance fees for
all submissions under VCP are determined
under this section 12. All fees must be sub-
mitted by check made payable to the U.S.
Treasury and, except for the special fees
described in sections 12.04 and 12.05(2),
must be included with the initial submis-
sion.
.02VCP fee for Qualified Plans and
403(b) Plans. (1) Except as otherwise pro-
vided in this section 12, the compliance fee
for a submission under VCP for Qualified
Plans and 403(b) Plans (including Anony-
mous Submissions) is determined in accor-
dance with the following chart.
Number of Participants
Fee
20 or fewer
$750
21 to 50
$1,000
51 to 100
$2,500
101 to 500
$5,000
501 to 1,000
$8,000
1,001 to 5,000
$15,000
5,001 to 10,000
$20,000
Over 10,000
$25,000
(2) If (a) a VCP submission involves
the failure to satisfy the minimum distri-
bution requirements of § 401(a)(9) for 50
or fewer participants, (b) such failure is the
only failure of the submission, and (c) the
failure would result in the imposition of the
excise tax under § 4974, the compliance
fee is $500.
(3) If (a) a VCP submission involves the
failure of participant loans to comply with
the requirements of § 72(p)(2), (b) the fail-
ure does not affect more than 25% of the
Plan Sponsor’s participants in any of the
year(s) in which the failure occurred, and
(c) the failure is the only failure of the sub-
mission, the applicable fee for a VCP sub-
mission determined under the provisions
of section 12.02(1) is reduced by 50%.
(4) At the discretion of the Service, the
VCP fee may be waived in the case of a
terminating Orphan Plan. In such cases,
the submission must include a request for
a waiver of the VCP fee.
.03VCP fee for nonamender failures.
In general, the compliance fee for plans
with a nonamender failure, as described
in section 6.05, is determined in accor-
dance with the chart in section 12.02(1).
The applicable fee for a VCP submission
that contains only nonamender failures is
reduced by 50% if it is submitted within
a one-year period following the expira-
tion of the plan’s remedial amendment
period for complying with such changes.
Notwithstanding the above, the compli-
ance fee for a submission that contains
only a failure to adopt timely interim
amendments or amendments required to
2008–35 I.R.B.492September 2, 2008

implement optional law changes, as de-
scribed in section 6.05(3)(a), is $375.
.04VCP fee for Group Submission.The
compliance fee for a Group Submission is
based on the number of plans affected by
the failure as described in the compliance
statement. With respect to pre-approved
plans, the fee is determined based on the
number of basic plan documents submit-
ted, irrespective of the number of accom-
panying adoption agreements. The initial
fee for the first 20 plans is $10,000. An
additional fee is due equal to the prod-
uct of the number of plans in excess of
20 multiplied by $250. The maximum
compliance fee for a Group Submission is
$50,000. If additional plans are added fol-
lowing the Group Submission, the addi-
tional fee is paid subject to the $50,000
maximum compliance fee. If more than
one master or prototype plan is submit-
ted as a Group Submission, each master
or prototype plan is considered a sepa-
rate Group Submission for purposes of the
compliance fee.
.05VCP fee for SEPs and SIMPLE IRA
Plans. (1) In general, the compliance fee
foraSEPoraSIMPLEIRAPlansubmis-
sion (including an Anonymous Submis-
sion) is $250. Notwithstanding the preced-
ing sentence, the Service reserves the right
to impose the fee schedule under section
12.02 or section 12.06 in appropriate cir-
cumstances.
(2) In any case in which a SEP or
SIMPLEIRAPlancorrectionisnot
similar to a correction for a similar
Qualification Failure (as provided under
section 6.10(1)), the Service may impose
an additional fee. If the failure involves
an Excess Amount to a SEP or a SIMPLE
IRA Plan and the Plan Sponsor retains the
Excess Amount in the SEP or SIMPLE
IRA Plan, a fee equal to at least 10% of the
Excess Amount excluding earnings will
be imposed. This is in addition to the SEP
or SIMPLE IRA Plan compliance fee set
forthinsection12.05(1).
.06VCP fee for egregious or intentional
failures. Notwithstanding the preceding
provisions of this section 12, in cases in-
volving failures that are egregious (as de-
scribed in section 4.11) or where the fail-
ure is not inadvertent (i.e.,isnotaresultof
an oversight or mistake), the compliance
fee for Qualified Plans, 403(b) Plans, SEPs
and SIMPLE IRA Plans is the greater of
(1) the fee that would be determined un-
der the preceding provisions of this sec-
tion 12, or (2) an amount equal to a negoti-
ated percentage of the Maximum Payment
Amount, with such percentage not to ex-
ceed 40%.
.07Establishing the number of plan
participants. Compliance fees under this
section 12 are determined based on the
total number of plan participants. For a
description of participant, see the Instruc-
tions for Form 5500, lines 6 and 7. For
new plans and ongoing plans, the number
of plan participants is determined from
the most recently filed Form 5500 series.
Thus, with respect to the 2007 Form 5500,
the Plan Sponsor would use the number
shown in item 7f (or the equivalent item
on the Form 5500 C/R or EZ) to establish
the total number of plan participants. In
the case of a terminated plan, the Form
5500 used to determine the number of
plan participants must be the one filed for
the plan year prior to the plan year for
which the Final Form 5500 return was
filed. If the submission involves a plan
with Transferred Assets and no new in-
cidents of the failure occurred after the
end of the second plan year that begins
after the corporate merger, acquisition,
or other similar employer transaction, the
Plan Sponsor may calculate the number of
plan participants based on the Form 5500
information that would have been filed
by the Plan Sponsor for the plan year that
includes the employer transaction if the
Transferred Assets were maintained as a
separate plan.
PART VI. CORRECTION ON AUDIT
(AUDIT CAP)
SECTION 13. DESCRIPTION OF
AUDIT CAP
.01Audit CAP requirements.IftheSer-
vice identifies a Qualification or 403(b)
Failure (other than a failure that has been
corrected in accordance with SCP or VCP)
upon an Employee Plans or Exempt Orga-
nizations examination of a Qualified Plan,
403(b) Plan, SEP, or SIMPLE IRA Plan,
the requirements of this section 13 are sat-
isfied with respect to the failure if the Plan
Sponsor corrects the failure, pays a sanc-
tion in accordance with section 14, satis-
fies any additional requirements of section
13.03, and enters into a closing agreement
with the Service. This section 13 also ap-
plies if the Service identifies a participant
loan that did not comply with the require-
ments of § 72(p)(2) (other than a loan fail-
ure that is corrected in accordance with
SCP or VCP) upon an Employee Plans
or Exempt Organizations examination of a
Qualified Plan or 403(b) Plan.
.02Payment of sanction. Payment of
the sanction under section 14 generally is
required at the time the closing agreement
is signed. All sanction amounts should be
submitted by certified check or cashier’s
check made payable to the U.S. Treasury.
.03Additional requirements. Depend-
ing on the nature of the failure, the Ser-
vice will discuss the appropriateness of
the plan’s existing administrative proce-
dures with the Plan Sponsor. If existing
administrative procedures are inadequate
for operating the plan in conformance with
the applicable requirements of the Code,
the closing agreement may be conditioned
upon the implementation of stated proce-
dures. In addition, for Qualified Plans,
pursuant to section 6.05, the Plan Sponsor
may be required to obtain a Favorable Let-
ter before the closing agreement is signed.
If a Favorable Letter is required, the Plan
Sponsor is required to pay the applicable
user fee for obtaining the letter.
.04Failure to reach resolution.Ifthe
Service and the Plan Sponsor cannot reach
an agreement with respect to the correc-
tion of the failure(s) or the amount of the
sanction, the plan will be disqualified or, in
the case of a 403(b) Plan, SEP, or SIMPLE
IRA Plan will not have reliance on this rev-
enue procedure.
.05Effect of closing agreement.Aclos-
ing agreement constitutes an agreement
between the Service and the Plan Spon-
sor that is binding with respect to the tax
matters identified therein for the periods
specified.
.06Other procedural rules. The proce-
dural rules for Audit CAP are set forth in
Internal Revenue Manual (“IRM”) 7.2.2,
EPCRS.
SECTION 14. AUDIT CAP SANCTION
.01Determination of sanction.Ex-
cept as otherwise provided in section
14.04, the sanction under Audit CAP is
a negotiated percentage of the Maximum
Payment Amount. Sanctions will not be
excessive and will bear a reasonable rela-
tionship to the nature, extent, and severity
September 2, 20084932008–35 I.R.B.

of the failures, based on the factors be-
low. In the case of any participant loan
that did not comply with the requirements
of § 72(p)(2), the Maximum Payment
Amount will include the tax the Service
could collect as a result of the loan not
being excluded from gross income under
§ 72(p)(2).
.02Factors considered. Factors in-
clude: (1) the steps taken by the Plan
Sponsor to ensure that the plan had no fail-
ures; (2) the steps taken to identify failures
that may have occurred; (3) the extent to
which correction had progressed before
the examination was initiated, including
full correction; (4) the number and type of
employees affected by the failure; (5) the
number of nonhighly compensated em-
ployees who would be adversely affected
if the plan were not treated as qualified or
as satisfying the requirements of § 403(b),
§ 408(k) or § 408(p); (6) whether the fail-
ure is a failure to satisfy the requirements
of § 401(a)(4), § 401(a)(26), or § 410(b),
either directly or through § 403(b)(12); (7)
whether the failure is solely an Employer
Eligibility Failure; (8) the period over
which the failure(s) occurred (for example,
the time that has elapsed since the end of
the applicable remedial amendment period
under § 401(b) for a Plan Document Fail-
ure); and (9) the reason for the failure(s)
(for example, data errors such as errors in
transcription of data, the transposition of
numbers, or minor arithmetic errors). Fac-
tors relating only to Qualified Plans also
include: (1) whether the plan is the subject
of a Favorable Letter; and (2) whether
the failure(s) were discovered during the
determination letter process. If one of the
failures discovered during an Employee
Plans examination includes the failure to
amend the plan timely for relevant legisla-
tion, it is expected that the sanction will be
greater than the applicable fee described in
section 14.04. An additional factor taken
into account with respect to a participant
loan that did not comply with the require-
ments of § 72(p)(2) is the extent to which
the failure is a result solely of action (or
inaction) of the employer or its agents (or
to the extent to which the failure is a result
of the employee’s or beneficiary’s actions
or inaction).
.03Transferred Assets. If the exam-
ination involves a plan with Transferred
Assets and the Service determines that no
new incidents of the failures that relate to
the Transferred Assets occur after the end
of the second plan year that begins after
the corporate merger, acquisition, or other
similar employer transaction, the sanction
under Audit CAP will not exceed the sanc-
tion that would apply if the Transferred As-
sets were maintained as a separate plan.
.04Fee for nonamenders discovered
during the determination letter application
process not related to a VCP submission.
(1) The compliance fee for nonamenders
(as defined in section 6.05(2)(a)(ii)) not
voluntarily identified by the Plan Sponsor,
but instead discovered by the Service in
connection with the determination letter
application process as described in section
5.03(3) is determined in accordance with
the chart below. This fee schedule applies
if the only failure in the submission is the
nonamender failure.
(2) The acronyms listed in the chart re-
fer to the following laws:
(a) Employee Retirement Income Se-
curity Act of 1974 (ERISA),
(b) Tax Equity and Fiscal Responsibil-
ity Act of 1982 (TEFRA); Deficit Reduc-
tion Act of 1984 (DEFRA); and Retire-
ment Equity Act of 1984 (REA) together
(T/D/R),
(c) Tax Reform Act of 1986 (TRA
’86),
(d) Unemployment Compensation Act
of 1992 (UCA); Omnibus Budget and Rec-
onciliation Act of 1993 (OBRA ’93),
(e) The Uruguay Round Agreements
Act; the Uniformed Services Employment
and Reemployment Rights Act of 1994;
the Small Business Job Protection Act of
1996; the Taxpayer Relief Act of 1997;
the Internal Revenue Service Restructur-
ing and Reform Act of 1998; and the Com-
munity Renewal Tax Relief Act of 2000
(collectively known as “GUST”),
(f) Final and temporary regulations
under § 401(a)(9), 74 FR 18987, published
on April 17, 2002 (“401(a)(9) Regs”),
(g) The Economic Growth and
Tax Relief Reconciliation Act of 2001
(“EGTRRA”).
Number of
Participants
EGTRRA/
subsequent
legislation
GUST/
401(a)(9) Regs
UCA/
OBRA ’93TRA ’86T/D/RERISA
20 or fewer
$ 2,500$ 3,000$ 3,500$ 4,000$ 4,500$ 5,000
21–50
$ 5,000$ 6,000$ 7,000$ 8,000$ 9,000$10,000
51–100
$ 7,500$ 9,000$10,500$12,000$13,500$15,000
101–500
$12,500$15,000$17,500$20,000$22,500$25,000
501–1,000
$17,500$21,000$24,500$28,000$31,500$35,000
1,001–5,000
$25,000$30,000$35,000$40,000$45,000$50,000
5,001 – 10,000
$32,500$39,000$45,500$52,000$58,500$65,000
Over 10,000
$40,000$48,000$56,000$64,000$72,000$80,000
2008–35 I.R.B.494September 2, 2008

PART VII. EFFECT ON OTHER
DOCUMENTS; EFFECTIVE DATE;
PAPERWORK REDUCTION ACT
SECTION 15. EFFECT ON OTHER
DOCUMENTS
.01Rev. Proc. 2006–27 modified and
superseded. Rev. Proc. 2006–27 is modi-
fied and superseded by this revenue proce-
dure.
.02Section 3 of Rev. Proc. 2007–49
modified and superseded. Section 3 of
Rev. Proc. 2007–49, 2007–30 I.R.B. 141,
is modified and superseded by this revenue
procedure.
SECTION 16. EFFECTIVE DATE
This revenue procedure is generally ef-
fective January 1, 2009. However, Plan
Sponsors are permitted, at their option, to
apply the provisions of this revenue proce-
dure on or after September 2, 2008.
SECTION 17. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–1673.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collection of information in
this revenue procedure is in sections
4.05, 6.02(5)(d), 6.05, 6.09(5), 6.09(6),
10.01, 10.02, 10.05–10.07, 10.10–10.12,
11.02–11.05, 11.07–11.15, 13.01, section
2.01–2.07 of Appendix B, Appendix C,
Appendix D, Appendix E, and Appendix
F. This information is required to enable
the Commissioner, Tax Exempt and Gov-
ernment Entities Division of the Internal
Revenue Service to make determinations
regarding the issuance of various types of
closing agreements and compliance state-
ments. This information will be used to
issue closing agreements and compliance
statements to allow individual plans to
continue to maintain their tax qualified
and tax-deferred status. As a result, fa-
vorable tax treatment of the benefits of
the eligible employees is retained. The
likely respondents are individuals, state
or local governments, businesses or other
for-profit institutions, nonprofit institu-
tions, and small businesses or organiza-
tions.
The estimated total annual reporting or
recordkeeping burden is 76,222 hours.
The estimated annual burden per re-
spondent/recordkeeper varies from .5 to
45.5 hours, depending on individual cir-
cumstances, with an estimated average of
20.4 hours. The estimated number of re-
spondents or recordkeepers is 3,745.
The estimated frequency of responses is
occasional.
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.
DRAFTING INFORMATION
The principal authors of this rev-
enue procedure are Avaneesh Bhagat
and Maxine Terry of the Employee
Plans, Tax Exempt and Government
Entities Division. For further information
regarding this revenue procedure,
please contact the Employee Plans’
taxpayer assistance telephone service
at 877–829–5500 (a toll-free number)
between the hours of 8:30 a.m. and
4:30 p.m.Eastern Time, Monday
through Friday.Alternatively, you
can direct your questions to either
Mr. BhagatorMs. Terrybysending
a question via electronic mail to
RetirementPlanQuestions@irs.gov.
APPENDIX A
OPERATIONAL FAILURES AND
CORRECTION METHODS
.01General rule. This appendix sets
forth Operational Failures and Correction
Methods relating to Qualified Plans. In
each case, the method described corrects
the Operational Failure identified in the
headings below. Corrective allocations
and distributions should reflect earnings
and actuarial adjustments in accordance
with section 6.02(4) of this revenue pro-
cedure. The correction methods in this
appendix are acceptable to correct Qualifi-
cation Failures under VCP, and to correct
Qualification Failures under SCP that
occurred notwithstanding that the plan
has established practices and procedures
reasonably designed to promote and facil-
itate overall compliance with the Code, as
provided in section 4.04 of this revenue
procedure. To the extent a failure listed in
this appendix could occur under a 403(b)
Plan, a SEP, or a SIMPLE IRA Plan, the
correction method listed for such failure
may similarly be used to correct the fail-
ure.
.02Failuretoproperlyprovidethemin-
imum top-heavy benefit under § 416 to
non-key employees. In a defined contribu-
tion plan, the permitted correction method
is to properly contribute and allocate the
required top-heavy minimums to the plan
in the manner provided for in the plan
on behalf of the non-key employees (and
any other employees required to receive
top-heavy allocations under the plan). In
a defined benefit plan, the minimum re-
quired benefit must be accrued in the man-
ner provided in the plan.
.03Failure to satisfy the ADP test set
forth in § 401(k)(3), the ACP test set forth
in § 401(m)(2), or, for plan years begin-
ning on or before December 31, 2001, the
multiple use test of § 401(m)(9). The per-
mitted correction method is to make qual-
ified nonelective contributions (QNECs)
(as defined in §1.401(k)–6) on behalf of
the nonhighly compensated employees to
the extent necessary to raise the actual
deferral percentage or actual contribution
percentage of the nonhighly compensated
employees to the percentage needed to
pass the test or tests. The contributions
must be made on behalf of all eligible
nonhighly compensated employees (to the
extent permitted under § 415) and must
be the same percentage of compensation.
QNECs contributed to satisfy the ADP
test need not be taken into account for
determining additional contributions (e.g.,
a matching contribution), if any. For pur-
poses of this section .03, employees who
would have received a matching contri-
bution had they madeelective deferrals
must be counted as eligible employees
for the ACP test, and the plan must sat-
isfy the ACP test. Under this correction
method, a plan may not be treated as two
separate plans, one covering otherwise
September 2, 20084952008–35 I.R.B.

excludable employees and the other cov-
ering all other employees (as permitted in
§ 1.410(b)–6(b)(3)), in order to reduce the
number of employees eligible to receive
QNECs. Likewise, under this correction
method, the plan may not be restructured
into component plans in order to reduce
the number of employees eligible to re-
ceive QNECs.
.04Failure to distribute elective defer-
rals in excess of the § 402(g) limit (in con-
travention of § 401(a)(30)). The permit-
ted correction method is to distribute the
excess deferral to the employee and to re-
port the amount as taxable in the year of
deferral and in the year distributed. The
inclusion of the deferral and the distribu-
tion (for both the excess deferral and earn-
ings) in gross income applies whether or
not any portion of the excess deferral is
attributable to a designated Roth contri-
bution (see § 402A(d)(3)). In accordance
with § 1.402(g)–1(e)(1)(ii), a distribution
to a highly compensated employee is in-
cluded in the ADP test; and a distribution
to a nonhighly compensated employee is
not included in the ADP test.
.05Exclusion of an eligible employee
from all contributions or accruals under
theplanforoneormoreplanyears.(1)
Improperly excluded employees: employer
provided contributions or benefits.For
plans with employer provided contribu-
tions or benefits (which are neither elective
deferrals under a qualified cash or deferred
arrangement under § 401(k) nor matching
or after-tax employee contributions that
are subject to § 401(m)), the permitted cor-
rection method is to make a contribution
to the plan on behalf of the employees ex-
cluded from a defined contribution plan or
to provide benefit accruals for the employ-
ees excluded from a defined benefit plan.
(2)Improperly excluded employees:
contributions subject to § 401(k) or
§401(m). (a) For plans providing bene-
fits subject to § 401(k) or § 401(m), the
corrective contribution for an improperly
excluded employee is described in the fol-
lowing paragraphs of this section .05(2).
(See Examples 3 through 12 of Appendix
B.)
(b) If the employee was not provided
the opportunity to elect and make elec-
tive deferrals (other than designated Roth
contributions) to a § 401(k) plan that does
not satisfy § 401(k)(3) by applying the
safe harbor contribution requirements of
§ 401(k)(12) or § 401(k)(13), the em-
ployer must make a QNEC to the plan on
behalf of the employee that replaces the
“missed deferral opportunity.” The missed
deferral opportunity is equal to 50% of
the employee’s “missed deferral.” The
missed deferral is determined by multi-
plying the actual deferral percentage for
the year of exclusion (whether or not the
plan is using current or prior year test-
ing) for the employee’s group in the plan
(either highly compensated or nonhighly
compensated) by the employee’s com-
pensation for that year. The employee’s
missed deferral amount is reduced further
to the extent necessary to ensure that the
missed deferral does not exceed applicable
plan limits, including the annual defer-
ral limit under § 402(g) for the calendar
year in which the failure occurred. Under
this correction method, a plan may not be
treated as two separate plans, one cover-
ing otherwise excludable employees and
the other covering all other employees (as
permitted in § 1.410(b)–6(b)(3)) in order
to reduce the applicable ADP, the corre-
sponding missed deferral, and the required
QNEC. Likewise, restructuring the plan
into component plans is not permitted in
order to reduce the applicable ADP, the
corresponding missed deferral, and the re-
quired QNEC. The QNEC required for the
employee for the missed deferral opportu-
nity for the year of exclusion is adjusted
for earnings to the date the corrective
QNEC is made on behalf of the affected
employee.
(c) If the employee should have been
eligible for but did not receive an alloca-
tion of employer matching contributions
under a non-safe harbor plan because he
or she was not given the opportunity to
make elective deferrals, the employer
should make a QNEC on behalf of the
affected employee. The QNEC is equal to
the matching contribution the employee
would have received had the employee
made a deferral equal to the missed de-
ferral determined under section .05(2)(b).
The QNEC must be adjusted for earnings
to the date the corrective QNEC is made
on behalf of the affected employee.
(d) If the employee was not provided
the opportunity to elect and make elec-
tive deferrals (other than designated Roth
contributions) to a safe harbor § 401(k)
plan that uses a rate of matching contri-
butions to satisfy the safe harbor require-
ments of § 401(k)(12), then the missed de-
ferral is deemed equal to the greater of 3%
of compensation or the maximum defer-
ral percentage for which the employer pro-
vides a matching contribution rate that is
at least as favorable as 100% of the elec-
tive deferral made by the employee. This
estimate of the missed deferral replaces
the estimate based on the ADP test in a
traditional § 401(k) plan. The required
QNEC on behalf of the excluded employee
is equal to (i) the missed deferral oppor-
tunity, which is an amount equal to 50%
of the missed deferral, plus (ii) the match-
ing contribution that would apply based on
the missed deferral. If an employee was
not provided the opportunity to elect and
make elective deferrals to a safe harbor
§ 401(k) plan that uses nonelective contri-
butions to satisfy the safe harbor require-
ments of § 401(k)(12), then the missed de-
ferral is deemed equal to 3% of compen-
sation. The required QNEC on behalf of
the excluded employee is equal to (i) 50%
of the missed deferral, plus (ii) the non-
elective contribution required to be made
on behalf of the employee. The QNEC
required to replace the employee’s missed
deferral opportunity and the corresponding
matching or nonelective contribution is ad-
justed for earnings to the date the correc-
tive QNEC is made on behalf of the af-
fected employee.
(e) If the employee should have been el-
igible to elect and make after-tax employee
contributions (other than designated Roth
contributions), the employer must make a
QNEC to the plan on behalf of the em-
ployee that is equal to the “missed op-
portunity for making after-tax employee
contributions.” The missed opportunity for
making after-tax employee contributions
is equal to 40% of the employee’s “missed
after-tax contributions.” The employee’s
missed after-tax contributions are equal to
the actual contribution percentage (ACP)
for the employee’s group (either highly
compensated or nonhighly compensated)
times the employee’s compensation, but
with the resulting amount not to exceed ap-
plicable plan limits. If the ACP consists of
both matching and after-tax employee con-
tributions, then, in lieu of basing the em-
ployee’s missed after-tax employee con-
tributions on the ACP for the employee’s
group, the employer is permitted to deter-
mine separately the portion of the ACP that
is attributable to after-tax employee con-
2008–35 I.R.B.496September 2, 2008

tributions for the employee’s group (either
highly compensated or nonhighly compen-
sated), multiplied by the employee’s com-
pensation for the year of exclusion. The
QNEC must be adjusted for earnings to the
date the corrective QNEC is made on be-
half of the affected employee.
(f) If the employee was improperly
excluded from an allocation of employer
matching contributions because he or she
was not given the opportunity to make
after-tax employee contributions (other
than designated Roth contributions), the
employer must make a QNEC on behalf
of the affected employee. The QNEC is
equal to the matching contribution the
employee would have received had the
employee made an after-tax employee
contribution equal to the missed after-tax
employee contribution determined under
section .05(2)(e). The QNEC must be
adjusted for earnings to the date the cor-
rective QNEC is made on behalf of the
affected employee.
(g) The methods for correcting the fail-
uresdescribedinthissection.05(2)donot
apply until after thecorrection of other
qualification failures. Thus, for example,
if, in addition to the failure of excluding
an eligible employee, the plan also failed
the ADP or ACP test, the correction meth-
ods described in section .05(2)(b) through
(f) cannot be used until after correction of
the ADP or ACP test failures. For pur-
poses of this section .05(2), in order to de-
termine whether the plan passed the ADP
or ACP test, the plan may rely on a test per-
formed with respect to those eligible em-
ployees who were provided with the op-
portunity to make elective deferrals or af-
ter-tax employee contributions and receive
an allocation of employer matching con-
tributions, in accordance with the terms of
the plan and may disregard the employees
who were improperly excluded.
(3)Improperly excluded employees:
designated Roth contributions.Forem-
ployees who were improperly excluded
from plans that (i) are subject to § 401(k)
(as described in section .05(2)) and (ii) pro-
vide for the optional treatment of elective
deferrals as designated Roth contributions,
the correction is the same as described un-
der section .05(2). Thus, for example, the
corrective employer contribution required
to replace the missed deferral opportunity
is made in accordance with the method
described in section .05(2)(b) in the case
of a § 401(k) plan that is not a safe harbor
§ 401(k) plan or .05(2)(d) in the case of
a safe harbor § 401(k) plan. However,
none of the corrective contributions made
by the employer may be treated as desig-
nated Roth contributions (and may not be
included in an employee’s gross income)
and thus may not be contributed or al-
located to a designated Roth account (as
described in § 402A(b)(2)). The corrective
contribution must be allocated to an ac-
count established for receiving a QNEC or
any other employer contribution in which
the employee is fully vested and subject
to the withdrawal restrictions that apply to
elective deferrals.
(4)Improperly excluded employees:
catch-up contributions only.(a)Correc-
tion for missed catch-up contributions.If
an eligible employee was not provided the
opportunity to elect and make catch-up
contributions to a § 401(k) plan, the em-
ployer must make a QNEC to the plan
on behalf of the employee that replaces
the “missed deferral opportunity” attrib-
utable to the failure to permit an eligible
employee to make a catch-up contribution
pursuant to § 414(v). The missed deferral
opportunity for catch-up contributions is
equal to 50% of the employee’s missed
deferral attributable to catch-up contribu-
tions. For this purpose, the missed deferral
attributable to catch-up contributions is
one half of the applicable catch-up con-
tribution limit for the year in which the
employee was improperly excluded. Thus,
for example if an eligible employee was
improperly precluded from electing and
making catch-up contributions in 2006,
the missed deferral attributable to catch-up
contributions is $2,500, which is one half
of $5,000, the 2006 catch-up contribution
limit for a § 401(k) plan. The eligible
employee’s missed deferral opportunity is
$1,250 (i.e., 50% of the missed deferral
attributable to catch-up contributions of
$2,500). The QNEC required to replace
the missed deferral opportunity for the
year of exclusion is adjusted for earnings
to the date the corrective QNEC is made
on behalf of the affected employee. For
purposes of this correction, an eligible
employee, pursuant to § 414(v)(5), refers
to any participant who (i) would have
attained age 50 by the end of the plan’s
taxable year and (ii) in the absence of the
plan’s catch-up provision, could not make
additional elective deferrals on account of
the plan or statutory limitations described
in § 414(v)(3) and § 1.414(v)–1(b)(1).
(b)Correction for missed matching
contributions. If an employee was pre-
cluded from making catch-up contribu-
tions under this section .05(4), the Plan
Sponsor should ascertain whether the af-
fected employee would have been entitled
to an additional matching contribution
on account of the missed deferral. If the
employee would have been entitled to
an additional matching contribution, then
the employer must make a QNEC for the
matching contribution on behalf of the
affected employee. The QNEC is equal
to the additional matching contribution
the employee would have received had
the employee made a deferral equal to the
missed deferral determined under para-
graph (a) of this section .05(4). The QNEC
must be adjusted for earnings to the date
the corrective QNEC is made on behalf
of the affected employee. If in addition to
the failure to provide matching contribu-
tions under this section .05(4)(b) , the plan
also failed the ACP test, the correction
methods described in this section cannot
be used until after correction of the ACP
test failure. For purposes of this section,
in order to determine whether the plan
passed the ACP test the plan may rely on
a test performed with respect to those eli-
gible employees who were provided with
the opportunity to make elective deferrals
or after-tax employee contributions and
receive an allocation of employer match-
ing contributions, in accordance with the
terms of the plan and may disregard any
employer matching contribution that was
not made on account of the plan’s failure
to provide an eligible employee with the
opportunity to make a catch up contribu-
tion.
(5)Failure to implement an employee
election.(a)Missed opportunity for elec-
tive deferrals. For eligible employees who
filed elections to make elective deferrals
under the Plan which the Plan Sponsor
failed to implement on a timely basis, the
Plan Sponsor must make a QNEC to the
plan on behalf of the employee to replace
the “missed deferral opportunity.” The
missed deferral opportunity is equal to
50% of the employee’s “missed defer-
ral.” The missed deferral is determined
by multiplying the employee’s elected
deferral percentage by the employee’s
compensation. If the employee elected
September 2, 20084972008–35 I.R.B.

a dollar amount for an elective deferral,
the missed deferral would be the specified
dollar amount. The employee’s missed
deferral amount is reduced further to the
extent necessary to ensure that the missed
deferral does not exceed applicable plan
limits, including the annual deferral limit
under § 402(g) for the calendar year in
which the failure occurred.
(b)Missed opportunity for after-tax
employee contributions. For eligible
employees who filed elections to make
after-tax employee contributions under
the Plan which the Plan Sponsor failed
to implement on a timely basis, the Plan
Sponsor must make a QNEC to the plan on
behalf of the employee to replace the em-
ployee’s missed opportunity for after-tax
employee contributions. The missed op-
portunity for making after-tax employee
contributions is equal to 40% of the em-
ployee’s “missed after-tax contributions.”
The missed after-tax employee contri-
bution is determined by multiplying the
employee’s elected after-tax employee
contribution percentage by the employee’s
compensation.
(c)Missed opportunity affecting match-
ing contributions. In the event of failure
described in section (a) or (b) of this sec-
tion .05(5), if the employee would have
been entitled to an additional matching
contribution had either the missed de-
ferral or after-tax employee contribution
been made, then the employer must make
a QNEC for the matching contribution
on behalf of the affected employee. The
QNEC is equal to the matching contribu-
tion the employee would have received
had the employee made a deferral equal to
the missed deferral determined under this
paragraph. The QNEC must be adjusted
for earnings to the date the corrective
QNEC is made on behalf of the affected
employee.
(d)Coordination with correction of
other Qualification Failures.Themethod
for correcting the failures described in
this section .05(5) does not apply until
after the correction of other qualification
failures. Thus, for example, if in addition
to the failure to implement an employee’s
election, the plan also failed the ADP
test or ACP test, the correction methods
describedinsection.05(5)(a),(b)or(c)
cannot be used until after correction of the
ADP or ACP test failures. For purposes
of this section .05(5), in order to deter-
mine whether the plan passed the ADP
or ACP test the plan may rely on a test
performed with respect to those eligible
employees who were not impacted by the
Plan Sponsor’s failure to implement em-
ployee elections and received allocations
of employer matching contributions, in
accordance with the terms of the plan and
may disregard employees whose elections
were not properly implemented.
.06Failure to timely pay the minimum
distribution required under § 401(a)(9).In
a defined contribution plan, the permitted
correction method is to distribute the re-
quired minimum distributions (with earn-
ings from the date of the failure to the
date of the distribution). The amount re-
quired to be distributed for each year in
which the initial failure occurred should
be determined by dividing the adjusted ac-
count balance on the applicable valuation
date by the applicable distribution period.
For this purpose, adjusted account balance
means the actual account balance, deter-
mined in accordance with § 1.401(a)(9)–5
Q&A–3, reduced by the amount of the to-
tal missed minimum distributions for prior
years. In a defined benefit plan, the per-
mitted correction method is to distribute
the required minimum distributions, plus
an interest payment representing the loss
of use of such amounts.
.07Failure to obtain participant or
spousal consent for a distribution subject
to the participant and spousal consent
rules under §§ 401(a)(11), 411(a)(11),
and 417. (1) The permitted correction
method is to give each affected partici-
pant a choice between providing informed
consent for the distribution actually made
or receiving a qualified joint and survivor
annuity. In the event that participant or
spousal consent is required but cannot be
obtained, the participant must receive a
qualified joint and survivor annuity based
on the monthly amount that would have
been provided under the plan at his or
her retirement date. This annuity may be
actuarially reduced to take into account
distributions already received by the par-
ticipant. However, the portion of the qual-
ified joint and survivor annuity payable
to the spouse upon the death of the par-
ticipant may not be actuarially reduced to
take into account prior distributions to the
participant. Thus, for example, if, in ac-
cordance with the automatic qualified joint
and survivor annuity option under a plan,
a married participant who retired would
have received a qualified joint and sur-
vivor annuity of $600 per month payable
for life with $300 per month payable to
the spouse for the spouse’s life beginning
upon the participant’s death, but instead
received a single-sum distribution equal
to the actuarial present value of the par-
ticipant’s accrued benefit under the plan,
then the $600 monthly annuity payable
during the participant’s lifetime may be
actuarially reduced totake the single-sum
distribution into account. However, the
spouse must be entitled to receive an an-
nuity of $300 per month payable for life
beginning at the participant’s death.
(2) An alternative permitted correction
method is to give each affected participant
a choice between (i) providing informed
consent for the distribution actually made,
(ii) receiving a qualified joint and survivor
annuity (both (i) and (ii) of this section
.07(2) are described in section .07(1) of
this Appendix A), or (iii) a single-sum pay-
ment to the participant’s spouse equal to
the actuarial present value of that survivor
annuity benefit (calculated using the appli-
cable interest rate and mortality table un-
der § 417(e)(3)). For example, assuming
the actuarial present value of a $300 per
month annuity payable to the spouse for
the spouse’s life beginning upon the partic-
ipant’s death were $7,837 (calculated us-
ing the applicable interest rate and applica-
ble mortality table under § 417(e)(3)), the
single-sum payment to the spouse under
clause (iii) of this section .07(2) is equal to
$7,837. If the single-sum payment is made
to the spouse, then the payment is treated
in the same manner as a distribution under
§ 402(c)(9) for purposes of rolling over the
payment to an IRA or other eligible retire-
ment plan.
.08Failure to satisfy the § 415 limits in
a defined contribution plan. For limitation
years beginning before January 1, 2009,
the permitted correction for failure to limit
annual additions (other than elective defer-
rals and after-tax employee contributions)
allocated to participants in a defined con-
tributionplanasrequiredin§415(evenif
the excess did not result from the alloca-
tion of forfeitures or from a reasonable er-
ror in estimating compensation) is to place
the excess annual additions into an unallo-
cated account, similar to the suspense ac-
count described in § 1.415–6(b)(6)(iii) (as
it appeared in the April 1, 2007 edition of
2008–35 I.R.B.498September 2, 2008

26 CFR part 1) prior to amendments made
by the recently finalized regulations under
§415,tobeusedasanemployercontri-
bution, other than elective deferrals, in the
succeeding year(s). While such amounts
remain in the unallocated account, the em-
ployer is not permitted to make additional
contributions to the plan. The permitted
correction for failure to limit annual addi-
tions that are elective deferrals or after-tax
employee contributions (even if the ex-
cess did not result from a reasonable error
in determining compensation, the amount
of elective deferrals or after-tax employee
contributions that could be made with re-
spect to an individual under the § 415 lim-
its) is to distribute the elective deferrals
or after-tax employee contributions using
a method similar to that described under
§ 1.415–6(b)(6)(iv) (as it appeared in the
April 1, 2007 edition of 26 CFR part 1)
prior to amendments made by the recently
finalized regulations under § 415. Elective
deferrals and after-tax employee contribu-
tions that are matched may be returned
to the employee, provided that the match-
ing contributions relating to such contri-
butions are forfeited (which will also re-
duce excess annual additions for the af-
fected individuals). The forfeited match-
ing contributions are to be placed into an
unallocated account to be used as an em-
ployer contribution, other than elective de-
ferrals, in succeeding periods. For limita-
tion years beginning on or after January 1,
2009, the failure to limit annual additions
allocated to participants in a defined con-
tributionplanasrequiredin§415iscor-
rected in accordance with section 6.06(2)
and (3).
.09Abandoned Orphan Plans; orphan
contracts and other abandoned plan as-
sets.(1)Abandoned plans. If (a) a plan has
one or more failures (whether a Qualifica-
tion Failure or a 403(b) Failure) that result
from either the employer having ceased to
exist, the employer no longer maintaining
the plan, or similar reasons and (b) the plan
is an Orphan Plan, as defined in section
5.03 (i.e.,isnotaplantowhichERISA
applies), the permitted correction is to ter-
minate the plan and distribute plan assets
to participants and beneficiaries. This cor-
rection must satisfy four conditions. First,
the correction must comply with condi-
tions, standards, and procedures substan-
tially similar to those set forth in section
2578.1 of the Department of Labor Regu-
lations (relating to abandoned plans). Sec-
ond, the qualified termination administra-
tor, based on plan records located and up-
dated in accordance with the Department
of Labor Regulations, must have reason-
ably determined whether, and to what ex-
tent, the survivor annuity requirements of
§§ 401(a)(11) and 417 apply to any benefit
payable under the plan and takes reason-
able steps to comply with those require-
ments (if applicable). Third, each partic-
ipant and beneficiary must have been pro-
vided a nonforfeitable right to his or her ac-
crued benefits as of the date of deemed ter-
mination under the Department of Labor
Regulations, subject to income, expenses,
gains, and losses between that date and the
date of distribution. Fourth, participants
and beneficiaries mustreceive notification
of their rights under § 402(f). In addition,
notwithstanding correction under this rev-
enue procedure, the Service reserves the
right to pursue appropriate remedies un-
der the Internal Revenue Code against any
party who is responsible for the plan, such
as the Plan Sponsor, plan administrator,
or owner of the business, even in its ca-
pacity as a participant or beneficiary un-
der the plan. However, with respect to the
first through third conditions above, no-
tice need not be furnished to the Depart-
ment of Labor, and notices furnished to the
Plan Sponsor, participants, or beneficiaries
need not indicate that the procedures fol-
lowed or notices furnished actually com-
ply with, or are required under, Depart-
ment of Labor regulations.
(2)Orphan contracts or other assets.
In any case in which a 403(b) Failure re-
sults from the employer having ceased in-
volvement with respect to specific assets
(including an insurance annuity contract)
held under a defined contribution plan on
behalf of a participant who is a former
employee or on behalf of a beneficiary, a
permitted correction is to distribute those
plan assets to the participant or benefi-
ciary. Compliance with the distribution
rules of section 2578.1(d)(2)(vii) of the
Department of Labor Regulations satisfies
this paragraph .09(2).
APPENDIX B
CORRECTION METHODS
AND EXAMPLES; EARNINGS
ADJUSTMENT METHODS
AND EXAMPLES
SECTION 1. PURPOSE,
ASSUMPTIONS FOR EXAMPLES
AND SECTION REFERENCES
.01Purpose. (1) This appendix sets
forth correction methodsrelatingtoOpera-
tional Failures under Qualified Plans. This
appendix also sets forth earnings adjust-
ment methods. In each case, the method
described corrects the Operational Failure
identified in the headings below. Correc-
tive allocations and distributions should
reflect earnings and actuarial adjustments
in accordance with section 6.02(4) of this
revenue procedure. The correction meth-
ods in this appendix are acceptable to
correct Qualification Failures under VCP,
and to correct Qualification Failures under
SCP that occurred notwithstanding that
the plan has established practices and pro-
cedures reasonably designed to promote
and facilitate overall compliance with the
Code,asprovidedinsection4.04ofthis
revenue procedure.
(2) To the extent a failure listed in this
appendix could occur under a 403(b) Plan,
SEP, or a SIMPLE IRA Plan, the correc-
tion method listed for such failure may
similarly be used to correct the failure.
.02Assumptions for Examples.Unless
otherwise specified, for ease of presenta-
tion, the examples assume that:
(1) the plan year and the § 415 limita-
tion year are the calendar year;
(2) the employer maintains a single plan
intended to satisfy § 401(a) and has never
maintained any other plan;
(3) in a defined contribution plan, the
plan provides that forfeitures are used to
reduce future employer contributions;
(4) the Qualification Failures are Op-
erational Failures and the eligibility and
other requirements for SCP, VCP or Audit
CAP, whichever applies, are satisfied; and
(5) there are no Qualification Failures
other than the described Operational Fail-
ures, and if a corrective action would result
in any additional Qualification Failure, ap-
propriate correctiveaction is taken for that
September 2, 20084992008–35 I.R.B.

additional Qualification Failure in accor-
dance with EPCRS.
.03Designated Roth contributions.The
examples in this Appendix B generally do
not identify whether the plan offers desig-
nated Roth contributions. The results in
the examples, including corrective contri-
butions, would be the same whether or not
the plan offered designated Roth contribu-
tions.
.04Section references. References to
section 2 and section 3 are references to the
section 2 and 3 in this appendix.
SECTION 2. CORRECTION METHODS
AND EXAMPLES
.01ADP/ACP Failures.
(1)Correction Methods.(a)Appendix
A Correction Method. Appendix A, sec-
tion .03 sets forth a correction method for
a failure to satisfy the actual deferral per-
centage (“ADP”), actual contribution per-
centage (“ACP”), or, for plan years be-
ginning on or before December 31, 2001,
multipleusetestsetforthin§§401(k)(3),
401(m)(2), and 401(m)(9), respectively.
(b)One-to-One Correction Method.
(i)General. In addition to the correction
method in Appendix A, a failure to sat-
isfy the ADP test, ACP test, or, for plan
years beginning on or before December
31, 2001, the multiple use test may be cor-
rected by using the one-to-one correction
method set forth in this section 2.01(1)(b).
Under the one-to-one correction method,
an excess contribution amount is deter-
mined and assigned to highly compen-
sated employees as provided in paragraph
(1)(b)(ii) below. That excess contribution
amount (adjusted for earnings) is either
distributed to the highly compensated
employees or forfeited from the highly
compensated employees’ accounts as pro-
vided in paragraph (1)(b)(iii) below. That
same dollar amount (i.e., the excess con-
tribution amount, adjusted for earnings)
is contributed to the plan and allocated
to nonhighly compensated employees as
provided in paragraph (1)(b)(iv) below.
Under this correction method, a plan may
not be treated as two separate plans, one
covering otherwise excludable employees
and the other covering all other employ-
ees (as permitted in § 1.410(b)–6(b)(3)).
Likewise, restructuring the plan into com-
ponent plans is not permitted.
(ii)Determination of the Excess Con-
tribution Amount. The excess contribu-
tion amount for the year is equal to the ex-
cess of (A) the sum of the excess contri-
butions (as defined in § 401(k)(8)(B)), the
excess aggregate contributions (as defined
in § 401(m)(6)(B)), and for plan years be-
ginning on or before December 31, 2001
the amount treated as excess contributions
or excess aggregate contributions under
the multiple use test for the year, as as-
signed to each highly compensated em-
ployee in accordance with § 401(k)(8)(C)
and § 401(m)(6)(C), over (B) previous cor-
rections that complied with § 401(k)(8),
§ 401(m)(6), and, for plan years beginning
on or before December 31, 2001, the mul-
tiple use test.
(iii)Distributions and Forfeitures of the
Excess Contribution Amount. (A) The por-
tion of the excess contribution amount as-
signed to a particular highly compensated
employee under paragraph (1)(b)(ii) is ad-
justed for earnings from the end of the plan
year of the year of the failure through the
date of correction. The amount assigned to
a particular highly compensated employee,
as adjusted, is distributed or, to the extent
the amount was forfeitable as of the close
of the plan year of the failure, is forfeited.
If the amount is forfeited, it is used in ac-
cordance with the plan provisions relating
to forfeitures that were in effect for the
year of the failure. If the amount so as-
signed to a particular highly compensated
employee has been previously distributed,
the amount is an Excess Amount within the
meaning of section 5.01(3) of this revenue
procedure. Thus, pursuant to section 6.06
of this revenue procedure, the employer
must notify the employee that the Excess
Amount is not eligible for favorable tax
treatment accorded to distributions from
qualified plans (and, specifically, is not el-
igible for tax-free rollover).
(B) If any matching contributions (ad-
justed for earnings) are forfeited in accor-
dance with § 411(a)(3)(G), the forfeited
amount is used in accordance with the plan
provisions relating to forfeitures that were
in effect for the year of the failure.
(C) If a payment was made to an em-
ployee and that payment is a forfeitable
match described in either paragraph
(1)(b)(iii)(A) or (B), then it is an Over-
payment defined in section 5.01(6) of this
revenue procedure that must be corrected
(see sections 2.04 and 2.05 below).
(iv)Contribution and Allocation of
Equivalent Amount. (A) The employer
makes a contribution to the plan that
is equal to the aggregate amounts dis-
tributed and forfeited under paragraph
(1)(b)(iii)(A) (i.e., the excess contribution
amount adjusted for earnings, as provided
in paragraph (1)(b)(iii)(A), which does not
include any matching contributions for-
feited in accordance with § 411(a)(3)(G)
as provided in paragraph (1)(b)(iii)(B)).
The contribution must satisfy the vesting
requirements and distribution limitations
of § 401(k)(2)(B) and (C).
(B)(1) This paragraph (1)(b)(iv)(B)(1)
applies to a plan that uses the cur-
rent year testing method described in
§1.401(k)–2(a)(2), §1.401(m)–2(a)(2)
and, for periods prior to the effective date
of those regulations, Notice 98–1, 1998–1
C.B. 327. The contribution made under
paragraph (1)(b)(iv)(A) is allocated to the
account balances of those individuals who
were either (I) the eligible employees for
the year of the failure who were nonhighly
compensated employees for that year or
(II) the eligible employees for the year of
the failure who were nonhighly compen-
sated employees for that year and who also
are nonhighly compensated employees
for the year of correction. Alternatively,
the contribution is allocated to account
balances of eligible employees described
in (I) or (II) of the preceding sentence, ex-
cept that the allocation is made only to the
account balances of those employees who
are employees on a date during the year
of the correction that is no later than the
date of correction. Regardless of which
of these four options (described in the two
preceding sentences) the employer selects,
eligible employees must receive a uniform
allocation (as a percentage of compensa-
tion) of the contribution. (See Examples
1 and 2.) Under the one-to-one correc-
tion method, the amount allocated to the
account balance of an employee (i.e.,the
employee’s share of the total amount con-
tributed under paragraph (1)(b)(iv)(A)) is
not further adjusted for earnings and is
treated as an annual addition under § 415
for the year of the failure for the employee
for whom it is allocated.
(2) This paragraph (1)(b)(iv)(B)(2)ap-
plies to a plan that uses the prior year test-
ing method described in§1.401(k)–2(a)(2)
and §1.401(m)–2(a)(2) and, for peri-
odspriortotheeffectivedateofthose
2008–35 I.R.B.500September 2, 2008

regulations, Notice 98–1. Paragraph
(1)(b)(iv)(B)(1) is applied by substituting
“the year prior to theyear of the failure”
for “the year of the failure”.
(3)Examples.
Example 1:
Employer A maintains a profit-sharing plan with
a cash or deferred arrangement that is intended to sat-
isfy § 401(k) using the current year testing method.
The plan does not provide for matching contributions
or after-tax employee contributions. In 2007, it was
discovered that the ADP test for 2005 was not per-
formed correctly. When the ADP test was performed
correctly, the test was not satisfied for 2005. For
2005, the ADP for highly compensated employees
was 9% and the ADP for nonhighly compensated em-
ployees was 4%. Accordingly, the ADP for highly
compensated employees exceeded the ADP for non-
highly compensated employees by more than two per-
centage points (in violation of § 401(k)(3)). There
were two highly compensated employees eligible un-
der the § 401(k) plan during 2005, Employee P and
Employee Q. Employee P made elective deferrals of
$10,000, which is equal to 10% of Employee P’s com-
pensation of $100,000 for 2005. Employee Q made
elective deferrals of $9,500, which is equal to 8% of
Employee Q’s compensation of $118,750 for 2005.
Correction:
On June 30, 2007, Employer A uses the one-to-
one correction method to correct the failure to sat-
isfy the ADP test for 2005. Accordingly, Employer
A calculates the dollar amount of the excess con-
tributions for the two highly compensated employ-
ees in the manner described in § 401(k)(8)(B). The
amount of the excess contribution for Employee P
is $4,000 (4% of $100,000) and the amount of the
excess contribution for Employee Q is $2,375 (2%
of $118,750), or a total of $6,375. In accordance
with § 401(k)(8)(C), $6,375, the excess contribution
amount, is assigned $3,437.50 to Employee P and
$2,937.50 to Employee Q. It is determined that the
earnings on the assigned amounts through June 30,
2007 are $687 and $587 for Employees P and Q, re-
spectively. The assigned amounts and the earnings
are distributed to Employees P and Q. Therefore, Em-
ployee P receives $4,124.50($3,437.50+ $687) and
Employee Q receives $3,524.50 ($2,937.50 + $587).
In addition, on the same date, Employer A makes a
corrective contribution to the § 401(k) plan equal to
$7,649 (the sum of the $4,124.50 distributed to Em-
ployee P and the $3,524.50 distributed to Employee
Q). The corrective contribution is allocated to the
account balances of eligible nonhighly compensated
employees for 2005,pro ratabased on their compen-
sation for 2005 (subject to § 415 for 2005).
Example 2:
ThefactsarethesameasinExample 1, except
that for 2005 the plan also provides for (1) after-tax
employee contributions and (2) matching contribu-
tions equal to 50% of the sum of an employee’s elec-
tive deferrals and after-tax employee contributions
that do not exceed 10% of the employee’s compensa-
tion. The plan provides that matching contributions
are subject to the plan’s 20% per year of service
vesting schedule and that matching contributions are
forfeited and used to reduce employer contributions
if associated elective deferrals or after-tax employee
contributions are distributed to correct an ADP or
ACP test failure. For 2005, nonhighly compensated
employees made after-tax employee contributions
and no highly compensated employee made any af-
ter-tax employee contributions. Employee P received
a matching contribution of $5,000 (50% of $10,000)
and Employee Q received a matching contribution of
$4,750 (50% of $9,500). Employees P and Q were
100% vested in 2005. It was determined that the plan
satisfied the requirements of the ACP test for 2005.
Correction:
The same corrective actions are taken as inEx-
ample 1. In addition, in accordance with the plan’s
terms, corrective action is taken to forfeit Employee
P’s and Employee Q’s matching contributions associ-
ated with their distributed excess contributions. Em-
ployee P’s distributed excess contributions and as-
sociated matching contributions are $3,437.50 and
$1,718.75, respectively. Employee Q’s distributed
excess contributions and associated matching con-
tributions are $2,937.50 and $1,468.75, respectively.
Thus, $1,718.75 is forfeited from Employee P’s ac-
count and $1,468.75 is forfeited from Employee Q’s
account. In addition, the earnings on the forfeited
amounts are also forfeited. It is determined that the
respective earnings on the forfeited amount for Em-
ployee P is $250 and for Employee Q is $220. The to-
tal amount of the forfeitures of $3,657.50 (Employee
P’s $1,718.75 + $250 and Employee Q’s $1,468.75
+ $220) is used to reduce contributions for 2007 and
subsequent years.
.02Exclusion of Otherwise Eligible
Employees.
(1)Exclusion of Eligible Employees
ina401(k)or(m)Plan.(a)Correc-
tion Method.(i)Appendix A Correction
Method for Full Year Exclusion. Appendix
A section .05(2) sets forth the correction
method for the exclusion of an eligible
employee from electing and making elec-
tive deferrals (other than designated Roth
contributions) and after-tax employee con-
tributions to a plan that provides benefits
that are subject to the requirements of
§ 401(k) or § 401(m) for one or more full
plan years. (See Example 3.) Appendix A
section .05(2) also specifies the method for
determining missed elective deferrals and
the corrective contributions for employ-
ees who were improperly excluded from
electing and making elective deferrals to a
safe harbor § 401(k) plan for one or more
full plan years. (See Examples 8, 9 and
10.) Appendix A section .05(3) sets forth
the correction method for the exclusion
of an eligible employee from electing and
making elective deferrals in a plan that
(i) is subject to § 401(k) and (ii) provides
employees with the opportunity to make
designated Roth contributions. Appendix
A section .05(4) sets forth the correction
method for the situation where an eligible
employee was permitted to make an elec-
tive deferral, but was not provided with
the opportunity to make catch-up contri-
butions under the terms of the plan and
§ 414(v), and correction is being made by
making a QNEC on behalf of the excluded
employee. (See Example 11.) Appendix
A section .05(5) sets forth the correction
method for the failure by a plan to imple-
ment an employee’s election with respect
to elective deferrals (including designated
Roth contributions) or after-tax employee
contributions. (See Example 12.) In sec-
tion 2.02(1)(a)(ii) below, the correction
methods for (I) the exclusion of an eligible
employee from all contributions (includ-
ing designated Roth contributions) under
a 401(k) or (m) plan for a full year, as
described in Appendix A sections .05(2)
and .05(3), (II) the exclusion of an eligi-
ble employee who was permitted to make
elective deferrals, but was not permitted to
make catch-up contributions for a full plan
year as described in Appendix A section
.05(4), and (III) the exclusion of an eligi-
ble employee on account of the failure to
implement an employee’s election to make
elective deferrals or after-tax employee
contributions to the plan as described in
Appendix A section .05(5) are expanded to
include correction for the exclusion from
these contributions (including designated
Roth contributions) under a 401(k) or (m)
plan for a partial plan year. This correction
for a partial year exclusion may be used in
conjunction with the correction for a full
year exclusion.
(ii)Expansion of Correction Method to
Partial Year Exclusion.(A)In General.
The correction method in Appendix A,
section .05 is expanded to cover an em-
ployee who was improperly excluded from
electing and making elective deferrals
(including designated Roth contributions)
or after-tax employee contributions for a
portion of a plan year or from receiving
matching contributions (on either elective
deferrals or after-tax employee contribu-
tions) for a portion of a plan year. In such
case, a permitted correction method for
the failure is for the Employer to satisfy
this section 2.02(1)(a)(ii). The Employer
makes a QNEC on behalf of the excluded
employee. The method and examples de-
scribed to correct the failure to include
September 2, 20085012008–35 I.R.B.

otherwise eligible employees do not apply
until after correction of other qualification
failures. Thus, for example, in the case
of a § 401(k) plan that does not apply the
safe harbor contribution requirements of
§ 401(k)(12) or § 401(k)(13) the correc-
tion for improperly excluding an employee
from making elective deferrals, as de-
scribed in the narrative and the examples
in this section cannot be used until after
correction of the ADP test failure. (See
Appendix A section .05(2)(g).)
(B)Elective Deferral Failures.(1)The
appropriate QNEC for the failure to allow
an employee to elect and make elective
deferrals (including designated Roth con-
tributions) for a portion of the plan year
is equal to the missed deferral opportu-
nity which is an amount equal to 50%
of the employee’s missed deferral. The
employee’s missed deferral is determined
by multiplying the ADP of the employee’s
group (either highly or nonhighly com-
pensated), determined prior to correction
under this section 2.02(1)(a)(ii), by the
employee’s plan compensation for the por-
tion of the year during which the employee
was improperly excluded. In a safe har-
bor § 401(k) plan, the employee’s missed
deferral is determined by multiplying 3%
(or, if greater, whatever percentage of the
participant’s compensation which, if con-
tributed as an elective deferral, would have
been matched at a rate of 100% or more)
by the employee’s plan compensation
for the portion of the year during which
the employee was improperly excluded.
The missed deferral for the portion of the
plan year during which the employee was
improperly excluded from being eligible
to make elective deferrals is reduced to
the extent that (i) the sum of the missed
deferral (as determined in the preceding
two sentences of this paragraph) and any
elective deferrals actually made by the
employee for that year would exceed (ii)
the maximum elective deferrals permitted
under the plan for the employee for that
plan year (including the § 402(g) limit).
The corrective contribution is adjusted
for earnings. For purposes of correcting
other failures under this revenue pro-
cedure (including determination of any
required matching contribution) after cor-
rection has occurred under this section
2.02(1)(a)(ii)(B), the employee is treated
as having made pre-tax elective deferrals
equal to the employee’s missed deferral
for the portion of the year during which
the employee was improperly excluded.
(See Examples 4 and 5.)
(2) The appropriate corrective contri-
bution for the plan’s failure to implement
an employee’s election with respect to
elective deferrals is equal to the missed
deferral opportunity which is an amount
equal to 50% of the employee’s missed
deferral. Corrective contributions are
adjusted for earnings. The missed de-
ferral is determined by multiplying the
employee’s deferral percentage by the em-
ployee’s plan compensation for the portion
of the year during which the employee
was improperly excluded. If the employee
elected a fixed dollar amount that can be
attributed to the period of exclusion, then
the flat dollar amount for the period of
exclusion may be used for this purpose.
If the employee elected a fixed dollar
amount to be deferred for the entire plan
year, then that dollar amount is multiplied
by a fraction. The fraction is equal to
the number of months, including partial
months where applicable, during which
the eligible employee was excluded from
making catch-up contributions divided by
12. The missed deferral for the portion
of the plan year during which the eligible
employee was improperly excluded from
making elective deferrals is reduced to
the extent that (i) the sum of the missed
deferral (as determined in the preceding
three sentences) and any elective defer-
rals actually made by the employee for
that year would exceed (ii) the maximum
elective deferrals permitted under the plan
for the employee for that plan year (in-
cluding the § 402(g) limit). The corrective
contribution is adjusted for earnings. The
requirements relating to the passage of the
ADP test before this correction method
can be used, as described in Appendix A
section .05(5)(d) still apply.
(C)After-tax Employee Contribution
Failures.(1) The appropriate correc-
tive contribution for the failure to allow
employees to elect and make after-tax
employee contributions for a portion of
theplanyearisequaltothemissedaf-
ter-tax employee contributions opportu-
nity, which is an amount equal to 40% of
the employee’s missed after-tax employee
contributions. The employee’s missed
after-tax employee contributions is deter-
mined by multiplying the ACP of the em-
ployee’s group (either highly or nonhighly
compensated), determined prior to correc-
tion under this section 2.02(1)(a)(ii)(C),
by the employee’s plan compensation for
the portion of the year during which the
employee was improperly excluded. If
the ACP consists of both matching and
after-tax employee contributions, then for
purposes of the preceding sentence, in lieu
of basing the missed after-tax employee
contributions on the ACP for the em-
ployee’s group (either highly compensated
or nonhighly compensated), the Employer
is permitted to determine separately the
portions of the ACP that are attributable to
matching contributions and after-tax em-
ployee contributions and base the missed
after-tax employee contributions on the
portion of the ACP that is attributable
to after-tax employee contributions. The
missed after-tax employee contribution
is reduced to the extent that (i) the sum
of that contribution and the actual total
after-tax employee contributions made by
the employee for the plan year would ex-
ceed (ii) the sum of the maximum after-tax
employee contributions permitted under
the plan for the employee for the plan year.
The corrective contribution is adjusted for
earnings. The requirements relating to the
passage of the ACP test before this correc-
tion method can be used, as described in
Appendix A section .05(2)(g) still apply.
(2) The appropriate corrective contri-
bution for the plan’s failure to implement
an employee’s election with respect to
after-tax employee contributions for a
portion of the plan year is equal to the
missed after-tax employee contributions
opportunity, which is an amount equal to
40% of the employee’s missed after-tax
employee contributions. Corrective con-
tributions are adjusted for earnings. The
missed after-tax employee contribution is
determined by multiplying the employee’s
elected after-tax employee contribution
percentage by the employee’s plan com-
pensation for the portion of the year during
which the employee was improperly ex-
cluded. If the employee elected a flat
dollar amount that can be attributed to
the period of exclusion, then the flat dol-
lar amount for the period of exclusion
may be used for this purpose. If the em-
ployee elected a flat dollar amount to
be contributed for the entire plan year,
then that dollar amount is multiplied by a
fraction. The fraction is equal to the num-
ber of months, including partial months
2008–35 I.R.B.502September 2, 2008

where applicable, during which the eligi-
ble employee was excluded from making
after-tax employee contributions divided
by 12. The missed after-tax employee
contribution is reduced to the extent that
(i) the sum of that contribution and the ac-
tual total after-tax employee contributions
made by the employee for the plan year
would exceed (ii) the sum of the maximum
after-tax employee contributions permit-
ted under the plan for the employee for the
plan year. The requirements relating to the
passage of the ACP test before this correc-
tion method can be used, as described in
Appendix A section .05(5)(d) still apply.
(D)Matching Contribution Failures.
(1) The appropriate corrective contribu-
tion for the failure to make matching
contributions for an employee because
the employee was precluded from making
elective deferrals (including designated
Roth contributions) or after-tax employee
contributions for a portion of the plan year
is equal to the matching contribution that
would have been made for the employee
if (1) the employee’s elective deferrals for
that portion of the plan year had equaled
the employee’s missed deferrals (deter-
mined under section 2.02(1)(a)(i)(B)) or
(2) the employee’s after-tax contribu-
tion for that portion of the plan year had
equaled the employee’s missed after-tax
employee contribution (determined under
section 2.02(1)(a)(ii)(C)). This matching
contribution is reduced to the extent that
(i) the sum of this contribution and other
matching contributions actually made on
behalf of the employee for the plan year
would exceed (ii) the maximum matching
contribution permitted if the employee
had made the maximum matchable con-
tributions permitted under the plan for the
plan year. The corrective contribution is
adjusted for earnings. The requirements
relating to the passage of the ACP test be-
fore this correction method can be used, as
described in Appendix A section .05(2)(g)
still apply.
(2) The appropriate corrective contribu-
tion for the failure to make matching con-
tributions for an employee because of the
failure by the plan to implement an em-
ployee’s election with respect to elective
deferrals (including designated Roth con-
tributions) or, where applicable, after-tax
employee contributions for a portion of the
plan year is equal to the matching contri-
bution that would have been made for the
employee if the employee made the elec-
tive deferral as determined under section
2.02(1)(a)(ii)(B)(2), or where applicable,
the after-tax employee contribution deter-
mined under section 2.02(1)(a)(ii)(C)(2).
This matching contribution is reduced to
the extent that (i) the sum of this contri-
bution and other matching contributions
actually made on behalf of the employee
for the plan year would exceed (ii) the
maximum matching contribution permit-
ted if the employee had made the max-
imum matchable contributions permitted
under the plan for the plan year. The cor-
rective contribution is adjusted for earn-
ings. The requirements relating to the pas-
sage of the ACP test before this correction
method can be used, as described in Ap-
pendix A section .05(5)(d), still apply.
(E)Use of Prorated Compensation.
For purposes of this paragraph (1)(a)(ii),
for administrative convenience, in lieu of
using the employee’s actual plan com-
pensation for the portion of the year dur-
ing which the employee was improperly
excluded, apro rataportion of the em-
ployee’s plan compensation that would
have been taken into account for the plan
year, if the employee had not been im-
properly excluded, may be used.
(F)Special Rule for Brief Exclusion
from Elective Deferrals and After-Tax
Employee Contributions.Anemployeris
not required to make a corrective contri-
bution with respect toelective deferrals
(including designated Roth contributions)
or after-tax employee contributions, as
provided in sections 2.02(1)(a)(ii)(B) and
(C), but is required to make a corrective
contribution with respect to any match-
ing contributions, as provided in section
2.02(1)(a)(ii)(D) for an employee for a
plan year if the employee has been pro-
vided the opportunity to make elective
deferrals or after-tax employee contri-
butions under the plan for a period of at
least the last 9 months in that plan year
and during that period the employee had
the opportunity to make elective defer-
rals or after-tax employee contributions
in an amount not less than the maximum
amount that would have been permitted if
no failure had occurred. (See Examples 6
and 7.)
(b) Examples.
Example 3:
Employer B maintains a § 401(k) plan. The plan
provides for matching contributions for eligible em-
ployees equal to 100% of elective deferrals that do
not exceed 3% of an employee’s compensation. The
plan allows employees to make after-tax employee
contributions up to a maximum of the lesser of 2%
of compensation or $1,000. The after-tax employee
contributions are not matched. The plan provides that
employees who complete one year of service are eli-
gible to participate in the plan on the next designated
entry date. The entry dates are January 1, and July 1.
In 2007, it is discovered that Employee V, a NHCE
with compensation of $30,000, was excluded from
the plan for the 2006 plan year even though she satis-
fied the plan’s eligibility requirements as of January
1, 2006.
For the 2006 plan year, the relevant employee and
contribution information is as follows:
September 2, 20085032008–35 I.R.B.

Compensation
Elective deferralMatchAfter-Tax Employee
Contribution
Highly Compensated Employees (HCEs):
R
$200,000$ 6,000$6,000
0
S
$150,000$12,000$4,500$1,000
Nonhighly Compensated Employees (NHCEs):
T
$80,000$12,000$2,400$1,000
U
$50,000$ 500$ 500
0
HCEs:
ADP - 5.5%
ACP - 3.33%
ACP attributable to matching contributions - 3%
ACP attributable to after-tax employee contributions - 0.33%
NHCEs:
ADP - 8%
ACP - 2.63%
ACP attributable to matching contributions - 2%
ACP attributable to after-tax employee contributions - 0.63%
Cor
rection:
Employer B uses the correction method for a
full year exclusion, described in Appendix A section
.05
(2), to correct the failure to include Employee V
in the plan for the full plan year beginning January 1,
2006. Employer B calculates the corrective QNEC
to b
e made on behalf of Employee V as follows:
Elective deferrals: Employee V was eligible to,
but was not provided with the opportunity to, elect
and
make elective deferrals in 2006. Thus, Employer
B must make a QNEC to the plan on behalf of Em-
ployee V equal to the missed deferral opportunity for
Em
ployee V, which is 50% of Employee V’s missed
deferral. The QNEC is adjusted for earnings. The
missed deferral for Employee V is determined by us-
in
g the ADP for NHCEs for 2006 and multiplying
that percentage by Employee V’s compensation for
2006. Accordingly, the missed deferral for Employee
V
on account of the employee’s improper exclusion
from the plan is $2,400 (8% x $30,000). The missed
deferral opportunity is $1,200 (i.e., 50% x $2,400).
T
hus, the required corrective contribution for the fail-
ure to provide Employee V with the opportunity to
make elective deferrals to the plan is $1,200 (plus
earnings). The corrective contribution is made to a
pre-tax QNEC account for Employee V (not to a des-
ignated Roth contributions account even if the plan
offers designated Roth contributions, as provided in
section .05(3) of Appendix A).
Matching contributions: Employee V should
have been eligible for, but did not receive, an allo-
cation of employer matching contributions because
Employee V was not provided the opportunity to
make elective deferrals in 2006. Thus, Employer B
must make a QNEC to the plan on behalf of Em-
ployee V that is equal to the matching contribution
Employee V would have received had the missed
deferral been made. The QNEC is adjusted for earn-
ings. Under the terms of the plan, if Employee V had
made an elective deferral of $2,400 or 8% of com-
pensation ($30,000), the employee would have been
entitled to a matching contribution equal to 100% of
first 3% of Employee V’s compensation ($30,000)
or $900. Accordingly, the contribution required to
rep
lace the missed employer matching contribution
is $900 (plus earnings).
After-tax employee contributions: Employee V
was
eligible to, but was not provided with the oppor-
tunity to, elect and make after-tax employee contri-
butions in 2006. Employer B must make a QNEC
to t
he plan equal to the missed opportunity for mak-
ing after-tax employee contributions for Employee V,
which is 40% of Employee V’s missed after-tax em-
pl
oyee contribution. The QNEC is adjusted for earn-
ings. The missed after-tax employee contribution
for Employee V is estimated by using the ACP for
NH
CEs (to the extent that the ACP is attributable to
after-tax employee contributions) for 2006 and mul-
tiplying that percentage by Employee V’s compensa-
t
ion for 2006. Accordingly, the missed after-tax em-
ployee contribution for Employee V, on account of
the employee’s improper exclusion from the plan is
$
189 (0.63% x $30,000). The missed opportunity to
make after-tax employee contributions to the plan is
$76 (40% x $189). Thus, the required corrective con-
tribution for the failure to provide Employee V with
the opportunity to make the $189 after-tax employee
contribution to the plan is $76 (plus earnings).
The total required corrective QNEC, before ad-
justments for earnings, on behalf of Employee V is
$2,176 ($1,200 for the missed deferral opportunity
plus $900 for the missed matching contribution plus
$76 for the missed opportunity to make after-tax
employee contributions). The required corrective
QNEC is further adjusted for earnings.
Example 4:
Employer C maintains a § 401(k) plan. The plan
provides for matching contributions for each payroll
period that are equal to 100% of an employee’s elec-
tive deferrals that do not exceed 2% of the eligible
employee’s plan compensation during the payroll pe-
riod. The plan provides for after-tax employee contri-
butions. The after-tax employee contribution cannot
exceed $1,000 for the plan year. The plan provides
that employees who complete one year of service are
eligible to participate in the plan on the next January 1
or July 1 entry date. Employee X, a nonhighly com-
pen
sated employee, who met the eligibility require-
ments and should have entered the plan on January 1,
2006, was not offered the opportunity to participate
in t
he plan. In August of 2006, the error was dis-
covered and Employer C offered Employee X the op-
portunity to make elective deferrals and after-tax em-
pl
oyee contributions as of September 1, 2006. Em-
ployee X made elective deferrals equal to 4% of the
employee’s plan compensation for each payroll pe-
ri
od from September 1, 2006 through December 31,
2006 (resulting in elective deferrals of $400). Em-
ployee X’s plan compensation for 2006 was $36,000
(
$26,000 for the first eight months and $10,000 for
the last four months). Employer C made matching
contributions equal to $200 on behalf of Employee X,
w
hich is 2% of Employee X’s plan compensation for
each payroll period from September 1, 2006 through
December 31, 2006 ($10,000). After being allowed
t
o participate in the plan, Employee X made $250
of after-tax employee contributions for the 2006 plan
year. The ADP for nonhighly compensated employ-
ees for 2006 was 3% and the ACP for nonhighly com-
pensated employees for 2006 was 2.3%. The ACP
attributable to matching contributions for nonhighly
compensated employees for 2003 was 1.8%. The
ACP attributable to employee contributions for non-
highly compensated employees for 2006 was 0.5%.
Correction:
In accordance with section 2.02(1)(a)(ii), Em-
ployer C uses the correction method described in
Appendix A section .05 to correct for the failure to
provide Employee X the opportunity to elect and
make elective deferrals and after-tax employee con-
tributions, and, as a result, not receiving matching
contributions for a portion of the plan year (January
1, 2006 through August 31, 2006). Thus, Employer
C makes a corrective contribution on behalf of
Employee X that satisfies the requirements of sec-
tion 2.02(1)(a)(ii). Employer C elects to utilize the
provisions of section 2.02(1)(a)(ii)(E) to determine
Employee X’s compensation for the portion of the
year in which Employee X was not provided the
opportunity to make elective deferrals and after-tax
2008–35 I.R.B.504September 2, 2008

employee contributions. Thus, for administrative
convenience, in lieu of using actual plan compen-
sation of $26,000 for the period Employee X was
excluded, Employee X’s annual plan compensation
is prorated for the 8-month period that the employee
was excluded from participating in the plan. The
corrective contribution is determined as follows:
(1) Corrective contribution for missed deferral:
Employee X was eligible to, but was not provided
with the opportunity to, elect and make elective
deferrals from January 1 through August 31 of
2006. Employer C must make a corrective contri-
bution to the plan on behalf of Employee X equal
to Employee X’s missed deferral opportunity for
that period, which is 50% of Employee X’s missed
deferral. From January 1 through August 31, 2006.
The corrective contribution is adjusted for earnings.
Employee X’s missed deferral is determined by
multiplying the 3% ADP for nonhighly compensated
employees by $24,000 (8/12ths of the employee’s
2006 compensation of $36,000). Accordingly, the
missed deferral is $720. The missed deferral is not
reduced because when this amount is added to the
amount already deferred, no plan limit (including
§ 402(g)) was exceeded. Accordingly, the required
corrective contribution is $360 (i.e., 50% multiplied
by the missed deferral amount of $720). The required
corrective contribution is adjusted for earnings.
(2) Corrective contribution for missed match-
ing contribution: Under the terms of the plan, if
Employee X had made an elective deferral of $720
or 3% of compensation for the period of exclusion
($24,000), the employee would have been entitled
to a matching contribution equal to 2% of $24,000
or $480. The missed matching contribution is not
reduced because no plan limit is exceeded when
this amount is added to the matching contribution
already contributed for the 2006 plan year. Accord-
ingly, the required corrective contribution is $480.
The required corrective contribution is adjusted for
earnings.
(3) Corrective contribution for missed after-tax
employee contribution: Employee X was eligible to,
but was not provided with the opportunity to elect
and make after-tax employee contributions from
January 1 through August 31 of 2006. Employer C
must make a corrective contribution to the plan on
behalf of Employee X equal to the missed opportu-
nity to make after-tax employee contributions. The
missed opportunity to make after-tax employee con-
tributions is equal to 40% of Employee X’s missed
after-tax employee contributions. The corrective
contribution is adjusted for earnings. The missed
after-tax employee contribution amount is equal to
the 0.5% ACP attributable to employee contributions
for nonhighly compensated employees multiplied
by $24,000 (8/12ths of the employee’s 2006 plan
compensation of $36,000). Accordingly, the missed
after-tax employee contribution amount is $120.
The missed after-tax employee contribution is not
reduced because the sum of $120 and the previously
made after-tax employee contribution of $250 is less
than the overall plan limit of $1,000. Therefore, the
required corrective contribution is $48 (i.e.,40%
multiplied by the missed after-tax employee con-
tribution of $120). The corrective contribution is
adjusted for earnings.
The total required QNEC on behalf of the em-
ployee is $888 ($360 for the missed deferral opportu-
nity plus $480 for the missed matching contribution
plus $48 for the missed opportunity to make after-tax
employee contributions).
Example 5:
The facts (including the ADP and ACP results)
are the same as in Example 4, except that it is now
determined that Employee X, after being included in
the plan in 2006, made after-tax employee contribu-
tions of $950.
Correction:
The correction is the same as inExample 4,
except that the corrective contribution required to
replace the missed after-tax employee contribution
is re-calculated to take into account applicable plan
limits in accordance with the provisions of section
2.02(1)(a)(ii)(C). The required corrective contribu-
tion is determined as follows:
Corrective contribution for missed after-tax
employee contribution: The missed after-tax em-
ployee contribution amount is equal to the 0.5%
ACP attributable to after-tax employee contributions
for nonhighly compensated employees multiplied
by $24,000 (8/12ths of the employee’s 2006 plan
compensation of $36,000). The missed after-tax
employee contribution amount, based on this calcu-
lation, is $120. However, the sum of this amount
($120) and the previously made after-tax employee
contribution ($950) is $1,070. Because the plan limit
for after-tax employee contributions is $1,000, the
missed after-tax employee contribution needs to be
reduced by $70, to ensure that the total after-tax
employee contributions comply with the plan limit.
Accordingly, the missed after-tax employee contri-
bution is $50 ($120 minus $70) and the required
corrective contribution is $20 (i.e., 40% multiplied
by the missed after-tax employee contribution of
$50). The corrective contribution is adjusted for
earnings.
Example 6:
Employer D sponsors a § 401(k) plan. The plan
has a one year of service eligibility requirement and
provides for January 1 and July 1 entry dates. Em-
ployee Y, who should have been provided the oppor-
tunity to elect and make elective deferrals on Jan-
uary 1, 2006, was not provided the opportunity to
elect and make elective deferrals until July 1, 2006.
The employee made $5,000 in elective deferrals to
the plan in 2006. The employee was a highly com-
pensated employee with compensation for 2006 of
$200,000. Employee Y’s compensation from January
1 through June 30, 2006 was $130,000. The ADP for
highly compensated employees for 2006 was 10%.
The ADP for nonhighly compensated employees for
2006 was 8%. The § 402(g) limit for deferrals made
in 2006 was $15,000.
Correction:
Corrective contribution for missed deferral: Em-
ployee W’s missed deferral is equal to the 10% ADP
for highly compensated employees multiplied by
$130,000 (compensation earned for the portion of
the year in which Employee W was erroneously
excluded,i.e., January 1 through June 30, 2006).
Themisseddeferralamount,basedonthiscalcula-
tion is $13,000. However, the sum of this amount
($13,000) and the previously made elective contribu-
tion ($5,000) is $18,000. The 2006 § 402(g) limit for
elective deferrals is $15,000. In accordance with the
provisions of section 2.02(1)(a)(ii)(B), the missed
deferral needs to be reduced by $3,000, to ensure
that the total elective contribution complies with the
applicable § 402(g) limit. Accordingly, the missed
deferral is $7,000 ($10,000 minus $3,000) and the
required corrective contribution is $3,500 (i.e.,50%
multiplied by the missed deferral of $7,000). The
corrective contribution is adjusted for earnings.
Example 7:
Employer E maintains a § 401(k) plan. The plan
provides for matching contributions for each payroll
period that are equal to 100% of an employee’s elec-
tive deferrals that do not exceed 2% of the eligible
employee’s plan compensation during the payroll pe-
riod. The plan also provides that the annual limit on
matching contributions is $750. The plan provides
for after-tax employee contributions. The after-tax
employee contribution cannot exceed $1,000 during
a plan year. The plan provides that employees who
complete one year of service are eligible to partic-
ipate in the plan on the next January 1 or July 1
entry date. Employee Z, a nonhighly compensated
employee who met the eligibility requirements and
should have entered the plan on January 1, 2006
was not offered the opportunity to participate in the
plan. In March of 2006, the error was discovered
and Employer E offered the employee an election
opportunity as of April 1, 2006. Employee Z had the
opportunity to make the maximum elective deferrals
and/or after-tax employee contributions that could
have been made under the terms of the plan for the
entire 2006 plan year. The employee made elective
deferrals equal to 3% of the employee’s plan com-
pensation for each payroll period from April 1, 2006
through December 31, 2006 (resulting in elective
deferrals of $960). The employee’s plan compen-
sation for 2006 was $40,000 ($8,000 for the first
three months and $32,000 for the last nine months).
Employer E made matching contributions equal to
$640 for the excluded employee, which is 2% of
the employee’s plan compensation for each payroll
period from April 1, 2006 through December 31,
2006 ($32,000). After being allowed to participate
in the plan, the employee made $500 in after-tax
employee contributions. The ADP for nonhighly
compensated employees for 2006 was 3% and the
ACP for nonhighly compensated employees for 2006
was 2.3%. The portion of the ACP attributable to
matching contributions for nonhighly compensated
employees for 2006 was 1.8%. The portion of the
ACP attributable to after-tax employee contributions
for nonhighly compensated employees for 2006 was
0.5%.
Correction:
Employer E uses the correction method for partial
year exclusions, pursuant to section 2.02(1)(a)(ii), to
correct the failure to include an eligible employee in
the plan. Because Employee Z was given an opportu-
nity to make elective deferrals and after-tax employee
contributions to the plan for at least the last 9 months
of the plan year (and the amount of the elective defer-
rals or after-tax employee contributions that the em-
ployee had the opportunity to make was not less than
the maximum elective deferrals or after-tax employee
contributions that the employee could have made if
September 2, 20085052008–35 I.R.B.

the employee had been given the opportunity to make
elective deferrals and after-tax employee contribu-
tions on January 1, 2006), under the special rule set
forth in section 2.02(1)(a)(ii)(F), Employer E is not
required to make a corrective contribution for the fail-
ure to provide the employee with the opportunity to
make either elective deferrals or after-tax employee
contributions. The employer only needs to make a
corrective contribution for the failure to provide the
employee with the opportunity to receive matching
contributions on deferrals that could have been made
during the first 3 months of the plan year. The calcu-
lation of the corrective contribution required to cor-
rect this failure is shown as follows:
The missed matching contribution is determined
by calculating the matching contribution that the
employee would have received had the employee
been provided the opportunity to make elective de-
ferrals during the period of exclusion,i.e.,January
1, 2006 through March 31, 2006. Assuming that the
employee elected to defer an amount equal to 3% of
compensation (which is the ADP for the nonhighly
compensated employees for the plan year), then,
under the terms of the plan, the employee would have
been entitled to a matching contribution of 2% of
compensation. Pursuant to the provisions of section
2.02(1)(a)(ii)(E), Employer E determines compensa-
tion by prorating Employee Z’s annual compensation
fortheportionoftheyearthat Employee Z was not
given the opportunity to make elective deferrals or
after-tax employee contributions. Accordingly, the
required matching contribution for the period of ex-
clusion is obtained by multiplying 2% by Employee
Z’s compensation of $10,000 (3/12ths of the em-
ployee’s 2006 plan compensation of $40,000). Based
on this calculation, the missed matching contribution
is $200. However, when this amount is added to the
matching contribution already received ($640), the
total ($840) exceeds the $750 plan limit on match-
ing contributions by $90. Accordingly, pursuant
to section 2.02(1)(a)(ii)(D), the missed matching
contribution figure is reduced to $110 ($200 minus
$90). The required corrective contribution is $110.
The corrective contribution is adjusted for earnings.
Example 8:
Employer G maintains a safe harbor § 401(k)
plan that requires matching contributions that satisfy
the requirements of §401(k)(12), which are equal
to: 100% of elective deferrals that do not exceed
3% of an employee’s compensation and 50% of
elective deferrals that exceed 3% but do not exceed
5% of an employee’s compensation. Employee M, a
nonhighly compensated employee who met the eligi-
bility requirements and should have entered the plan
on January 1, 2006, was not offered the opportunity
to defer under the plan and was erroneously excluded
for all of 2006. Employee M’s compensation for
2006 was $20,000.
Correction:
In accordance with the provisions of section
2.02(1)(a)(ii)(B), Employee M’s missed deferral on
account of exclusion from the safe harbor § 401(k)
plan is 3% of compensation. Thus, the missed defer-
ral is equal to 3% multiplied by $20,000, or $600.
Accordingly, the required QNEC for Employee M’s
missed deferral opportunity in 2006 is $300,i.e.,
50% of $600. The required matching contribution,
based on the missed deferral of $600, is $600. The
required corrective contribution for Employee M’s
missed matching contribution is $600. The total
required corrective contribution, before adjustments
for earnings, on behalf of Employee M is $900 (i.e.,
$300 for the missed deferral opportunity, plus $600
for the missed matching contribution). The correc-
tive contribution is adjusted for earnings.
Example 9:
Same facts asExample 8, except that the plan pro-
vides for matching contributions equal to 100% of
elective deferrals that do not exceed 4% of an em-
ployee’s compensation.
Correction:
In accordance with the provisions of section
2.02(1)(a)(ii)(B), Employee M’s missed deferral on
account of exclusion from the safe harbor § 401(k)
plan is 4% of compensation. The missed deferral
is 4% of compensation because the plan provides
for a 100% match for deferrals up to that level of
compensation. (See Appendix A section .05(2)(d).)
Therefore, in this case, Employee M’s missed defer-
ral is equal to 4% multiplied by $20,000, or $800.
The required corrective contribution for Employee
M’s missed deferral opportunity in 2006 is $400,
i.e., 50% multiplied by $800. The required matching
contribution, based on the missed deferral of $800, is
$800. Thus, the required corrective contribution for
Employee M’s missed matching contribution is $800.
The total required corrective contribution, before ad-
justments for earnings, on behalf of Employee M is
$1,200 (i.e., $400 for the missed deferral opportunity
plus $800 for the missed matching contribution).
The corrective contribution is adjusted for earnings.
Example 10:
Same facts as
Example 8, except that the plan uses
a rate of nonelective contributions to satisfy the re-
quirements of §401(k)(12) and provides for a QNEC
equal to 3% of compensation.
Correction:
In accordance with the provisions of section
2.02(1)(a)(ii)(B), Employee M’s missed deferral on
account of exclusion from the safe harbor § 401(k)
plan is 3% of compensation. Thus, the missed
deferral is equal to 3% multiplied by $20,000, or
$600. Thus, the required corrective contribution for
Employee M’s missed deferral opportunity in 2006
is $300 (50% of $600). The required nonelective
contribution, based on the plan’s formula of 3% of
compensation for nonelective contributions, is $600.
The total required QNEC, before adjustments for
earnings, on behalf of Employee M is $900 (i.e., $300
for the missed deferral opportunity, plus $600 for
the missed nonelective contribution). The corrective
contribution is adjusted for earnings.
Example 11:
Employer H maintains a § 401(k) plan. The plan
limit on deferrals is the lesser of the deferral limit un-
der § 401(a)(30) or the limitation under § 415. The
plan also provides that eligible participants (as de-
fined in § 414(v)(5) may make contributions in ex-
cess of the plan’s deferral limits, up to the limitations
on catch-up contributions for the year. The plan also
provides for a 60% matching contribution on elective
deferrals. The deferral limit under § 401(a)(30) for
2006 is $15,000. The limitation on catch-up contribu-
tions under the terms of the plan and § 414(v)(2)(B)(i)
is $5,000.
Employee R, age 55, was provided with the
opportunity to make elective deferrals up to the
plan limit, but was not provided the option to make
catch-up contributions. Employee R is a nonhighly
compensated employee who earned $60,000 in
compensation and made elective deferrals totaling
$15,000 in 2006.
Correction:
In accordance with the provisions of Appendix
A section .05(4), Employee R’s missed deferral on
account of the plan’s failure to offer the opportunity
to make catch-up contributions is $2,500 (or one half
of the limitation on catch-up contributions for 2006).
The missed deferral opportunity is $1,250 (or 50%
of $2,500). Thus, the required QNEC for Employee
R’s missed deferral opportunity relating to catch-up
contributions in 2006 is $1,250 adjusted for earnings.
In addition, Employee R was entitled to an addi-
tional matching contribution, under the terms of the
plan, equal to 60% of the missed deferral that is attrib-
utable to the catch-up contribution that the employee
would have made had the failure not occurred. In
this case, the missed deferral is $2,500 and the corre-
sponding matching contribution is $1,500 (i.e.,60%
of $2,500). Thus, the required corrective contribution
for the additional matching contribution that should
have been made on behalf of Employee R is $1,500
adjusted for earnings.
Example 12:
Employer K maintains a § 401(k) plan. The plan
provides for matching contributions for eligible em-
ployees equal to 100% of elective deferrals that do
not exceed 5% of an employee’s compensation. On
January 1, 2006, Employee T made an election to
contribute 10% of compensation for the 2006 plan
year. However, Employee T’s election was not pro-
cessed, and the required amounts were not withheld
from Employee T’s salary in 2006. Employee T’s
salary was $30,000 in 2006.
Correction:
Employer K uses the correction method described
in Appendix A section .05(5), to correct the failure
to implement Employee T’s election to make elective
deferrals under the plan for the full plan year begin-
ning January 1, 2006. Employer K calculates the cor-
rective QNEC to be made on behalf of Employee T
as follows:
(1) Elective deferrals:
Employee T’s election to make elective deferrals,
pursuant to an election, in 2006 was not implemented.
Thus, pursuant to section .05(5)(a) of Appendix A,
Employer K must make a QNEC to the plan on behalf
of Employee T equal to the missed deferral opportu-
nity for Employee T, which is 50% of Employee T’s
missed deferral. The QNEC is adjusted for earnings.
The missed deferral for Employee T is determined
by using T’s elected deferral percentage (10%) for
2006 and multiplying that percentage by Employee
T’s compensation for 2006 ($30,000). Accordingly,
the missed deferral for Employee V, on account of
the employee’s improper exclusion from the plan is
$3,000 (10% x $30,000). The missed deferral oppor-
2008–35 I.R.B.506September 2, 2008

tunity is $1,500 (i.e., 50% x $3,000). Thus, the re-
quired corrective contribution for the failure to pro-
vide Employee V with the opportunity to make elec-
tive deferrals to the plan is $1,500 (plus earnings).
(2) Matching contributions:
Employee T should have been eligible for but did
not receive an allocation of employer matching con-
tributions because no elective deferrals were made on
behalf of Employee T in 2006. Thus, pursuant to
section .05(5)(c) of Appendix A, Employer K must
make a QNEC to the plan on behalf of Employee T
that is equal to the matching contribution Employee
T would have received had the missed deferral been
made. The QNEC is adjustedfor earnings. Under the
terms of the plan, if Employee T had made an elective
deferral of $3,000 or 10% of compensation ($30,000),
the employee would have been entitled to a matching
contribution equal to 100% of first 3% of Employee
T’s compensation ($30,000) or $900. Accordingly,
the contribution required to replace the missed em-
ployer matching contribution is $900 (plus earnings).
The total required corrective QNEC, before ad-
justments for earnings, on behalf of Employee T is
$2,400 ($1,500 for the missed deferral opportunity
plus $900 for the missed matching contribution).
(2)Exclusion of Eligible Employees In
aProfit-SharingPlan.
(a)Correction Methods.(i)Appendix
A Correction Method. Appendix A, sec-
tion .05 sets forth the correction method
for correcting the failure to make a contri-
bution on behalf of the employees improp-
erly excluded from a defined contribution
plan or to provide benefit accruals for the
employees improperly excluded from a de-
fined benefit plan. In the case of a defined
contribution plan, the correction method
is to make a contribution on behalf of the
excluded employee. Section 2.02(2)(a)(ii)
of this Appendix B clarifies the correction
method in the case of a profit-sharing or
stock bonus plan that provides for nonelec-
tive contributions (within the meaning of
§1.401(k)–6).
(ii)Additional Requirements for Appen-
dixACorrectionMethodasappliedto
Profit-Sharing Plans. To correct for the
exclusion of an eligible employee from
nonelective contributions in a profit-shar-
ing or stock bonus plan under the Ap-
pendix A correction method, an allocation
amount is determined for each excluded
employee on the same basis as the allo-
cation amounts were determined for the
other employees under the plan’s alloca-
tion formula (e.g., the same ratio of allo-
cation to compensation), taking into ac-
count all of the employee’s relevant fac-
tors (e.g., compensation) under that for-
mula for that year. The Employer makes
a corrective contribution on behalf of the
excluded employee that is equal to the allo-
cation amount for the excluded employee.
The corrective contribution is adjusted for
earnings. If, as a result of excluding an
employee, an amount was improperly allo-
cated to the account balance of an eligible
employee who shared in the original allo-
cation of the nonelective contribution, no
reduction is made to the account balance
of the employee who shared in the original
allocation on account of the improper allo-
cation. (See Example 15.)
(iii)Reallocation Correction Method.
(A)In General. Subject to the limita-
tions set forth in section 2.02(2)(a)(iii)(F)
below, in addition to the Appendix A
correction method, the exclusion of an
eligible employee for a plan year from
a profit-sharing or stock bonus plan that
provides for nonelective contributions
may be corrected using the reallocation
correction method set forth in this sec-
tion 2.02(2)(a)(iii). Under the reallocation
correction method,the account balance
of the excluded employee is increased as
provided in paragraph (2)(a)(iii)(B) below,
the account balances of other employ-
ees are reduced as provided in paragraph
(2)(a)(iii)(C) below,and the increases and
reductions are reconciled, as necessary, as
provided in paragraph (2)(a)(iii)(D) below.
(See Examples 16 and 17.)
(B)Increase in Account Balance of Ex-
cluded Employee. The account balance
of the excluded employee is increased by
an amount that is equal to the allocation
the employee would have received had the
employee shared in the allocation of the
nonelective contribution. The amount is
adjusted for earnings.
(C)Reduction in Account Balances of
Other Employees.(1) The account balance
of each employee who was an eligible
employee who shared in the original al-
location of the nonelective contribution
is reduced by the excess, if any, of (I)
the employee’s allocation of that contri-
bution over (II) the amount that would
have been allocated to that employee’s
account had the failure not occurred. This
amount is adjusted for earnings taking
into account the rules set forth in sec-
tion 2.02(2)(a)(iii)(C)(2)and(3)below.
The amount after adjustment for earn-
ings is limited in accordance with section
2.02(2)(a)(iii)(C)(4)below.
(2) This paragraph (2)(a)(iii)(C)(2)ap-
plies if most of the employees with account
balances that are being reduced are non-
highly compensated employees. If there
has been an overall gain for the period
from the date of the original allocation of
the contribution through the date of correc-
tion, no adjustment for earnings is required
to the amount determined under section
2.02(2)(a)(iii)(C)(1) for the employee. If
the amount for the employee is being ad-
justed for earnings and the plan permits
investment of account balances in more
than one investment fund, for administra-
tive convenience, the reduction to the em-
ployee’s account balance may be adjusted
by the lowest earnings rate of any fund
for the period from the date of the origi-
nal allocation of the contribution through
the date of correction.
(3) If an employee’s account balance
is reduced and the original allocation was
made to more than one investment fund
or there was a subsequent distribution or
transfer from the fund receiving the orig-
inal allocation, thenreasonable, consis-
tent assumptions are used to determine the
earnings adjustment.
(4) The amount determined in sec-
tion 2.02(2)(a)(iii)(C)(1) for an em-
ployee after the application of section
2.02(2)(a)(iii)(C)(2)and(3) may not ex-
ceed the account balance of the employee
on the date of correction, and the employee
is permitted to retain any distribution made
prior to the date of correction.
(D)Reconciliation of Increases and
Reductions. If the aggregate amount of the
increases under section 2.02(2)(a)(iii)(B)
exceeds the aggregate amount of the re-
ductions under section 2.02(2)(a)(iii)(C),
the Employer makes a corrective contri-
bution to the plan for the amount of the
excess. If the aggregate amount of the
reductions under section 2.02(2)(a)(iii)(C)
exceeds the aggregate amount of the in-
creases under section 2.02(2)(a)(iii)(B),
then the amount by which each employee’s
account balance is reduced under section
2.02(2)(a)(iii)(C) is decreased on apro
ratabasis.
(E)Reductions Among Multiple Invest-
ment Funds. If an employee’s account bal-
ance is reduced and the employee’s ac-
count balance is invested in more than one
investment fund, then the reduction may be
made from the investment funds selected
in any reasonable manner.
(F)Limitations on Use of Reallo-
cation Correction Method.Ifanyem-
ployee would be permitted to retain
September 2, 20085072008–35 I.R.B.

any distribution pursuant to section
2.02(2)(a)(iii)(C)(4), then the reallocation
correction method may not be used un-
less most of the employees who would
bepermittedtoretainadistributionare
nonhighly compensated employees.
(b) Examples.
Example 13:
Employer D maintains a profit-sharing plan that
provides for discretionary nonelective employer con-
tributions. The plan provides that the employer’s con-
tributions are allocated toaccount balances in the ra-
tio that each eligible employee’s compensation for the
plan year bears to the compensation of all eligible em-
ployees for the plan year and,therefore, the only rel-
evant factor for determining an allocation is the em-
ployee’s compensation. The plan provides for self-di-
rected investments among four investment funds and
daily valuations of account balances. For the 2006
plan year, Employer D made a contribution to the
plan of a fixed dollar amount. However, five em-
ployees who met the eligibility requirements were in-
advertently excluded from participating in the plan.
The contribution resulted in an allocation on behalf
of each of the eligible employees, other than the ex-
cluded employees, equal to 10% of compensation.
Most of the employees who received allocations un-
der the plan for the year of the failure were nonhighly
compensated employees. No distributions have been
made from the plan since 2006. If the five excluded
employees had shared in the original allocation, the
allocation made on behalf of each employee would
have equaled 9% of compensation. The excluded em-
ployees began participating in the plan in the 2007
plan year.
Correction:
Employer D uses the Appendix A correction
method to correct the failure to include the five
eligible employees. Thus, Employer D makes a
corrective contribution to the plan. The amount
of the corrective contribution on behalf of the five
excluded employees for the 2006 plan year is equal
to 10% of compensation of each excluded employee,
the same allocation that was made for other eligible
employees, adjusted for earnings. The excluded
employees receive an allocation equal to 10% of
compensation (adjusted for earnings) even though,
had the excluded employees originally shared in the
allocation for the 2006 contribution, their account
balances, as well as those of the other eligible em-
ployees, would have received an allocation equal to
only 9% of compensation.
Example 14:
The facts are the same as inExample 13.
Correction:
Employer D uses the reallocation correction
method to correct the failure to include the five
eligible employees. Thus, the account balances are
adjusted to reflect what would have resulted from
the correct allocation of the employer contribution
for the 2006 plan year among all eligible employees,
including the five excluded employees. The inclu-
sion of the excluded employees in the allocation of
that contribution would have resulted in each eligi-
ble employee, including each excluded employee,
receiving an allocation equal to 9% of compensation.
Accordingly, the account balance of each excluded
employee is increased by 9% of the employee’s 2006
compensation, adjusted for earnings. The account
balance of each of the eligible employees other
than the excluded employees is reduced by 1% of
the employee’s 2006 compensation, adjusted for
earnings. Employer D determines the adjustment
for earnings using the earnings rate of each eligible
employee’s excess allocation (using reasonable, con-
sistent assumptions). Accordingly, for an employee
who shared in the original allocation and directed
the investment of the allocation into more than one
investment fund or who subsequently transferred a
portion of a fund that had been credited with a portion
of the 2006 allocation to another fund, reasonable,
consistent assumptions are followed to determine
the adjustment for earnings. It is determined that
the total of the initially determined reductions in
account balances exceeds the total of the required
increases in account balances. Accordingly, these
initially determined reductions are decreasedpro
rataso that the total of the actual reductions in ac-
count balances equals the total of the increases in the
account balances, and Employer D does not make
any corrective contribution. The reductions from the
account balances are made on apro ratabasis among
all of the funds in which each employee’s account
balance is invested.
Example 15:
ThefactsarethesameasinExample 13.
Correction:
The correction is the same as inExample 14,ex-
cept that, because most of the employees whose ac-
count balances are being reduced are nonhighly com-
pensated employees, for administrative convenience,
Employer D uses the earnings rate of the fund with
the lowest earnings rate for the period of the failure
to adjust the reduction toeach account balance. It is
determined that the aggregate amount (adjusted for
earnings) by which the account balances of the ex-
cluded employees is increased exceeds the aggregate
amount (adjusted for earnings) by which the other
employees’ account balances are reduced. Accord-
ingly, Employer D makes a contribution to the plan
in an amount equal to the excess. The reduction from
account balances is made on apro ratabasis among
all of the funds in which each employee’s account bal-
ance is invested.
.03Vesting Failures.
(1)Correction Methods.(a)Contribu-
tion Correction Method.Afailureinade-
fined contribution plan to apply the proper
vesting percentage to an employee’s ac-
count balance that results in forfeiture of
too large a portion of the employee’s ac-
count balance may be corrected using the
contribution correction method set forth
in this paragraph. The Employer makes
a corrective contribution on behalf of the
employee whose account balance was im-
properly forfeited in an amount equal to
the improper forfeiture. The corrective
contribution is adjusted for earnings. If,
as a result of the improper forfeiture, an
amount was improperly allocated to the ac-
count balance of another employee, no re-
duction is made to the account balance of
that employee. (See Example 16.)
(b)Reallocation Correction Method.In
lieu of the contribution correction method,
in a defined contribution plan under which
forfeitures of account balances are reallo-
cated among the account balances of the
other eligible employees in the plan, a fail-
ure to apply the proper vesting percentage
to an employee’s account balance which
results in forfeiture of too large a portion
of the employee’s account balance may
be corrected under the reallocation correc-
tion method set forth in this paragraph.
A corrective reallocation is made in ac-
cordance with the reallocation correction
method set forth in section 2.02(2)(a)(iii),
subject to the limitations set forth in sec-
tion 2.02(2)(a)(iii)(F). In applying section
2.02(2)(a)(iii)(B), the account balance of
the employee who incurred the improper
forfeiture is increased by an amount equal
to the amount of the improper forfeiture
and the amount is adjusted for earnings.
In applying section 2.02(2)(a)(iii)(C)(1),
the account balance of each employee who
shared in the allocation of the improper
forfeiture is reduced by the amount of the
improper forfeiture that was allocated to
that employee’s account. The earnings
adjustments for the account balances that
are being reduced are determined in accor-
dance with sections 2.02(2)(a)(iii)(C)(2)
and (3) and the reductions after adjust-
ments for earnings are limited in accor-
dance with section 2.02(2)(a)(iii)(C)(4). In
accordance with section 2.02(2)(a)(iii)(D),
if the aggregate amount of the increases
exceeds the aggregate amount of the re-
ductions, the Employer makes a correc-
tive contribution to the plan for the amount
of the excess. In accordance with section
2.02(2)(a)(iii)(D), if the aggregate amount
of the reductions exceeds the aggregate
amount of the increases, then the amount
by which each employee’s account balance
is reduced is decreased on apro ratabasis.
(See Example 17.)
(2) Examples.
Example 16:
Employer E maintains a profit-sharing plan that
provides for nonelective contributions. The plan pro-
vides for self-directed investments among four in-
vestment funds and daily valuation of account bal-
2008–35 I.R.B.508September 2, 2008

ances. The plan provides that forfeitures of account
balances are reallocated among the account balances
of other eligible employees on the basis of compen-
sation. During the 2006 plan year, Employee R ter-
minated employment with Employer E and elected
and received a single-sum distribution of the vested
portion of his account balance. No other distribu-
tions have been made since 2006. However, an incor-
rect determination of Employee R’s vested percent-
age was made resulting in Employee R receiving a
distribution of less than the amount to which he was
entitled under the plan. The remaining portion of Em-
ployee R’s account balance was forfeited and reallo-
cated (and these reallocations were not affected by
the limitations of § 415). Most of the employees who
received allocations of the improper forfeiture were
nonhighly compensated employees.
Correction:
Employer E uses the contribution correction
method to correct the improper forfeiture. Thus, Em-
ployer E makes a contribution on behalf of Employee
R equal to the incorrectly forfeited amount (adjusted
for earnings) and Employee R’s account balance is
increased accordingly. Noreduction is made from
the account balances of the employees who received
an allocation of the improper forfeiture.
Example 17:
The facts are the same as inExample 16.
Correction:
Employer E uses the reallocation correction
method to correct the improper forfeiture. Thus,
Employee R’s account balance is increased by the
amount that was improperly forfeited (adjusted for
earnings). The account of each employee who shared
in the allocation of the improper forfeiture is reduced
by the amount of the improper forfeiture that was
allocated to that employee’s account (adjusted for
earnings). Because most of the employees whose
account balances are being reduced are nonhighly
compensated employees, for administrative conve-
nience, Employer E uses the earnings rate of the
fund with the lowest earnings rate for the period of
the failure to adjust the reduction to each account
balance. It is determined that the amount (adjusted
for earnings) by which the account balance of Em-
ployee R is increased exceeds the aggregate amount
(adjusted for earnings) by which the other employ-
ees’ account balances are reduced. Accordingly,
Employer E makes a contribution to the plan in an
amount equal to the excess. The reduction from the
account balances is made on apro ratabasis among
all of the funds in which each employee’s account
balance is invested.
.04§ 415 Failures.
(1)Failures Relating to a § 415(b) Ex-
cess.
(a)Correction Methods.(i)Return of
Overpayment Correction Method.Over-
payments as a result of amounts being paid
in excess of the limits of § 415(b) may
be corrected using the return of Overpay-
ment correction method set forth in this
paragraph (1)(a)(i). The Employer takes
reasonable steps to have the Overpayment
(with appropriate interest) returned by the
recipient to the plan and reduces future
benefit payments (if any) due to the em-
ployee to reflect § 415(b). To the ex-
tent the amount returned by the recipi-
ent is less than the Overpayment, adjusted
for earnings at the plan’s earnings rate,
then the Employer or another person con-
tributes the difference to the plan. In ad-
dition, in accordance with section 6.05 of
this revenue procedure, the Employer must
notify the recipient that the Overpayment
was not eligible for favorable tax treat-
ment accorded to distributions from quali-
fied plans (and, specifically, was not eligi-
ble for tax-free rollover). (See Examples
20 and 21.)
(ii)Adjustment of Future Payments
Correction Method.(A)In General.In
addition to the return of overpayment cor-
rection method, in the case of plan benefits
that are being distributed in the form of
periodic payments, Overpayments as a
result of amounts being paid in excess of
the limits in § 415(b) may be corrected
by using the adjustment of future pay-
mentscorrectionmethodsetforthinthis
paragraph (1)(a)(ii). Future payments to
the recipient are reduced so that they do
not exceed the § 415(b) maximum limit
and an additional reduction is made to
recoup the Overpayment (over a period
not longer than the remaining payment
period) so that the actuarial present value
of the additional reduction is equal to the
Overpayment plus interest at the interest
rate used by the plan to determine actuarial
equivalence. (See Examples 18 and 19.)
(B)Joint and Survivor Annuity Pay-
ments. If the employee is receiving pay-
ments in the form of a joint and survivor
annuity, with the employee’s spouse to re-
ceive a life annuity upon the employee’s
death equal to a percentage (e.g.,75%)of
the amount being paid to the employee, the
reduction of future annuity payments to re-
flect § 415(b) reduces the amount of bene-
fits payable during the lives of both the em-
ployee and spouse, but any reduction to re-
coup Overpayments made to the employee
does not reduce the amount of the spouse’s
survivor benefit. Thus, the spouse’s bene-
fit will be based on the previous specified
percentage (e.g., 75%) of the maximum
permitted under § 415(b), instead of the re-
duced annual periodic amount payable to
the employee.
(C)Overpayment Not Treated as an Ex-
cess Amount. An Overpayment corrected
under this adjustment of future payment
correction method is not treated as an Ex-
cess Amount as defined in section 5.01(3)
of this revenue procedure.
(b) Examples.
Example 18:
Employer F maintains a defined benefit plan
funded solely through employer contributions. The
plan provides that the benefits of employees are
limited to the maximum amount permitted under
§ 415(b), disregarding cost-of-living adjustments un-
der § 415(d) after benefit payments have commenced.
At the beginning of the 2006 plan year, Employee
S retired and started receiving an annual straight
life annuity of $185,000 from the plan. Due to an
administrative error, the annual amount received by
Employee S for 1998 included an Overpayment of
$10,000 (because the § 415(b)(1)(A) limit for 2006
was $175,000). This error was discovered at the
beginning of 2007.
Correction:
Employer F uses the adjustment of future pay-
ments correction method to correct the failure to sat-
isfy the limit in § 415(b). Future annuity benefit pay-
ments to Employee S are reduced so that they do not
exceed the § 415(b) maximum limit, and, in addition,
Employee S’s future benefit payments from the plan
are actuarially reduced torecoup the Overpayment.
Accordingly, Employee S’s future benefit payments
from the plan are reduced to $175,000 and further re-
duced by $1,000 annually for life, beginning in 2007.
The annual benefit amount is reduced by $1,000 an-
nually for life because, for Employee S, the actuarial
present value of a benefit of $1,000 annually for life
commencing in 2007 is equal to the sum of $10,000
and interest at the rate used by the plan to determine
actuarial equivalence beginning with the date of the
first Overpayment and ending with the date the re-
duced annuity payment begins. Thus, Employee S’s
remaining benefit payments are reduced so that Em-
ployee S receives $174,000 for 2007, and for each
year thereafter.
Example 19:
The facts are the same as inExample 18.
Correction:
Employer F uses the adjustments of future pay-
ments correction method to correct the § 415(b) fail-
ure, by recouping the entire excess payment made in
2006 from Employee S’s remaining benefit payments
for 2007. Thus, Employee S’s annual annuity benefit
for 2007 is reduced to $164,400 to reflect the excess
benefit amounts (increased by interest) that were paid
from the plan to Employee S during the 2006 plan
year. Beginning in 2008, Employee S begins to re-
ceive annual benefit payments of $175,000.
Example 20:
The facts are the same as inExample 18, except
that the benefit was paid to Employee S in the form
of a single-sum distribution in 2006, which exceeded
the maximum § 415(b) limits by $110,000.
September 2, 20085092008–35 I.R.B.

Correction:
Employer F uses the return of overpayment cor-
rection method to correct the § 415(b) failure. Thus,
Employer F notifies Employee S of the $110,000
Overpayment and that the Overpayment was not
eligible for favorable tax treatment accorded to dis-
tributions from qualified plans (and, specifically, was
not eligible for tax-free rollover). The notice also
informs Employee S that the Overpayment (with
interest at the rate used by the plan to calculate the
single-sum payment) is owed to the plan. Employer
F takes reasonable steps to have the Overpayment
(with interest at the rate used by the plan to calculate
the single-sum payment) paid to the plan. Employee
S pays the $110,000 (plus the requested interest) to
the plan. It is determined that the plan’s earnings
rate for the relevant period was 2 percentage points
more than the rate used by the plan to calculate
the single-sum payment. Accordingly, Employer F
contributes the difference to the plan.
Example 21:
The facts are the same as inExample 20.
Correction:
Employer F uses the return of overpayment cor-
rection method to correct the § 415(b) failure. Thus,
Employer F notifies Employee S of the $110,000
Overpayment and that the Overpayment was not
eligible for favorable tax treatment accorded to dis-
tributions from qualified plans (and, specifically, was
not eligible for tax-free rollover). The notice also
informs Employee S that the Overpayment (with
interest at the rate used by the plan to calculate the
single-sum payment) is owed to the plan. Employer
F takes reasonable steps to have the Overpayment
(with interest at the rate used by the plan to calculate
the single-sum payment) paid to the plan. As a result
of Employer F’s recovery efforts, some, but not
all, of the Overpayment (with interest) is recovered
from Employee S. It is determined that the amount
returned by Employee S to the plan is less than the
Overpayment adjusted for earnings at the plan’s
earnings rate. Accordingly, Employer F contributes
thedifferencetotheplan.
(2)Failures Relating to a § 415(c) Ex-
cess.
(a)Correction Methods.(i)Appendix
A Correction Method. Appendix A, sec-
tion .08 sets forth the correction method for
correcting the failure to satisfy the § 415(c)
limits on annual additions.
(ii)Forfeiture Correction Method.In
addition to the Appendix A correction
method, the failure to satisfy § 415(c)
with respect to a nonhighly compensated
employee (A) who in the limitation year
of the failure had annual additions consist-
ing of both (I) either elective deferrals or
after-tax employee contributions or both
and (II) either matching or nonelective
contributions or both, (B) for whom the
matching and nonelective contributions
equal or exceed the portion of the em-
ployee’s annual addition that exceeds the
limits under § 415(c) (“§ 415(c) excess”)
for the limitation year, and (C) who has
terminated with no vested interest in the
matching and nonelective contributions
(and has not been reemployed at the time
of the correction), may be corrected by
using the forfeiturecorrection method
set forth in this paragraph. The § 415(c)
excess is deemed to consist solely of the
matching and nonelective contributions.
If the employee’s § 415(c) excess (ad-
justed for earnings)has previously been
forfeited, the § 415(c) failure is deemed to
be corrected. If the § 415(c) excess (ad-
justed for earnings) has not been forfeited,
that amount is placed in an unallocated
account, as described in section 6.06(2) of
this revenue procedure, to be used to re-
duce employer nonelective contributions
in succeeding year(s) (or if the amount
would have been allocated to other em-
ployees who were in the plan for the year
of the failure if the failure had not oc-
curred, then that amount is reallocated to
the other employees in accordance with
the plan’s allocation formula). Note that
while this correction method will permit
more favorable tax treatment of elective
deferrals for the employee than the Appen-
dix A correction method, this correction
method could be less favorable to the em-
ployee in certain cases, for example, if the
employee is subsequently reemployed and
becomes vested. (See Examples 22 and
23.)
(iii)Return of Overpayment Correc-
tion Method. A failure to satisfy § 415(c)
that includes a distribution of the § 415(c)
excess attributable tononelective contri-
butions and matching contributions may
be corrected using the return of Overpay-
ment correction method set forth in section
6.06(3) of this revenue procedure.
(b) Examples.
Example 22:
Employer G maintains a § 401(k) plan. The
plan provides for nonelective employer contribu-
tions, elective deferrals, and after-tax employee
contributions. The plan provides that the nonelec-
tive contributions vest under a 5-year cliff vesting
schedule. The plan provides that when an employee
terminates employment, the employee’s nonvested
account balance is forfeited five years after a dis-
tribution of the employee’s vested account balance
and that forfeitures are used to reduce employer
contributions. For the 1998 limitation year, the
annual additions made on behalf of two nonhighly
compensated employees in the plan, Employees T
and U, exceeded the limit in § 415(c). For the 1998
limitation year, Employee T had § 415 compensation
of $60,000, and, accordingly, a § 415(c)(1)(B) limit
of $15,000. Employee T made elective deferrals and
after-tax employee contributions. For the 1998 limi-
tation year, Employee U had § 415 compensation of
$40,000, and, accordingly,a § 415(c)(1)(B) limit of
$10,000. Employee U made elective deferrals. Also,
on January 1, 1999, Employee U, who had three
years of service with Employer G, terminated his
employment and received his entire vested account
balance (which consisted of his elective deferrals).
The annual additions for Employees T and U con-
sisted of:
TU
Nonelective Contributions
$ 7,500$ 4,500
Elective Deferrals10,000
5,800
After-tax Contributions
500
0
To
tal Contributions
$18,000$10,300
§4
15(c) Limit
$15,000$10,000
§ 415(c) Excess
$3
,000
$3
00
Correction:
Employer G uses the Appendix A correction
method to correct the § 415(c) excess with respect
to Employee T (i.e., $3,000). Thus, a distribution
of plan assets (and corresponding reduction of the
account balance) consisting of $500 (adjusted for
earnings) of after-tax employee contributions and
$2,500 (adjusted for earnings) of elective deferrals is
made to Employee T. Employer G uses the forfeiture
correction method to correct the § 415(c) excess with
respect to Employee U. Thus, the § 415(c) excess
is deemed to consist solely of the nonelective con-
tributions. Accordingly, Employee U’s nonvested
account balance is reduced by $300 (adjusted for
earnings) which is placed in an unallocated account,
as described in section 6.06(2) of this revenue proce-
dure, to be used to reduce employer contributions in
succeeding year(s). After correction, it is determined
that the ADP and ACP tests for 1998 were satisfied.
2008–35 I.R.B.510September 2, 2008

Example 23:
Employer H maintains a § 401(k) plan. The
plan provides for nonelective employer contribu-
tions, matching contributions and elective deferrals.
The plan provides for matching contributions that
are equal to 100% of an employee’s elective de-
ferrals that do not exceed 8% of the employee’s
plan compensation for the plan year. For the 1998
limitation year, Employee V had § 415 compensa-
tion of $50,000, and, accordingly, a § 415(c)(1)(B)
limit of $12,500. During that limitation year, the
annual additions for Employee V totaled $15,000,
consisting of $5,000 in elective deferrals, a $4,000
matching contribution (8% of $50,000), and a $6,000
nonelective employer contribution. Thus, the annual
additions for Employee V exceeded the § 415(c)
limit by $2,500.
Correction:
Employer H uses the Appendix A correction
method to correct the § 415(c) excess with respect
to Employee V (i.e., $2,500). Accordingly, $1,000
of the unmatched elective deferrals (adjusted for
earnings) are distributed to Employee V. The remain-
ing $1,500 excess is apportioned equally between
the elective deferrals and the associated matching
employer contributions, so Employee V’s account
balance is further reduced by distributing to Em-
ployee V $750 (adjusted for earnings) of the elective
deferrals and forfeiting $750 (adjusted for earnings)
of the associated employer matching contributions.
The forfeited matching contributions are placed in an
unallocated account, as described in section 6.06(2)
of this revenue procedure, to be used to reduce em-
ployer contributions in succeeding year(s). After
correction, it is determined that the ADP and ACP
tests for 1998 were satisfied.
.05Correction of Other Overpayment
Failures.
An Overpayment, other than one de-
scribed in section 2.04(1) (relating to a
§ 415(b) excess) or section 2.04(2) (re-
lating to a § 415(c) excess), may be cor-
rected in accordance with this section 2.05.
An Overpayment from a defined benefit
plan is corrected in accordance with the
rules in section 2.04(1). An Overpayment
from a defined contribution plan is cor-
rected in accordance with the rules in sec-
tion 2.04(2)(a)(iii).
.06§ 401(a)(17) Failures.
(1)Reduction of Account Balance Cor-
rection Method. The allocation of contri-
butions or forfeitures under a defined con-
tribution plan for a plan year on the basis of
compensation in excess of the limit under
§ 401(a)(17) for the plan year may be cor-
rected using the reduction of account bal-
ance correction method set forth in section
6.06(2) of this revenue procedure.
(2) Example.
Example 24:
Employer J maintains a money purchase pension
plan. Under the plan, an eligible employee is entitled
to an employer contribution of 8% of the employee’s
compensation up to the § 401(a)(17) limit ($220,000
for 2006). During the 2006 plan year, an eligible
employee, Employee W, inadvertently was credited
with a contribution based on compensation above the
§ 401(a)(17) limit. Employee W’s compensation for
2006 was $250,000. Employee W received a contri-
bution of $20,000 for 2006 (8% of $250,000), rather
than the contribution of $17,600 (8% of $220,000)
provided by the plan for that year, resulting in an im-
proper allocation of $2,400.
Correction:
The § 401(a)(17) failure is corrected using the re-
duction of account balance method by reducing Em-
ployee W’s account balance by $2,400 (adjusted for
earnings) and crediting that amount to an unallocated
account, as described in section 6.06(2) of this rev-
enue procedure, to be used to reduce employer con-
tributions in succeeding year(s).
.07Correction by Amendment.
(1)§ 401(a)(17) Failures.(a)Contribu-
tion Correction Method. In addition to the
reduction of account balance correction
method under section 6.06(2) of this rev-
enue procedure, an employer may correct
a § 401(a)(17) failure for a plan year under
a defined contribution plan by using the
contribution correctionmethodsetforthin
this paragraph. The Employer contributes
an additional amount on behalf of each of
the other employees (excluding each em-
ployee for whom there was a § 401(a)(17)
failure) who received an allocation for the
year of the failure, amending the plan (as
necessary) to provide for the additional
allocation. The amount contributed for an
employee is equal to the employee’s plan
compensation for the year of the failure
multiplied by a fraction, the numerator of
which is the improperly allocated amount
made on behalf of the employee with the
largest improperly allocated amount, and
the denominator of which is the limit un-
der § 401(a)(17) applicable to the year
of the failure. The resulting additional
amount for each of the other employees is
adjusted for earnings. (See Example 25.)
(b) Example.
Example 25:
ThefactsarethesameasinExample 24.
Correction:
Employer J corrects the failure under VCP using
the contribution correction method by (1) amend-
ing the plan to increase the contribution percentage
for all eligible employees (other than Employee
W) for the 2003 plan year and (2) contributing an
additional amount (adjusted for earnings) for those
employees for that plan year. To determine the
increase in the plan’s contribution percentage (and
the additional amount contributed on behalf of each
eligible employee), the improperly allocated amount
($2,400) is divided by the § 401(a)(17) limit for 2006
($220,000). Accordingly, the plan is amended to
increase the contribution percentage by 1.09 percent-
age points ($2,400/$220,000) from 8% to 9.09%. In
addition, each eligible employee for the 2006 plan
year (other than Employee W) receives an additional
contribution of 1.09% multiplied by that employee’s
plan compensation for 2006. This additional contri-
bution is adjusted for earnings.
(2)Hardship Distribution Failures and
Plan Loan Failures.(a)Plan Amend-
ment Correction Method. The Operational
Failure of making hardship distributions
to employees under a plan that does not
provide for hardship distributions may
be corrected using the plan amendment
correction method set forth in this para-
graph. The plan is amended retroactively
to provide for the hardship distributions
that were made available. This paragraph
does not apply unless (i) the amendment
satisfies § 401(a), and (ii) the plan as
amended would have satisfied the qualifi-
cation requirements of § 401(a) (including
the requirements applicable to hardship
distributions under § 401(k), if applicable)
had the amendment been adopted when
hardship distributions were first made
available. (See Example 26.) The Plan
Amendment Correction Method is also
available for the Operational Failure of
permitting plan loans to employees un-
der a plan that does not provide for plan
loans. The plan is amended retroactively
to provide for the plan loans that were
made available. This paragraph does not
apply unless (i) the amendment satisfies
§ 401(a), and (ii) the plan as amended
would have satisfied the qualification
requirements of § 401(a) (and the re-
quirements applicable to plan loans under
§ 72(p)) had the amendment been adopted
when plan loans were first made available.
(b) Example.
Example 26:
Employer K, a for-profit corporation, maintains
a § 401(k) plan. Although plan provisions in 2005
did not provide for hardship distributions, beginning
in 2005 hardship distributions of amounts allowed to
be distributed under § 401(k) were made currently
and effectively available to all employees (within the
meaning of § l.401(a)(4)–4). The standard used to de-
termine hardship satisfied the deemed hardship distri-
bution standards in § 1.401(k)–1(d). Hardship distri-
butions were made to a number of employees during
September 2, 20085112008–35 I.R.B.

the2005and2006planyears,creatinganOperational
Failure. The failure was discovered in 2007.
Correction:
Employer K corrects the failure under VCP by
adopting a plan amendment, effective January 1,
2005, to provide a hardship distribution option that
satisfies the rules applicable to hardship distributions
in § 1.401(k)–1(d). The amendment provides that
the hardship distribution option is available to all
employees. Thus, the amendment satisfies § 401(a),
and the plan as amended in 2005 would have sat-
isfied § 401(a) (including § 1.401(a)(4)–4 and the
requirements applicable to hardship distributions
under § 401(k)) if the amendment had been adopted
in 2005.
(3)Early Inclusion of Otherwise Eli-
gible Employee Failure.(a)Plan Amend-
ment Correction Method. The Operational
Failure of including an otherwise eligible
employee in the plan who either (i) has
not completed the plan’s minimum age
or service requirements, or (ii) has com-
pleted the plan’s minimum age or service
requirements but became a participant in
the plan on a date earlier than the appli-
cable plan entry date, may be corrected
by using the plan amendment correction
method set forth in this paragraph. The
plan is amended retroactively to change
the eligibility or entry date provisions to
provide for the inclusion of the ineligible
employee to reflect the plan’s actual oper-
ations. The amendment may change the
eligibility or entry date provisions with
respect to only those ineligible employees
that were wrongly included, and only to
those ineligible employees, provided (i)
the amendment satisfies § 401(a) at the
time it is adopted, (ii) the amendment
would have satisfied § 401(a) had the
amendment been adopted at the earlier
time when it is effective, and (iii) the em-
ployees affected by the amendment are
predominantly nonhighly compensated
employees.
(b) Example.
Example 27:
Employer L maintains a § 401(k) plan applicable
to all of its employees who have at least six months
of service. The plan is a calendar year plan. The
plan provides that Employer L will make matching
contributions based upon an employee’s salary reduc-
tion contributions. In 2007, it is discovered that all
four employees who were hired by Employer L in
2006 were permitted to make salary reduction con-
tributions to the plan effective with the first weekly
paycheck after they were employed. Three of the four
employees are nonhighly compensated. Employer L
matched these employees’ salary reduction contribu-
tions in accordance with the plan’s matching contri-
bution formula. Employer L calculates the ADP and
ACP tests for 2006 (taking into account the salary re-
duction and matching contributions that were made
for these employees) and determines that the tests
were satisfied.
Correction:
Employer L corrects the failure under SCP by
adopting a plan amendment,effective for employees
hired on or after January 1, 2006, to provide that there
is no service eligibility requirement under the plan
and submitting the amendment to the Service for a
determination letter.
SECTION 3. EARNINGS
ADJUSTMENT METHODS AND
EXAMPLES
.01Earnings Adjustment Methods.(1)
In general. (a) Under section 6.02(4)(a)
of this revenue procedure, whenever the
appropriate correction method for an Op-
erational Failure in a defined contribution
plan includes a corrective contribution or
allocation that increases one or more em-
ployees’ account balances (now or in the
future), the contribution or allocation is
adjusted for earnings and forfeitures. This
section 3 provides earnings adjustment
methods (but not forfeiture adjustment
methods) that may be used by an em-
ployer to adjust a corrective contribution
or allocation for earnings in a defined
contribution plan. Consequently, these
earnings adjustment methods may be used
to determine the earnings adjustments
for corrective contributions or allocations
made under the correction methods in sec-
tion 2 and under the correction methods
in Appendix A. If an earnings adjustment
method in this section 3 is used to adjust
a corrective contribution or allocation,
that adjustment is treated as satisfying the
earnings adjustment requirement of sec-
tion 6.02(4)(a) of this revenue procedure.
Other earnings adjustment methods, dif-
ferent from those illustrated in this section
3, may also be appropriate for adjusting
corrective contributions or allocations to
reflect earnings.
(b) Under the earnings adjustment
methods of this section 3, a corrective
contribution or allocation that increases an
employee’s account balance is adjusted to
reflect an “earnings amount” that is based
on the earnings rate(s) (determined under
section 3.01(3)) for the period of the fail-
ure (determined under section 3.01(2)).
The earnings amount is allocated in accor-
dance with section 3.01(4).
(c) The rule in section 6.02(5)(a) of this
revenue procedure permitting reasonable
estimates in certain circumstances applies
for purposes of this section 3. For this pur-
pose, a determination of earnings made in
accordance with the rules of administra-
tive convenience set forth in this section
3 is treated as a precise determination of
earnings. Thus, if the probable difference
between an approximate determination of
earnings and a determination of earnings
under this section 3 is insignificant and the
administrative cost of a precise determina-
tion would significantly exceed the prob-
able difference, reasonable estimates may
be used in calculating the appropriate earn-
ings.
(d) This section 3 does not apply to
corrective distributions or corrective re-
ductions in account balances. Thus, for
example, while this section 3 applies in
increasing the account balance of an im-
properly excludedemployee to correct
the exclusion of the employee under the
reallocation correction method described
in section 2.02(2)(a)(iii)(B), this section
3doesnotapplyinreducingtheaccount
balances of other employees under the re-
allocation correction method. (See section
2.02(2)(a)(iii)(C) for rules that apply to
the earnings adjustments for such reduc-
tions.) In addition, this section 3 does not
apply in determining earnings adjustments
under the one-to-one correction method
described in section 2.01(1)(b)(iii).
(2)Period of the Failure.(a)General
Rule. For purposes of this section 3, the
“period of the failure” is the period from
the date that the failure began through the
date of correction. For example, in the case
of an improper forfeiture of an employee’s
account balance, the beginning of the pe-
riod of the failure is the date as of which the
account balance was improperly reduced.
See section 6.02(4)(e) of this revenue pro-
cedure.
(b)Rules for Beginning Date for Ex-
clusion of Eligible Employees from Plan.
(i)General Rule. Inthecaseofanexclu-
sion of an eligible employee from a plan
contribution, the beginning of the period
of the failure is the date on which con-
tributions of the same type (e.g., elective
deferrals, matching contributions, or dis-
cretionary nonelective employer contribu-
tions) were made for other employees for
the year of the failure. In the case of an
exclusion of an eligible employee from an
2008–35 I.R.B.512September 2, 2008

allocation of a forfeiture, the beginning
of the period of the failure is the date on
which forfeitures were allocated to other
employees for the year of the failure.
(ii)Exclusion from a 401(k) or (m)
Plan. For administrative convenience,
for purposes of calculating the earnings
rate for corrective contributions for a plan
year (or the portion of the plan year) dur-
ing which an employee was improperly
excluded from making periodic elective
deferrals or after-tax employee contribu-
tions, or from receiving periodic matching
contributions, the Employer may treat the
date on which the contributions would
have been made as the midpoint of the plan
year (or the midpoint of the portion of the
plan year) for which the failure occurred.
Alternatively, in this case, the Employer
may treat the date on which the contribu-
tions would have been made as the first
date of the plan year (or the portion of
the plan year) during which an employee
was excluded, provided that the earnings
rate used is one half of the earnings rate
applicable under section 3.01(3) for the
plan year (or the portion of the plan year)
for which the failure occurred.
(3)Earnings Rate.(a)General Rule.
For purposes of this section 3, the earn-
ings rate generally is based on the invest-
ment results that would have applied to the
corrective contribution or allocation if the
failure had not occurred.
(b)Multiple Investment Funds.Ifa
plan permits employees to direct the in-
vestment of account balances into more
than one investment fund, the earnings rate
is based on the rate applicable to the em-
ployee’s investment choices for the period
of the failure. For administrative conve-
nience, if most of the employees for whom
the corrective contribution or allocation is
made are nonhighly compensated employ-
ees, the rate of return of the fund with the
highest earnings rate under the plan for the
period of the failure may be used to de-
termine the earnings rate for all corrective
contributions or allocations. If the em-
ployee had not made any applicable in-
vestment choices, the earnings rate may be
based on the earnings rate under the plan
as a whole (i.e., the average of the rates
earned by all of the funds in the valua-
tion periods during the period of the failure
weighted by the portion of the plan assets
invested in the various funds during the pe-
riod of the failure).
(c)Other Simplifying Assumptions.For
administrative convenience, the earnings
rate applicable to the corrective contribu-
tion or allocation for a valuation period
with respect to any investment fund may
be assumed to be the actual earnings rate
for the plan’s investments in that fund dur-
ing that valuation period. For example,
the earnings rate may be determined with-
out regard to any special investment provi-
sions that vary according to the size of the
fund. Further, the earnings rate applicable
to the corrective contribution or allocation
for a portion of a valuation period may be
apro rataportion of the earnings rate for
the entire valuation period, unless the ap-
plication of this rule would result in either
a significant understatement or overstate-
ment of the actual earnings during that por-
tion of the valuation period.
(4)Allocation Methods.(a)In General.
For purposes of this section 3, the earnings
amount generally may be allocated in ac-
cordance with any of the methods set forth
in this paragraph (4). The methods under
paragraph (4)(c), (d), and (e) are intended
to be particularly helpful where corrective
contributions are made at dates between
the plan’s valuation dates.
(b)Plan Allocation Method.Under
the plan allocation method, the earnings
amount is allocated to account balances
under the plan in accordance with the
plan’s method for allocating earnings as if
the failure had not occurred. (See, Exam-
ple 28.)
(c)Specific Employee Allocation
Method. Under the specific employee
allocation method, the entire earnings
amount is allocated solely to the account
balance of the employee on whose behalf
the corrective contribution or allocation
is made (regardless of whether the plan’s
allocation method would have allocated
the earnings solely to that employee). In
determining the allocation of plan earn-
ings for the valuation period during which
the corrective contribution or allocation is
made, the corrective contribution or allo-
cation (including the earnings amount) is
treated in the same manner as any other
contribution under the plan on behalf of
the employee during that valuation period.
Alternatively, where the plan’s allocation
method does not allocate plan earnings
for a valuation period to a contribution
made during that valuation period, plan
earnings for the valuation period during
which the corrective contribution or al-
location is made may be allocated as if
that employee’s account balance had been
increased as of the last day of the prior
valuation period by the corrective contri-
bution or allocation, including only that
portion of the earnings amount attribut-
able to earnings through the last day of the
prior valuation period. The employee’s
account balance is then further increased
as of the last day of the valuation period
during which the corrective contribution
or allocation is made by that portion of the
earnings amount attributable to earnings
after the last day of the prior valuation
period. (See Example 29.)
(d)Bifurcated Allocation Method.Un-
der the bifurcated allocation method, the
entire earnings amount for the valuation
periods ending before the date the correc-
tive contribution or allocation is made is
allocated solely to the account balance of
the employee on whose behalf the cor-
rective contribution or allocation is made.
The earnings amount for the valuation pe-
riod during which the corrective contribu-
tion or allocation is made is allocated in ac-
cordance with the plan’s method for allo-
cating other earnings for that valuation pe-
riod in accordance withsection 3.01(4)(b).
(See Example 30.)
(e)Current Period Allocation Method.
Under the current period allocation
method, the portion of the earnings amount
attributable to the valuation period dur-
ing which the period of the failure begins
(“first partial valuation period”) is allo-
cated in the same manner as earnings for
the valuation period during which the cor-
rective contribution or allocation is made
in accordance section 3.01(4)(b). The
earnings for the subsequent full valuation
periods ending before the beginning of
the valuation period during which the cor-
rective contribution or allocation is made
are allocated solely to the employee for
whom the required contribution should
have been made. The earnings amount
for the valuation period during which the
corrective contribution or allocation is
made (“second partial valuation period”)
is allocated in accordance with the plan’s
method for allocating other earnings for
that valuation period in accordance with
section 3.01(4)(b). (See Example 31.)
.02Examples.
September 2, 20085132008–35 I.R.B.

Example 28:
Employer L maintains a profit-sharing plan that
provides only for nonelective contributions. The plan
has a single investment fund. Under the plan, assets
are valued annually (the last day of the plan year) and
earnings for the year are allocated in proportion to ac-
count balances as of the last day of the prior year, after
reduction for distributions during the current year but
without regard to contributions received during the
current year (the “prior year account balance”). Plan
contributions for 1997 were made on March 31, 1998.
On April 20, 2000 Employer L determines that an op-
erational failure occurred for 1997 because Employee
X was improperly excluded from the plan. Employer
L decides to correct the failure by using the Appen-
dix A correction method for the exclusion of an el-
igible employee from nonelective contributions in a
profit-sharing plan. Under this method, Employer L
determines that this failure is corrected by making a
contribution on behalf of Employee X of $5,000 (ad-
justed for earnings). The earnings rate under the plan
for 1998 was +20%. The earnings rate under the plan
for 1999 was +10%. On May 15, 2000, when Em-
ployer L determines that a contribution to correct for
the failure will be made on June 1, 2000, a reasonable
estimate of the earnings rate under the plan from Jan-
uary 1, 2000 to June 1, 2000 is +12%.
Earnings Adjustment on the Corrective Contribution:
The $5,000 corrective contribution on behalf of
Employee X is adjusted to reflect an earnings amount
based on the earnings rates for the period of the fail-
ure (March 31, 1998 through June 1, 2000) and the
earnings amount is allocated using the plan alloca-
tion method. Employer L determines that apro rata
simplifying assumption may be used to determine the
earnings rate for the period from March 31, 1998 to
December 31, 1998, because that rate does not sig-
nificantly understate or overstate the actual earnings
for that period. Accordingly, Employer L determines
that the earnings rate for that period is 15% (9/12 of
the plan’s 20% earnings rate for the year). Thus, ap-
plicable earnings rates under the plan during the pe-
riod of the failure are:
Time PeriodsEarnings Rate
3/31/98 — 12/31/98 (First Partial Valuation Period)
+15%
1/1/99 — 12/31/99+10%
1/1/00 — 6/1/00 (Second Partial Valuation Period)+12%
If the $5,000 corrective contribution had been
contributed for Employee X on March 31, 1998, (1)
earnings for 1998 would have been increased by the
amount of the earnings on the additional $5,000 con-
tribution from March 31, 1998 through December 31,
1998 and would have been allocated as 1998 earnings
in proportion to the prior year (December 31, 1997)
account balances, (2) Employee X’s account balance
as of December 31, 1998 would have been increased
by the additional $5,000 contribution, (3) earnings for
1999 would have been increased by the 1999 earn-
ings on the additional $5,000 contribution (including
1998 earnings thereon) allocated in proportion to the
prior year (December 31, 1998) account balances
along with other 1999 earnings, and (4) earnings
for 2000 would have been increased by the earnings
on the additional $5,000 (including 1998 and 1999
earnings thereon) from January 1 to June 1, 2000 and
would be allocated in proportion to the prior year
(December 31, 1999) account balances along with
other 2000 earnings. Accordingly, the $5,000 cor-
rective contribution is adjusted to reflect an earnings
amount of $2,084 ($5,000[(1.15)(1.10)(1.12)–1])
and the earnings amount is allocated to the account
balances under the plan allocation method as follows:
(a) Each account balance that shared in the allo-
cation of earnings for 1998 is increased, as of Decem-
ber 31, 1998, by its appropriate share of the earnings
amount for 1998, $750 ($5,000(.15)).
(b) Employee X’s account balance is increased, as
of December 31, 1998, by $5,000.
(c) The resulting December 31, 1998 account
balances will share in the 1999 earnings, including
the $575 for 1999 earnings included in the corrective
contribution ($5,750(.10)), to determine the account
balances as of December 31, 1999. However, each
account balance other than Employee X’s account
balance has already shared in the 1999 earnings,
excluding the $575. Accordingly, Employee X’s ac-
count balance as of December 31, 1999 will include
$500 of the 1999 portion of the earnings amount
based on the $5,000 corrective contribution allocated
to Employee X’s account balance as of December
31, 1998 ($5,000(.10)). Then each account balance
that originally shared in the allocation of earnings
for 1999 (i.e., excluding the $5,500 additions to
Employee X’s account balance) is increased by its
appropriate share of the remaining 1999 portion of
the earnings amount, $75.
(d) The resulting December 31, 1999 account bal-
ances (including the $5,500 additions to Employee
X’s account balance) will share in the 2000 portion
of the earnings amount based on the estimated Jan-
uary 1, 2000 to June 1, 2000 earnings included in the
corrective contribution equal to $759 ($6,325(.12)).
(See Table 1.)
2008–35 I.R.B.514September 2, 2008

TABLE 1
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings Rate
Amount
Allocated to:
Corrective Contribution
$5,000
Employee X
First Partial Valuation Period Earnings
15%750
1
All 12/31/1997 Account Balances
4
1999 Earnings10%
575
2
Employee X ($500)/All 12/31/1998
Account Balances ($75)
4
Second Partial Valuation Period
Earnings
12%
759
3
All 12/31/1999 Account Balances
(including Employee X’s $5,500)
4
Total Amount Contributed
$7,084
1
$5,000 x 15%
2
$5,750($5,000 +750) x 10%
3
$6,325($5,000 +750 +575) x 12%
4
After reduction for distributions during the year for which earning are being determined but without regard to contributions received during the yearfor
which earnings are being determined.
Example 29:
The facts are the same as inExample 28.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribu-
tion is the same as in Example 30, but the earnings
amount is allocated using the specific employee al-
location method. Thus, the entire earnings amount
for all periods through June 1, 2000 (i.e., $750 for
March 31, 1998 to December 31, 1998, $575 for
1999, and $759 for January 1, 2000 to June 1, 2000)
is allocated to Employee X. Accordingly, Employer
L makes a contribution on June 1, 2000 to the plan
of $7,084 ($5,000(1.15)(1.10)(1.12)). Employee X’s
account balance as of December 31, 2000 is increased
by $7,084. Alternatively, Employee X’s account bal-
ance as of December 31, 1999is increased by $6,325
($5,000(1.15)(1.10)), which shares in the allocation
of earnings for 2000, and Employee X’s account bal-
ance as of December 31, 2000 is increased by the re-
maining $759. (See Table 2.)
TABLE 2
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings Rate
Amount
Allocated to:
Corrective Contribution
$5,000
Employee X
First Partial Valuation Period Earnings
15%750
1
Employee X
1999 Earnings10%
575
2
Employee X
Second Partial Valuation Period
Earnings
12%
759
3
Employee X
Total Amount Contributed
$7,084
1
$5,000 x 15%
2
$5,750
($5,000 +750) x 10%
3
$6,325($5,000 +750 +575) x 12%
Example 30:
The facts are the same as inExample 28.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribu-
tion is the same as in Example 23, but the earnings
amount is allocated using the bifurcated allocation
method. Thus, the earnings for the first partial val-
uation period (March 31, 1998 to December 31,
1998) and the earnings for 1999 are allocated to
Employee X. Accordingly, Employer L makes a
contribution on June 1, 2000 to the plan of $7,084
($5,000(1.15)(1.10)(1.12)). Employee X’s account
balance as of December 31, 1999 is increased by
$6,325 ($5,000(1.15)(1.10)); and the December 31,
1999 account balances of employees (including Em-
ployee X’s increased account balance) will share
in estimated January 1, 2000 to June 1, 2000 earn-
September 2, 20085152008–35 I.R.B.

ings on the corrective contribution equal to $759
($6,325(.12)). (See Table 3.)
TABLE 3
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings Rate
Amount
Allocated to:
Corrective Contribution
$5,000
Employee X
First Partial Valuation Period Earnings
15%750
1
Employee X
1999 Earnings10%
575
2
Employee X
Second Partial Valuation Period
Earnings
12%
759
3
12/31/99 Account Balances (including
Employee X’s $6,325)
4
Total Amount Contributed
$7,084
1
$5,000 x 15%
2
$5,750($5,000 +750) x 10%
3
$6,325($5,000 +750 +575) x 12%
4
After reduction for distributions during the 2000 year but without regard to contributions received during the 2000 year.
Example 31:
The facts are the same as inExample 28.
Earnings Adjustment on the Corrective Contribution:
The earnings amount on the corrective contribu-
tion is the same as in Example 23, but the earnings
amount is allocated using the current period alloca-
tion method. Thus, the earnings for the first partial
valuation period (March 31, 1998 to December 31,
1998) are allocated as 2000 earnings. Accordingly,
Employer L makes a contribution on June 1, 2000 to
the plan of $7,084 ($5,000 (1.15)(1.10)(1.12)). Em-
ployee X’s account balance as of December 31, 1999
is increased by the sum of $5,500 ($5,000(1.10)) and
the remaining 1999 earnings on the corrective contri-
bution equal to $75 ($5,000(.15)(.10)). Further, both
(1) the estimated March 31, 1998 to December 31,
1998 earnings on the corrective contribution equal
to $750 ($5,000(.15)) and (2) the estimated January
1, 2000 to June 1, 2000 earnings on the corrective
contribution equal to $759 ($6,325(.12)) are treated
in the same manner as 2000 earnings by allocating
these amounts to the December 31, 2000 account bal-
ances of employees in proportion to account balances
as of December 31, 1999 (including Employee X’s in-
creased account balance). (See Table 4.) Thus, Em-
ployee X is allocated the earnings for the full valua-
tion period during the period of the failure.
TABLE 4
CALCULATION AND ALLOCATION OF THE
CORRECTIVE AMOUNT ADJUSTED FOR EARNINGS
Earnings Rate
Amount
Allocated to:
Corrective Contribution
$5,000
Employee X
First Partial Valuation Period Earnings
15%750
1
12/31/99 Account Balances (including
Employee X’s $5,575)
4
1999 Earnings10%
575
2
Employee X
Second Partial Valuation Period
Earnings
12%
759
3
12/31/99 Account Balances (including
Employee X’s $5,575)
4
Total Amount Contributed
$7,084
1
$5,000 x 15%
2
$5,750($5,000 +750) x 10%
3
$6,325($5,000 +750 +575) x 12%
4
After reduction for distributions during the year for which earnings are being determined but without regard tocontributions received during the year for
which earnings are being determined.
2008–35 I.R.B.516September 2, 2008

APPENDIX C
VCP CHECKLIST
Plan Name:
EIN:Plan #:
INSTRUCTIONS
NOTE:If you are submitting a Streamlined Application under VCP using Appendix F inaccordance with section 11.02 of this
revenue procedure, this Appendix C does not need to be completed. If you are submitting a VCP submission using Appendix D,
then Part I of this Appendix C does not need to be completed.
The Service will be able to respond more quickly to your VCP request if it is carefully prepared and complete. To ensure that your
request is in order, use this checklist.Sign and date the checklist (as plan sponsor or authorized representative) and include it in
the submission as provided in section 11.10 of Rev. Proc. 2008–50. (Hereafter, all section references are to Rev. Proc. 2008–50)
You must submit a completed copy of this checklist with your request. If a completed checklist is not submitted with your request,
substantive consideration of your submission will be deferred until a completed checklist is received.
PART I – PLAN INFORMATION
1. APPLICANT’S NAME
2. APPLICANT’S ADDRESS
3. APPLICANT’S TELEPHONE NO.4. FAX NO.
(optional)(optional)
5. APPLICANT’S EIN6. PLAN NO.
(do not use a Social Security Number)
7. PLAN NAME
8. TYPE OF SUBMISSION
□
REGULAR SUBMISSION
□
REGULAR SUBMISSION — ANONYMOUS
□
REGULAR SUBMISSION — MULTI-EMPLOYER PLAN
□
REGULAR SUBMISSION — MULTIPLE EMPLOYER PLAN
□
GROUP SUBMISSION
September 2, 20085172008–35 I.R.B.

9. TYPE OF PLAN (CHECK ONE ONLY):
□
01 PROFIT SHARING
□
09 CASH BALANCE
□
02 401(k)
□
10 GOVERNMENTAL PLAN (§ 414(d))
□
03 MONEY PURCHASE
□
11 SEP
□
04 DEFINED BENEFIT
□
12 SARSEP
□
05
ESOP
□
13 SIMPLE
□
06 TARGET BENEFIT
□
14 STOCK BONUS
□
07 403(b)
□
15
KSOP
□
08
457
□
16 OTHER (specify):
10. DATE (month and day) ON WHICH PLAN YEAR ENDS.
11. NUMBER OF PARTICIPANTS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES
(See Rev. Proc. 2008–50, section 12.07.):
12. ASSETS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES (ROUND TO
NEAREST DOLLAR): $
See Rev. Proc. 2008–50, section 12.07.
If the Applicant is being represented by someone in connection with this matter or wishes to authorize someone to
receive information from us in connection with this matter, submit a completed Form 2848 or Form 8821 and complete
items 13 through 18.
13. NAME OF APPLICANT’S REPRESENTATIVE
14. NAME OF REPRESENTATIVE’S FIRM (if applicable)
15. REPRESENTATIVE’S ADDRESS
16. REPRESENTATIVE’S PHONE NO.17. FAX NO.
18. REPRESENTATIVE’S E-MAIL ADDRESS
(optional)
PART II – SUBMISSION REQUIREMENTS
Answer each question by answering “Yes” or “N/A” as appropriate
YesN/AQuestion
Reference
(Rev. Proc.
section)
1. Have you included an explanation of how and why the failure(s) arose,
including a description of the applicable administrative procedures for the
plan in effect at the time the failure(s) occurred?
11.03(6)
2008–35 I.R.B.518September 2, 2008

YesN/AQuestion
Reference
(Rev. Proc.
section)
2. Have you included a detailed description of the method for correcting
the failure(s) identified in your submission? This description must include,
for example, the number of employees affected and the expected cost of
correction (both of which may be approximated if the exact number cannot
be determined at the time of the request), the years involved, and calculations
or assumptions the Plan Sponsor used to determine the amounts needed for
correction. Note that each step of the correction method must be described
in narrative form.
11.03(7)
3. If you are you requesting that participant loans being corrected under
this revenue procedure not be treated as distributions pursuant to § 72(p),
have you included the request and a detailed description of the failure?
Alternatively, if you are requesting that participant loans being corrected
under this revenue procedure be recognized as distributions in the year of
correction instead of the year that the deemed distribution occurred under
§ 72(p), have you included the request and a detailed description of the
failure?
11.03(13)
4. Have you described the earnings or interest methodology (indicating
computation period and basis for determining earnings or interest rates) that
will be used to calculate earnings or interest on any corrective contributions
or distributions? (As a general rule, the interest rate (or rates) earned by
the plan during the applicable period(s) should be used in determining the
earnings for corrective contributions or distributions.)
11.03(8)
5. Have you submitted specific calculations for either all affected employees
or a representative sample of affected employees? In lieu of providing
correction calculations with respect toeach employee affected by a failure,
you may submit calculations with respect to a representative sample of
affected employees. However, the representative sample calculations must
be sufficient to demonstrate each aspect of the correction method proposed.
11.03(9)
6. If you are requesting a waiver of the excise tax under § 4974 of the Code,
have you included the request, and, if applicable, an explanation supporting
the request for any affected owner-employee or 10 percent owner?
11.03(12)
7. If you are requesting relief of the excise tax under §§ 4972, 4973, or 4979,
have you included the request and a detailed description of the failure?
11.03(12)
8. Have you described the method that will be used to locate and notify
former employees or, if there are no former employees affected by the
failure(s) or the correction(s), provided an affirmative statement to that
effect?
11.03(10)
9. Have you provided a description of the administrative measures that have
been or will be implemented to ensure that the same failure(s) do not recur?
11.03(11)
10. Have you included a statement that, to the best of the Plan Sponsor’s
knowledge, the plan is not currently under an Employee Plans examination?
11.03(14)
11. Have you included a statement that, to the best of the Plan Sponsor’s
knowledge, the Plan Sponsor is not under an Exempt Organizations
examination?
11.03(14)
12. Have you included a statement that neither the plan nor the Plan Sponsor
has been a party to an abusive tax avoidance transaction? Alternatively, have
you provided a statement identifying the abusive tax avoidance transaction(s)
to which the plan or the Plan Sponsor has been a party?
11.03(15)
September 2, 20085192008–35 I.R.B.

YesN/AQuestion
Reference
(Rev. Proc.
section)
13. If the submission includes a failure related to Transferred Assets, have
you included a description of the related employer transaction, including the
date of the employer transaction and the date the assets were transferred
to the plan?
11.03(16)
14. Have you included a copy of the portions of the plan document (and
adoption agreement,if applicable) relevant to the failure(s) and method(s) of
correction?
11.04(1)
15. Have you included the original signature of the sponsor or the sponsor’s
authorized representative?
11.07
16. Have you included aPower of Attorney(Form 2848) orTax Information
Authorization(Form 8821)? Note: Authorization to represent a plan sponsor
before the Service using Form 2848 is limited to attorneys, certified public
accountants, enrolled agents, enrolledretirement plan agents, and enrolled
actuaries.
11.08
17. Have you included a Penalty of Perjury Statement signed (original
signature only) and dated by the Plan Sponsor?
11.09
18. Have you submitted the Appendix E acknowledgement letter?11.12
19. Where applicable, have you submitted an application for a determination
letter and Form 8717 together with a check for the user fee made payable
to the U.S. Treasury?
10.05 and 11.04(2)
20. If the plan is currently being considered in an unrelated determination
letter application, have you included a statement to that effect?
11.03(17)
21. Have you included a check for the VCP compliance fee, and, if
applicable, a separate check for thedetermination letter fee, each made
payable to the U. S. Treasury?
11.04 and 11.05
22. If your submission is for a terminating Orphan Plan, have you included a
request for a waiver of the VCP fee?
11.03(22)
23. Have you assembled your submission as described in section 11.15?11.15
If you inserted “N/A” for any item, enter an explanation here:
SignatureDate
Title or Authority
Typed or printed name of person signing checklist
2008–35 I.R.B.520September 2, 2008

APPENDIX D
VCP SUBMISSION
Plan Name:
EIN:Plan #:
(Please includ
e the plan name, EIN, and plan number information on each page of the submission.)
PART I – PLAN INFORMATION
1. APPLICANT’S NAME
2. APPLICANT’S ADDRESS
3. APPLICANT’S TELEPHONE NO.4. FAX NO.
(optional)(optional)
5. APPLICANT’S EIN6. PLAN NO.
(do not use a S
ocial Security Number)
7. PLAN NAME
8. TYPE OF SUB
MISSION
□
REGULAR SUBMISSION
□
REGULAR SUBM
ISSION — ANONYMOUS
□
REGULAR SUBMISSION — MULTI-EMPLOYER PLAN
□
REGULAR SUBMISSION — MULTIPLE EMPLOYER PLAN
□
GROUP SUBMIS
SION
9. TYPE OF PLAN (CHECK ONE ONLY):
□
01 PROFIT SHARING
□
09 CASH BALANCE
□
02 401(k)
□
10 GOVERNMENTAL PLAN (§ 414(d))
□
03 MONEY PURCHA
SE
□
11 SEP
□
04 DEFINED BENEFIT
□
12 SARSEP
□
05
ESOP
□
13 SIMPLE
□
06 TARGET BENEF
IT
□
14 STOCK BONUS
□
07 403(b)
□
15
KSOP
□
08
457
□
16 OTHER (specify):
10. DATE (month and day) ON WHICH PLAN YEAR ENDS.
11. NUMBER OF
PARTICIPANTS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES
(See Rev. Pro
c. 2008–50, section 12.07.):
12. ASSETS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES (ROUND TO
NEAREST DOLLAR): $
(See Rev. Proc. 2008–50, section 12.07)
If the Applicant is being represented by someone in connection with this matter or wishes to authorize someone to
receive information from us in connection with this matter, submit a completed Form 2848 or Form 8821, and complete
items 13 through 18.
September 2, 20085212008–35 I.R.B.

13. NAME OF APPLICANT’S REPRESENTATIVE
14. NAME OF REPRESENTATIVE’S FIRM
15. REPRESENTATIVE’S ADDRESS:
16. REPRESENTATIVE’S PHONE NO.17. FAX NO.
18. REPRESENTATIVE’S E-MAIL ADDRESS
(optional)
PART II. APPLICANT’S DESCRIPTION OF FAILURES
Attach additional pages, as needed. Label attachment “PART II. APPLICAN’TS DESCRIPTION OF FAILURES.” List and
number each failure separately.
PART III. APPLICANT’S DESCRIPTION OF THE PROPOSED METHOD OF CORRECTION
Attach additional pages, as needed. Label attachment“PART III. APPLICAN’TS DESCRIPTION OF THE PROPOSED
METHOD OF CORRECTION.” Describe the correction method applicable to each failure listed in Part II.
PART IV. APPLICANT’S PROPOSED REVISION TO ADMINISTRATIVE PROCEDURES
Attach additional pages, as needed. Label attachment “PART IV. APPLICAN’TS PROPOSED REVISION TO
ADMINISTRATIVE PROCEDURES.” Please include an explanation of how and why the failures arose and a description of the
measures that will be implemented to ensure that the same failures will not occur.
PART V. REQUESTS RELATED TO EXCISE TAXES, ADDITIONAL TAX, AND TAX REPORTING
□The Applicant requests that the Service not pursue the following taxes under the Internal Revenue Code (attach supporting
rationale as required by Section 6.09), labeled “PART V. REQUESTS RELATED TO EXCISE TAX, ADDITIONAL TAX,
AND TAX REPORTING.”)
□
Excise tax under § 4972 with respect to failure(s) #.
□
Excise tax under § 4973 with respect to failure(s) #.
□
Excise tax under § 4974 with respect to failure(s) #.
□
Excise tax under § 4979 with respect to failure(s) #.
□
Imposition of additional tax under § 72(t) with respect to failure(s) #.
□The Applicant requests that the Service grant the following with respect to plan loan failures as described in section 6.07 of
Rev. Proc. 2008–50:
□
With respect to failure(s) #, that a deemed distribution corrected pursuant to this VCP submission
not be required to be reported on Form 1099–R and that repayments made by such correction not result in the
affected participant having additional basis in the plan for purposes of determining the tax treatment of subsequent
distributions from the plan.
□
With respect to failure(s) #, that a deemed distribution be reported on Form 1099–R with respect to
affected participant(s) for the year of correction instead of the year of the failure.
PART VI. APPLICANT’S REPRESENTATIONS
(Note: Since the representations include the penalty of perjurystatement, the representations under Part VI of this Appendix D
must be signed by the Plan Sponsor, not the plan representative.)
2008–35 I.R.B.522September 2, 2008

A.Under Examination
To the best of my knowledge:
1)
The subject plan is not currently under examination of either an Employee Plans Form 5500 series return or other
Employee Plans examination,
2) The Plan Sponsor is not under an Exempt Organizations examination (that is, an examination of a Form 990 series
return or other Exempt Organizations examination),
3) Neither the Plan Sponsor nor any of its representatives has received verbal or written notification from the Tax Exempt
and Government Entities Division of the Internal Revenue Service of an impending examination or of any impending
referral for such examination, nor is the plan in Appeals or litigation for any issues raisedin such an examination, and
4) The subject plan is not currently under investigation by the Criminal Investigation Division of the Internal Revenue
Service.
B.Abusive tax avoidance transaction(check box that applies)
□
Neither the plan nor the Plan Sponsor has been a party to an abusive tax avoidance transaction as defined in section
4.13(2) of Rev. Proc. 2008–50.
□
The plan or the Plan Sponsor has been a party to an abusive taxavoidance transaction. Details of the transaction(s) are
provided in a separate statement whichhas been included with the submission.
C.Compliance Fee
The Applicant will neither attempt to amortize, deduct, or recover from the Internal Revenue Service any compliance
fee paid in connection with this compliance statement norreceive any Federal tax benefit on account of payment of
such compliance fee.
D.Penalties of Perjury
Under penalties of perjury, I declare that I have examinedthis submission, includingaccompanying documents and
representations. To the best of my knowledge and belief, the facts and information presented in support of this submission
are true, correct, and complete.
Signed:
Date:
Name (printed):Title:
PART VII. ENFORCEMENT RESOLUTION (to be completed by IRS only)
The Service will not pursue the sanction of revoking the tax-favored status of the plan under §§ 401(a), 403(b), 408(k) or 408(p)
on account of the failure(s) described in this submission. Thiscompliance statement considers only the acceptability of the
correction method(s) and the revision(s) of administrative procedures described in thesubmission and does not express an opinion
as to the accuracy or acceptability of any calculations or other material submitted with the application. In no event may this
compliance statement be relied on for the purpose of concludingthat the plan or Plan Sponsor (as defined in Rev. Proc. 2008–50)
was not a party to an abusive tax avoidance transaction. The compliance statement should not be construed as affecting the rights
of any party under any other law, including Title I of the Employee Retirement Income Security Act of 1974.
This compliance statement is conditioned on (1) there being nomisstatement or omission of material facts in connection
with the submission and (2) the completion of all corrections described within one hundred fifty (150) days of the date of
the compliance statement.
□
The Service will treat the failure to adopt interim amendments or amendments for optional law changes, as described
in section 6.05(3)(a) of Rev. Proc. 2008–50 as if they had been adopted timely for the purpose of making available
the extended remedial amendment period currently set forth in Revenue Procedure 2007–44, 2007–28 I.R.B. 54, or
its successors. However, this compliance statement does notconstitute a determination as to whether any such plan
amendments, as drafted, comply with the applicable changes in qualification requirements.
□
The Service will not pursue the following on account of the qualification failure(s) described in this submission:
□
Excise tax under § 4972.
□
Excise tax under § 4973.
September 2, 20085232008–35 I.R.B.

□
Excise tax under § 4974.
□
Excise tax under § 4979.
□
With respect to the loan failure(s) described in this submission:
□
The Service will not require deemed distributions under §72(p) to be reported on Forms 1099–R with respect to the
participant(s) affected by the failure(s), and repayments made pursuant to the correction of such loan(s) will not result
in an affected participant having additional basis in the plan for the purpose of determining the tax treatment of
subsequent distributions from the plan to such participant(s).
□
The Service will require deemed distributions under §72(p) to be reported on Form 1099–R with respect to the
participant(s) affected by the failure(s). However, the plan will be permitted to report deemed distributions on Form
1099–R in the year of correction, instead of the year of the failure.
□
With respect to the Overpayment failures described in this submission that were corrected by removing improper
distributions from the IRA(s) of the affected participant(s) and returning those distributions to the plan, the Service will not
pursue
% of the 10% additional income tax under § 72(t).
Approved:
Joyce Kahn, Manager
Employee Plans Voluntary Compliance
Tax Exempt and Government Entities Division
Date:
2008–35 I.R.B.524September 2, 2008

APPENDIX E
ACKNOWLEDGEMENT LETTER
[]
[]
[]
[]
[INSERT NAME AND
ADDRESS OF PLAN
SPONSOR OR
AUTHORIZED REPRESENTATIVE
AT LEFT]
Applicant’s Name:
Plan Name:
[insert plan name]
Plan No.
[insert plan number]
Control No.:
(to be completed by IRS)
Received Date:
(to be completed by IRS)
The Internal Revenue Service,Employee Plans Voluntary Compliance, has received your VCP submission for the above-captioned
plan. Your request has been assigned the control number listed above. This number should be referred to in any communication
to us concerning your submission.
You will be contacted when the case is assigned to an agent. If you need to inquire about the status of your case prior to that date,
please call (626) 312–4921 (not a toll-free number). Please leave a message with the name of the plan, the Control Number,
your name, and a phone number where you can be reached.
Thank you.
September 2, 20085252008–35 I.R.B.

APPENDIX F
STREAMLINED VCP SUBMISSION
Plan Name:
EIN:Plan #:
(Please includ
e the plan name, EIN, and plan number information on each page of the submission.)
PART I – PLAN INFORMATION
1. APPLICANT’S NAME
2. APPLICANT’S ADDRESS
3. APPLICANT’S TELEPHONE NO.4. FAX NO.
(optional)(optional)
5. APPLICANT’S EIN6. PLAN NO.
(do not use a S
ocial Security Number)
7. PLAN NAME
8. TYPE OF SUB
MISSION
□
REGULAR SUBMISSION
□
REGULAR SUBMI
SSION — ANONYMOUS
□
REGULAR SUBMISSION — MULTI-EMPLOYER PLAN
□
REGULAR SUBMISSION — MULTIPLE EMPLOYER PLAN
□
GROUP SUBMIS
SION
9. TYPE OF PLAN (CHECK ONE ONLY):
□
01 PROFIT SHARING
□
09 CASH BALANCE
□
02 401(k)
□
10 GOVERNMENTAL PLAN (§ 414(d))
□
03 MONEY PURCHAS
E
□
11 SEP
□
04 DEFINED BENEFIT
□
12 SARSEP
□
05
ESOP
□
13 SIMPLE
□
06 TARGET BENEF
IT
□
14 STOCK BONUS
□
07 403(b)
□
15
KSOP
□
08
457
□
16 OTHER (specify):
10. DATE (month and day) ON WHICH PLAN YEAR ENDS.
11. NUMBER OF
PARTICIPANTS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES
(See Rev. Pro
c. 2008–50, section 12.07.):
12. ASSETS IN THE PLAN AS PROVIDED ON THE MOST RECENTLY FILED FORM 5500 SERIES (ROUND TO
NEAREST DOLLAR): $
See Rev. Proc. 2008–50, section 12.07.
If the Applicant is being represented by someone in connection with this matter or wishes to authorize someone to
receive information from us in connection with this matter, submit a completed Form 2848 or Form 8821, and complete
items 13 through 18.
13. NAME OF APPLICANT’S REPRESENTATIVE
2008–35 I.R.B.526September 2, 2008

14. NAME OF REPRESENTATIVE’S FIRM
15. REPRESENTATIVE’S ADDRESS:
16. REPRESENTATIVE’S PHONE NO.17. FAX NO.
18. REPRESENTATIVE’S E-MAIL ADDRESS
(optional)
PART II. APPLICANT’S ENCLOSURES
The Applicant encloses the following documents with this submission:
□
VCP fee of $made p
ayable to the U.S. Treasury (required). (If the fee is determined on the basis of treating
Transferred Ass
ets as a separate plan, pursuant to section 12.07 ofRev. Proc. 2008–50, please enclose a description of
the related emp
loyer transaction, including the date of the employer transaction and the date the assets were transferred
to the plan.)
□
A written reque
st if the application is made for a terminating Orphan Plan and the Applicant is applying for a waiver of
the VCP fee.
□
Power of Attorn
ey(Form 2848) orTax Information Authorization(Form 8821), if applicable.
□
If the plan is be
ing considered for an unrelated determination letter application, a statement to that effect.
□
Appendix E (opti
onal)
□
Completed Appen
dix F schedule(s). (Check the schedules that apply)
□
Schedule 1 — Inte
rim and Certain Discretionary Nonamender Failures
□
Schedule 2 — Nona
mender Failures (other than those to which Schedule 1 applies)
□
Schedule 3 — SEPs
and SARSEPs
□
Schedule 4 — SIMP
LE IRAs
□
Schedule 5 — Plan Loan Failures
□
Schedule 6 — Empl
oyer Eligibility Failure
□
Schedule 7 — Failu
re to Distribute Elective Deferrals in Excess of the § 402(g) Limit
□
Schedule 8 — Failu
re to Pay Required Minimum Distributions Timely under § 401(a)(9)
□
Schedule 9 — Corre
ction by Plan Amendment (in accordance with Appendix B)
□
Information requ
ired by each schedule, as set forth in each applicable Part entitled “Enclosures.”.
PART III. APPLICANT’S REPRESENTATIONS
A.Under Examination
To the best of my knowledge:
1)
The subject plan is not currently under examination of either an Employee Plans Form 5500 series return or other
Employee Plans examination,
2) The Plan Sponsor is not under an Exempt Organizations examination (that is, an examination of a Form 990 series
return or other Exempt Organizations examination),
3) Neither the Plan Sponsor nor any ofits representatives has received verbal or written notification from the Tax
Exempt and Government Entities Division of the Internal Revenue Service (“Service”) of an impending examination
or of any impending referral for such examination nor is the plan in Appeals or litigation for any issues raised in
such an examination, and
4) The subject plan is not currently under investigation by the Criminal Investigation Division of the Internal Revenue
Service.
September 2, 20085272008–35 I.R.B.

B.Abusive tax avoidance transaction (check box that applies)
□
Neither the plan nor the Plan Sponsor has been a party to an abusive tax avoidance transaction as defined in section
4.13(2) of Rev. Proc. 2008–50.
□
The plan or the Plan Sponsor has been a party to an abusive taxavoidance transaction. Details of the transaction(s)
are provided in a separate statement which has been included with the submission.
C.Compliance Fee
The Applicant will neither attempt to amortize, deduct, or recover from the Internal Revenue Service any compliance
fee paid in connection with this compliance statement norreceive any Federal tax benefit on account of payment of
such compliance fee.
D.Penalties of Perjury
Under penalties of perjury, I declare that I have examinedthis submission, includingaccompanying documents and
representations. To the best of my knowledge and belief, the facts and information presented in support of this submission
are true, correct, and complete.
Signed:
Date:
Name (printed):
Title:
PART IV: ENFORCEMENT RESOLUTION (to be completed by IRS only)
The Internal Revenue Service will not pursue the sanction of revoking the tax-favored status of the plan under §§ 401(a), 403(b),
408(k), or 408(p) of the Internal Revenue Code on account of the failure(s) described in the schedules submitted pursuant to
this Appendix F. This compliance statement considers only theacceptability of the correction method(s) and the revision(s) of
administrative procedures described in the schedules submitted pursuant to this Appendix F submission and does not express an
opinion as to the accuracy or acceptability of any calculations or other material submitted with the application. In no event may
this compliance statement be relied on for the purpose of concluding that the plan or Plan Sponsor (as defined in Rev. Proc.
2008–50) was not a party to an abusive tax avoidance transaction.The compliance statement should not be construed as affecting
the rights of any party under any other law, including Title I of the Employee Retirement Income Security Act of 1974.
This compliance statement is conditioned on (1) there being no misstatement or omission of material facts in connection with the
submission and (2) the completion of all corrections described in the applicable schedule(s) to this Appendix F submission within
one hundred fifty (150) days of the date of the compliance statement.
In addition:
(paragraph applies only if checked by the Service)
□
For failure(s) described in Schedule 1 of Appendix F, the Service will treat the amendments as if they had been adopted
timely for the purpose of making available the extended remedial amendment period set forth in Revenue Procedure
2007–44, 2007–28 I.R.B. 54, or its successors. However, this compliance statement does not constitute a determination as
to whether any such plan amendment, asdrafted, complies with the applicable change in qualification requirements.
□
For failure(s) described in Schedule 3 of Appendix F, the Service will not pursue the following:
□
Excise tax under § 4972.
□
Excise tax under § 4979.
□
For failure(s) described in Schedule 4 of AppendixF, the Service will not pursue excise tax under § 4972.
□
For loan failure(s) described in sectionof Schedule 5 of Appendix F, the Service will not require the deemed
distributions to be reported on Form 1099–R with respect to the participant(s) affected by the failure(s). The repayments
made pursuant to the correction of such loan(s) will not result in an affected participant having additional basis in the plan
for the purpose of determining the tax treatment of subsequent distributions from the plan to such participant(s).
□
For loan failure(s) described in sectionof Schedule 5 of Appendix F, the Service will require the deemed distributions
to be reported on Form 1099–R with respect to the participant(s) affected by the failure(s). However, the plan will be
permitted to report deemed distributions on Form 1099–R inthe year of correction instead of the year of the failure.
2008–35 I.R.B.528September 2, 2008

□
For minimum distribution failure(s) described in Schedule 8 of Appendix F, the Service will waive the excise tax under
§ 4974.
Approved:
Joyce Kahn, Manager
Employee Plans Voluntary Compliance
Tax Exempt and Government Entities Division
Date:
September 2, 20085292008–35 I.R.B.

APPENDIX F, SCHEDULE 1
Interim and Certain Discretionary Nonamender Failures
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURES
A.Interim Amendments
The plan identified above was not amended timely for (check all failures that apply)
□
Good faith amendments under the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) required
under Notice 2001–42 (for details see Notice 2001–57). If the Plan Sponsor failed to timely adopt one or more good faith
amendmentsrequiredfor the plan to comply with EGTRRA, then check the box on the left and check the applicable
amendments below:
□
The increased limit on annual additions under § 415(c) (applies to defined contribution plans that do not incorporate
§ 415(c) by reference)
□
Modification of top heavy rules under § 416 (applies to both defined benefit and defined contribution plans)
□
Vesting requirements for employer matching contributions under § 411 (applies to plans that provided for employer
matching contributions that do not vest as rapidly asany of the schedules provided for under § 411(a)(12))
□
Modification of rules relating to eligible rollover distributions under §§ 401(a)(31)(A), 401(a)(31)(C), 402(c)(4), and
402(c)(8) (applies to both defined benefit and defined contribution plans)
□
Repeal of the multiple use test under Treasury Regulations § 1.401 (m)–2 (applies to § 401(k) plans that were
formerly subject to the multiple use test)
□
Suspension period following hardship distribution (required for plans subject to the safe harbor requirements of
§ 401(k)(12) or § 401(m)(11))
□
Plan provisions prohibiting loans to any owner-employee or shareholder-employee (required for plans that provide
loans to participants but prohibit the making of loans to owner-employees or Subchapter S shareholder-employees)
□
The automatic rollover provision under § 401(a)(31)(B), as described in Notice 2005–5 (applies to both defined benefit and
defined contribution plans)
□
The final and temporary regulations under § 401(a)(9) (interim amendment required for defined contribution plans;
defined benefit plans have until the end of the extended EGTRRA remedial amendment period to amend. See Rev.
Procs. 2002–29 and 2003–10.)
□
Guidance relating to the prescribed mortality table under § 415(b)(2)(E)(v) or the applicable mortality table under
§ 417(e)(3)(A)(ii)(I), as described in Rev. Rul. 2001–62 (applies to defined benefit plans.)
□
Interim amendments, as described in Rev. Proc. 2007–44 or its successors. If the plan failed to adopt one or more
amendmentsrequiredfor the plan to comply with a law change, then check the box on the left and check the applicable
amendments below:
□
Final §§ 401(k) and 401(m) regulations (plans with 401(k) and 401(m) provisions must comply with the regulations
for plan years beginning on or after January 1, 2006)
□
Prohibited allocation of securities in an ESOP maintained by a S-Corp. pursuant to § 409(p)
□
Retroactive annuity starting date provisions pursuant toTreasury Regulations § 1.417(e)–1 (required for plans that
provide for retroactive annuity starting dates)
□
Final regulations regarding low normal retirement age (§ 1.401(a)–1(b)(2))
□
Amendments to § 1.411(d)–3 of the final regulations
□
Final regulations under § 415
2008–35 I.R.B.530September 2, 2008

□
Other (i.e., any other interim amendment that complies with therequirements in Rev. Proc. 2007–44 or its successors).
Please list:
B.Implementation of Applicable Optional Law Changes(defined in section 6.05(3) of Rev. Proc. 2008–50)
The plan identified above was not amended timely for (check all failures that apply)
□
Optional good faith EGTRRA amendments under Notice 2001–42 (for details, see Notice 2001–57). If the Plan Sponsor
implemented any of the optional law changes and failed to adopt good faith amendments timely to conform the plan to its
operation, then check the box on the left andcheck the applicableamendments below:
□
Increasing the limit on compensation (under § 401(a)(17)) that is taken intoaccount for the purpose of determining
allocations in a defined contribution plan or benefits in a defined benefit plan
□
Disregarding amounts attributable torollovers in determiningthe value of an employee’s vested accrued benefit
subject to involuntary distributionpursuantto§411(a)(11)(D).
□
Increasing the contributionlimit for elective deferrals on account of theincreased limitation under § 402(g) or, in the
case of a SIMPLE 401(k) plan, § 408(p)(2)
□
Adding types of rolloversaccepted by the plan pursuant to EGTRRA §§ 641, 642, and 643 (available for rollovers
accepted after December 31, 2001)
□
Providing for catch-up contributions pursuant to § 414(v)
□
Adding “severance from employment” as a distributable event pursuant to §§ 401(k)(2) and 401(k)(10)
□
Increasing the limit on a participant’s benefit pursuant to § 415(b)
□
Final §§ 401(k) and 401(m) regulations (optional for plan years beginning before January 1, 2006, the earliest possible plan
year in which regulations could be effective: plan year ending after December 29, 2004)
□
Permitting participants to designate elective deferrals as Roth contributions pursuant to § 402A
□
Permitting deemed individual retirement accounts pursuant to § 408(q)
□
Final regulations under § 409(p) regarding ESOPs holding S-Corp stock
□
Other amendments relating to implementation of optional law changes. Please list
PART II. DESCRIPTION OF METHOD OF CORRECTION
The Plan Sponsor has adopted amendments that satisfy the requirements of all of the items checked in Part I of this Appendix F,
Schedule 1 retroactively to the effective dates of the specific provisions contained in the amendments. The executed amendments
have been enclosed with this submission.
September 2, 20085312008–35 I.R.B.

PART III. CHANGE IN ADMINISTRATIVE PROCEDURES
The Applicant has taken the following step(s) to ensure that the failure(s) will not recur:
PART IV. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses copies of the signed and dated
amendments used to correct the failure(s) identified in Part I of this Appendix F, Schedule 1.
2008–35 I.R.B.532September 2, 2008

APPENDIX F, SCHEDULE 2
Nonamender Failures (other than those to which Schedule 1 applies)
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURES
The plan identified above was not amended to comply with the applicable provisions of the following legislative and regulatory
requirements by the applicable deadlines in accordance with § 401(b) and the regulations thereunder:
□
The Employee Retirement Income Security Act of 1974 (ERISA)
□
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
□
The Deficit Reduction Act of 1984 (DEFRA)
□
The Retirement Equity Act of 1984 (REA)
□
The Tax Reform Act of 1986 (TRA ’86)
□
The Unemployment Compensation Amendments of 1992 (UCA)
□
The Omnibus Budget Reconciliation Act of 1993 (OBRA)
□
GUST (includes The Uruguay Round Agreements Act, the Uniformed ServicesEmployment and Reemployment Rights
Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service
Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000)
□
The changes required by the 2005 Cumulative List (Notice 2005–101, 2005–2 C.B. 1219)
□
The changes required by the 2006 Cumulative List (Notice 2007–3, 2007–1 C. B. 255)
□
The changes required by the 2007 Cumulative List (Notice 2007–94, 2007–2 C.B. 1179)
□
Other (specify the legal requirement and applicable Cumulative List):
PART II. DESCRIPTION OF PROPOSED METHOD OF CORRECTION
The Plan Sponsor has adopted (or will adopt) amendments that satisfy the requirements of all of the items checked in Part I of
this Appendix F, Schedule 2 retroactively to the effective datesof the specific provisions contained in the amendments. The
amendments and restated plan documents (whereapplicable) are enclosed with this submission.
PART III. CHANGE IN ADMINISTRATIVE PROCEDURES
The Plan Sponsor has taken the following step(s) to ensure that the failure(s) will not recur:
September 2, 20085332008–35 I.R.B.

PART IV. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•Copies of all amendments used to correct the failure(s), either as adopted or in proposed form,
•A copy of the plan document in effect prior to anyof the amendments used to correct the failure(s),
•A copy of the most recent determination letter issued with respect to the plan (if applicable), and
•A determination letter application (Form 5300, 5307, or 5310 along with Form 8717 and the applicable user fee payment made
payable to the U.S. Treasury).
2008–35 I.R.B.534September 2, 2008

APPENDIX F, SCHEDULE 3
SEPs and SARSEPs
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
Instructions: This Schedule 3 is available for Simplified Employee Pension plans (SEPs), including SEPs that include
salary reduction arrangements (i.e., Salary Reduction Simplified Employee Pension plans (SARSEPs).)
PART I. IDENTIFICATION OF FAILURE(S) AND PROPOSED METHOD(S) OF CORRECTION
The following failure(s) occurred with respect to the plan identified above. Check the failure(s) that apply. Within each failure,
check applicable boxes, and provide the information requested:
□
A.
Employer Eligibility Failure(SARSEPs only)
□
The Plan Sponsor was not eligible to sponsor aSARSEP because the plan was established on. (Plan Sponsors were
not permitted to establish SARSEPs after December 31, 1996.)
□
The plan was adopted by a Plan Sponsor who was (or subsequently became) ineligible tosponsor a SARSEP under the
requirements of § 408(k)(6) because the Plan Sponsor (and, if applicable, its related controlled group or affiliated service
group employers) had more than 25 employees (including leased employees, if applicable) during the following plan
year(s):
The plan was adopted by a Plan Sponsor that became ineligible to sponsor a SARSEP under the requirements of
§ 408(k)(6) because, in one or more plan year(s),fewerthan 50% of the employees eligibleto participate in the plan elected
to make salary reduction contributions. The failure occurred during the following plan year(s):
Description of Proposed Method of Correction
All contributions ceased as of
(insert date beginning no later than the date this application is filed under
VCP). The Plan Sponsor will not permit any new salary reduction contributions to the plan.
□
B.
Failure to satisfy the deferral percentage test(SARSEPs only)
At least one highly compensated employee (“HCE”) deferred an amount which, as a percentage of compensation, was
more than 125% of the average deferral percentage (“ADP”) for all nonhighly compensated employees (“NHCEs”)
eligible to participate in the plan (§ 408(k)(6)(A)(iii)).
The total excess deferrals for each affected plan year were as follows:
YearExcess Deferrals
September 2, 20085352008–35 I.R.B.

Description of the Proposed Method of Correction
The Plan Sponsor has made (or will make) nonforfeitable contributions on behalf of all eligible NHCEs. Each eligible
NHCE will receive a contribution equal toa uniform percentage of compensation. The uniform percentage is equal to
the difference between the (1) ADP that would have been required for a HCE’s deferral percentage to have passed the
nondiscrimination test and (2) the actual ADP for NHCEs. (Example: In a particular plan year, an HCE defers 10% of
compensation. The ADP for NHCEs for the same plan year is 5%of compensation. However, in order for the plan to pass
the nondiscrimination test, the ADP should have been 8% of compensation. The corrective contribution on behalf of each
eligible NHCE will be equal to 3% of compensation.) The corrective contribution made on behalf of each NHCE will also
be adjusted for earnings. Earnings will be calculated from the last day of the plan year for which the failure occurred
through the date of the corrective contribution. The corrective contribution (adjusted for earnings) will be made to each
affected NHCE’s SARSEP IRA account. If an affectedemployee does not have a SARSEP IRA account, a SARSEP
IRA account will be established for that employee. Earnings will be calculated for an affected NHCE’s account on
the basis of one of the following methods (check one):
□
Actual investment results of the affected NHCE’s SARSEP IRA account.
□
The interest rate incorporated in the Department of Labor’s Voluntary Fiduciary Correction Program Online Calculator
(“VFCP Online Calculator”) (http://www.dol.gov/ebsa/calculator/main.html), since the actual earnings of the affected
NHCE’s SARSEP IRA account cannot be ascertained
□
Actual investment results for years in which data is available, or the rate incorporated in the VFCP Online Calculator
for years in which the actual earnings of the affected NHCE’s SARSEP IRA account cannot be ascertained. The VFCP
Online Calculator was or will be used for the following years:
The total corrective contribution (before adjusting for earnings) on behalf of the affected NHCEs for each plan year
is as follows:
YearCorrective contribution
Former employees affected by the failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SARSEP IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s
last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the
use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the
Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee
is not found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the
affected employee’s SARSEP IRA account at that time.
□
C.
Failure to Make Required Employer Contributions(SEPs or SARSEPs)
The Plan Sponsor failed to make employer contributions on behalf of eligible employees as required under the terms
of the plan.
□
The failure occurred on account of the erroneous exclusion of eligible employees.
□
Other (describe):
The failure occurred for the following plan years:.
2008–35 I.R.B.536September 2, 2008

Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts tothe plan on behalf of each affected employee.
For each affected employee, the corrective contribution will be determined by calculating the contribution the employee
would have been entitled to under the terms of the plan and subtracting any contributionsalready made on behalf of the
participant for the plan year. The required contribution made on behalf of an affected participant will be adjusted for
earnings. Earnings will be calculated from the last day of theplan year for which the failureoccurred through the date of
the corrective contribution. The corrective contribution (adjusted for earnings) will be made to each affected employee’s
SEP (or SARSEP, if applicable) IRA account. If an affectedemployee does not have a SEP (or SARSEP, if applicable)
IRA account, a SEP (or SARSEP, if applicable)account will be established for that employee.
The total corrective contribution (before adjusting forearnings) for each year is:
YearCorrective Contribution
Earnings will be calculated for an affected employeeon the basis of the following method(s) (check one):
□
Actual investment results of the affected employee’s SEP or SARSEP IRA account.
□
The interest rate incorporated in the VFCP Online Calculator, since the actual earnings of the affected employee’s IRA
account cannot be ascertained.
□
Actual investment results for years in which data is available, or the rate incorporated in the VFCP Online
Calculator for years in which the actual earnings of theaffected employee’s IRA cannot be ascertained. The VFCP
Online Calculator was or will be used for the following years:
Former employees affected by the failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SEP or SARSEP IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s last
known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the use of
the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social
Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not
found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the affected
employee’s SEP or SARSEP IRA account at that time.
□
D.
Failure to provide eligible employees with the opportunity to make elective deferrals(SARSEPs only)
The plan did not provide employee(s) who satisfied the applicable eligibility requirements with the opportunity to make
elective deferrals to the SARSEP. The failure occurred for the following plan years:
Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts tothe plan on behalf of each affected employee.
The corrective contribution will be made to compensate the affected employee(s) for the missed deferral opportunity.
The corrective contribution on behalf of each affected employee is equal to 50%of what the employee’s deferral might
have been had he or she been provided with the opportunity tomake elective deferrals to the plan. Since the employee’s
deferral decision is not known, the deferral amount is estimated by determining the average of the deferral percentages
for the employee’s group (highly compensated or nonhighly compensated). (Example: N, an NHCE, was erroneously
excluded from the plan. During the yearof exclusion, N made $10,000 in compensation. The average of the deferral
percentages for other NHCEs who were provided with the opportunity to make elective deferrals was 5%. N’s missed
deferral is estimated to be: 5% times $10,000 or $500. The required corrective contribution on behalf of N, before
adjusting for earnings, is 50% of $500 or $250.)
September 2, 20085372008–35 I.R.B.

The total corrective contribution (before adjusting for earnings) on behalf of the affected NHCEs for each plan year
is as follows:
YearCorrective contribution
The corrective contribution made on behalf of each affected employee will also be adjusted for earnings. Earnings will be
calculated from the date(s) that the contribution(s) should have been made through the date of the corrective contribution.
The corrective contribution (adjusted for earnings) will be made to eachaffected employee’s SARSEP IRA account. If an
affected employee does not have a SARSEP IRA account, a SARSEP IRA account will be established for that employee.
Earnings will be calculated on the basis of one of the following methods (check one):
□
Actual investment results of the affected employee’s SARSEP IRA account.
□
The interest rate incorporated in the VFCP Online Calculator, since the actual earnings of the affected employee’s IRA
account cannot be ascertained.
□
Actual investment results for years in which data is available, or the rate incorporated in the VFCP Online Calculator
for years in which the actual earnings of the affectedemployee’s IRA account cannot be ascertained. The VFCP
Online Calculator was or will be used for the following years:
Former employees affected by the failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SARSEP IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s last
known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the use of
the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social
Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not
found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the affected
employee’s SEP or SARSEP IRA account at that time.
□
E.
Excess Amounts Contributed
□
The Plan Sponsor contributed Excess Amounts to the Plan on behalf of participants as follows:
(check boxes that apply)
□Amounts were contributed in excess of the benefit the participants were entitled to under the plan.
□SARSEP only: Elective deferrals were contributed to the SARSEP in excess of the limitation under the terms
of the SARSEP (e.g., the lesser of 25% of compensation or the applicable limit under § 402(g)).
The total of the Excess Amounts for each affected plan year was as follows:
YearExcess Amounts
Number of
Participants
Affected
2008–35 I.R.B.538September 2, 2008

Description of the Proposed Method of Correction
(check all correction methods that apply)
□
Distribution of Excess Elective Deferrals (SARSEPs only)
The Plan Sponsor has effected (or will effect) a corrective distribution of the Excess Amounts, adjusted for earnings
through the date of correction, to the affected participant(s). The earnings adjustment will be based on the actual
rates of return of the participant’s SARSEP IRA accountfrom the date(s) that the excess deferrals were made
through the date of correction.
Affected participants were (or will be)informed that the corrective distribution of an Excess Amount is not eligible for
favorable tax treatment accorded to distributions from a SARSEP and, specifically, is not eligible for tax-free rollover.
The total corrective distribution (before adjusting for earnings) for each affected year is as follows:
YearCorrective Distribution
Number of
Participants
Affected
□
Distribution of Excess Employer Contributions
The Plan Sponsor has effected (or will effect) the return ofexcess employer contributions, adjusted for earnings
through the date of correction, to the Plan Sponsor. The earnings adjustment will be based on the actual rates of return
of the SEP or SARSEP from the date(s) that the excess employer contributions were made through the date of
correction. The amount returned to the Plan Sponsor is not includible in the gross income of the affected participant(s).
The Plan Sponsor is not entitled to a deduction for such excess employer contributions. The amount returned is
reported on Form 1099–R as a distribution issued to the affected participant(s), indicating the taxable amount as zero.
The amount to be returned to the Plan Sponsor (before adjusting for earnings)for each affected year is as follows:
Year
Return of Excess
Employer Contributions
Number of
Participants
Affected
□
Retention of Excess Amounts
Note: If this correction method is selected, an additional VCP fee is required. (See section 12.05(2) of Rev. Proc.
2008–50.)
September 2, 20085392008–35 I.R.B.

□
The Excess Amounts (including earnings) were retained in the SARSEP or SEP IRA accounts of the affected
participants as follows:
Year
Excess
Amounts
Retained
Number of
Participants
Affected
The earnings adjustment will be basedon the actual rates of return of the SEPor SARSEP from the date(s) that the
excess employer contributions were made through the date of correction.
□
Excess Amounts of $100 or less (See section 6.02(5)(e) of Rev. Proc. 2008–50.)
For one or more participants, the total Excess Amount (employer contributions and/orelective deferrals before
adjusting for earnings) is $100 or less. The Excess Amount will not be distributed.
PART II. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
PART III. REQUEST(S) FOR EXCISE TAX RELIEF
(check applicable boxes)
□
Excise tax pursuant to § 4979. The Applicant requests that the Service not pursue the excise tax under § 4979. (This applies
only to failures to satisfy the nondiscrimination test for elective deferrals. See section 6.09(4) of Rev. Proc. 2008–50 for an
example of a situation where a request for relief under § 4979 would be considered. Please enclose a written explanation in
support of your request for relief from this excise tax.)
□
Excise tax pursuant to § 4972. The Applicant requests that the Service not pursue the excise tax under § 4972. (This applies
to situations where corrective contributions made in accordance with this submission would be nondeductible contributions
for the year of correction and thus would be subject to the excise tax under § 4972. See section 6.09(3) of Rev. Proc.
2008–50. Please enclose a written explanation in supportof your request for relief from this excise tax.)
2008–35 I.R.B.540September 2, 2008

PART IV. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•The applicable plan document. (This could be an IRS form document, such as a Form 5305–SEP or 5305A–SEP, or a prototype
plan document developed by a financial institution. If a prototype plan document isused, please send a copy of the most recent
favorable opinion letter issued for such plan document).
•A written explanation of how and why the failure(s) described in this submission occurred, including a description of the ad-
ministrative procedures applicable to the failure(s) in effect at the time the failure(s) occurred.
•For failures that involve corrective contributions or corrective distributions, a description of assumptions and supporting calcu-
lations used to determine the amounts needed for correction:
1) For failures to satisfy the nondiscrimination test for elective deferrals, computations in support of the proposed correction,
including:
a) The determination of HCEs and NHCEs,
b) The deferral percentages of individual employees and the applicable ADP calculations,
c) The determination of corrective contributions on behalf of NHCEs to correct the ADP test, and,
d) Calculations showing how the earnings adjustment and the ultimate corrective contribution on behalf of affected
employees will be determined. (Please use estimates, including an estimated correction date,if corrective distributions
have not been made yet.)
2) For failures to make required employer contributions and forfailures to provide eligible employees with the opportunity
to make elective deferrals:
a) Computations in support of the corrective contribution amounts attributable to each participant. In the case of a failure
to provide eligible employees with the opportunity to make elective deferrals, please include computations showing
how the average deferral percentage, missed deferral, and corrective contribution amount was determined.
b) Calculations showing how the earnings adjustment and the ultimate corrective contribution on behalf of affected
employees will be determined.
3) For failures involving the contribution of Excess Amounts:
a) Computations in support of theexcess contribution amounts attributable to each participant;
b) Calculations showing how the earnings adjustment and the ultimate corrective distribution amounts are determined.
(Please use estimates, including an estimated correction date, if corrective distributions have not been made yet.)
•Explanations in support of requests for excise tax relief.
•Any other information that would be useful for the purposeof understanding the proposals made under the submission.
September 2, 20085412008–35 I.R.B.

APPENDIX F, SCHEDULE 4
SIMPLE IRAs
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE(S) AND CORRECTION METHODS
The following failure(s) occurred with respect to the SIMPLE IRA Plan identified above:
(Check failure(s) that apply. Within each failure, check applicable boxes, and provide the information requested.)
□
A.
Employer Eligibility Failure
□
The plan was adopted by a Plan Sponsor who was (or subsequently became) ineligible to sponsor a SIMPLE IRA
Plan under the requirements of § 408(p) because the Plan Sponsor (and, if applicable, itsrelated controlled group or
affiliated service group employers) had more than 100 employees (including leased employees, if applicable) who
earned $5,000 or more in compensation during the following plan year(s):
□
The plan was adopted by a Plan Sponsor who was not eligible to sponsor a SIMPLE IRA Plan under the requirements
of § 408(p) because the Plan Sponsor established or maintained a Qualified Plan with respect to which contributions
were made (or under which benefits were accrued) during any plan year of the SIMPLE IRA Plan. The failure
occurred during the following plan year(s):
Description of the Proposed Method of Correction
All contributions to the plan ceased as of
(insert a date no later than the datethis application is filed under
VCP). The Plan Sponsor will not permit any new employer or salary reduction contributions to be made to the plan.
□
B.
Failure to Make Required Employer Contributions
The Plan Sponsor failed to make employer contributions onbehalf of eligible employeesas required under the terms
of the plan.
□
The failure occurred on account of the erroneous exclusion of eligible employees
□
Other (describe):
The failure occurred for the following plan years:
For the applicable plan years, the provisions of the plan document required the Plan Sponsor to make employer
contributions based on the following formula:
□
2% nonelective contribution on behalf of each eligible employee who earned at least $5,000 in compensation for
the year.
□
Matching contribution on behalf of each eligible employee equal to deferrals up to 3% of compensation.
□
Grace period applied. The plan provided for a matching contribution on behalf of each eligible employee equal to
deferrals up to ____% of compensation.
(Note: If the failure occurredfor multiple plan years and different employer contribution criteria applied during those
years, check the applicable box, and indicate theplan years for which the formula applied).
2008–35 I.R.B.542September 2, 2008

Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts to the plan on behalf of each affected employee.
For each affected employee, the corrective contribution will be determined by calculating the contribution the employee
would have been entitled to receive under the terms of the plan and subtracting any contributions already made on behalf
of the employee for the plan year. The corrective contribution made on behalf of an affected employee will be adjusted
for earnings. Earnings will be calculated from the last day of the plan year for which the failure occurred through the
date of the corrective contribution. The corrective contribution (adjusted for earnings) will be made to each affected
employee’s SIMPLE IRA account. If an affected employee does not have a SIMPLE IRA account, an account will
be established for that employee.
If the plan did not provide eligible employees with the opportunity to make elective deferrals and the plan provides for
matching contributions, the corrective matching contribution will be based on the assumption that the eligible employee
would have made an elective deferral equal to 3% of compensation.
The total corrective contribution (beforeadjusting for earnings) for each plan year is:
YearCorrective contribution
The earnings calculation for an affected employee will be based on one of the following method(s) (check one):
□
Actual investment results of the affected employee’s SIMPLE IRA account.
□
The interest rate incorporated in the Department of Labor’s Voluntary Fiduciary Correction Program Online Calculator
(“VFCP Online Calculator”) (http://www.dol.gov/ebsa/calculator/main.html), since the actual earnings of the affected
employee’s IRA account cannot be ascertained.
□
Actual investment results for years in which data is available, or the rate incorporated in the VFCP Online Calculator
for years in which the actual earnings of the affectedemployee’s IRA account cannot be ascertained. The VFCP
Online Calculator was or will be used for the following years:
Former employees affected bythe failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SIMPLE IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s
last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the
use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the
Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee
is not found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the
affected employee’s SIMPLE IRA account at that time.
□
C.
Failure to provide eligible employees withthe opportunity to make elective deferrals
The plan did not provide employee(s) who satisfied the applicable eligibility requirements with the opportunity to make
elective deferrals to the SIMPLE IRA plan. Thefailure occurred for the following plan years:
September 2, 20085432008–35 I.R.B.

Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts to the plan on behalf of each affected employee.
The corrective contribution will be made to compensate the affected employee(s) for themissed deferral opportunity.
The corrective contribution on behalf of each affected employee is equal to 50% of what the employee’s deferral might
have been had he or she been provided with the opportunity tomake elective deferrals to the plan. Since the employee’s
deferral decision is not known, the deferral amount is estimated by assuming that the excluded employee would have
made an elective deferral equal to 3% of his or her compensation. (Example: N, a nonhighly compensated employee
was erroneously excluded from the plan. During the year of exclusion, N made $10,000 in compensation. N’s missed
deferral is estimated to be: 3% times $10,000 or $300. The required corrective contribution on behalf of N, before
adjusting for earnings, is 50% of $300 or $150). Thus, the required corrective contribution for an employee who was
erroneously excluded from making elective deferrals from a SIMPLE IRA Plan is equal to 1.5% of compensation
(adjusted for earnings).
The total corrective contribution (before adjusting for earnings) on behalf of the affected employees for each plan
year is as follows:
YearCorrective contribution
The corrective contribution made on behalf of each affected employee will also be adjusted for earnings. Earnings will be
calculated from the date(s) that the contribution(s) should have been made through the date of the corrective contribution.
The corrective contribution (adjustedfor earnings) will be made to each affected employee’s SIMPLE IRA account. If an
affected employee does not have a SIMPLE IRA account, a SIMPLE IRA account will be established for that employee.
Earnings will be calculated on the basis of one of the following methods (check one):
□
Actual investment results of the affected employee’s SIMPLE IRA account.
□
The interest rate incorporated in the VFCP Online Calculator, since the actual earnings of the affected employee’s IRA
account cannot be ascertained.
□
Actual investment results for years in which data is available, or the rate incorporated in the VFCP Online Calculator
for years in which the actual earnings of the affectedemployee’s IRA account cannot be ascertained. The VFCP
Online Calculator was or will be used for the following years:
Former employees affected bythe failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SIMPLE IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s
last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the
use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the
Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is
not found but is subsequently located on a later date, thePlan Sponsor will make a corrective contribution to the
affected employee’s SIMPLE IRA account at that time.
□
D.
Excess Amounts Contributed
The Plan Sponsor contributed Excess Amounts to the plan on behalf of participants as follows:
(check boxes that apply)
□
Amounts were contributed in excess of the benefit theparticipants were entitled to under the plan.
□
Elective deferrals were made to the SIMPLE IRA in excess of the limitation under the terms of the SIMPLE IRA
(e.g., the applicable limit under § 408(p)(2)(E)).
2008–35 I.R.B.544September 2, 2008

The total of the Excess Amounts for each affected plan year was as follows:
Year
Excess
Amounts
Number of
Participants
Affected
Description of the Proposed Method of Correction
(check all correction methods that apply)
□
Distribution of Excess Elective Deferrals
The Plan Sponsor has effected (or will effect) a distribution of the Excess Amounts, adjusted for earnings through
the date of correction, to the affected participant(s). The earnings adjustment will be based on the actual rates of
return of the participant’s SARSEP IRA account from the date(s) that the excess deferrals were made through the
date of correction.
Affected participants were (or will be) informed that the distribution of an Excess Amount is not eligible for favorable
tax treatment accorded to distributions from a SIMPLE IRA and, specifically, is not eligible for tax-free rollover.
The total corrective distribution (before adjusting for earnings) for each affected plan year is as follows:
Year
Corrective
Distribution
Number of
Participants
Affected
□
Distribution of Excess Employer Contributions
The Plan Sponsor has effected (or will effect) the return ofexcess employer contributions, adjusted for earnings
through the date of correction, to the Plan Sponsor. The earnings adjustment will be based on the actual rates of return
on the affected participants’ SIMPLE IRA accounts from the date(s) that theexcess employer contributions were
made through the date of correction. The amount returned to the Plan Sponsor is not includible in the gross income of
the affected participant(s). The Plan Sponsor is not entitled to a deduction for such excess employer contributions.
The amount returned is reported on Form 1099–R as a distribution issued to the affected participant(s), indicating the
taxable amount as zero.
September 2, 20085452008–35 I.R.B.

The return of the excess employer contributions (before adjusting for earnings) for each affected plan year is as follows:
Year
Return of Excess
Employer Contributions
Number of
Participants
Affected
□
Retention of Excess Amounts
Note:If this correction method is selected, an additional VCP fee is required.
(See section 12.05(2) of Rev. Proc. 2008–50.)
□
The Excess Amounts (including earnings) were retained in the SIMPLE IRA accounts ofthe affected participants
as follows.
Year
Excess
Amounts
Retained
Number of
Participants
Affected
The earnings adjustment will be based on the actual ratesof return of the SEP or SARSEP from the date(s) that the
excess employer contributions were made through the date of correction.
□
Excess Amounts of $100 or less (See section 6.02(5)(e) of Rev. Proc. 2008–50.)
For one or more participants, the total Excess Amount (employer contributions and/orelective deferrals before
adjusting for earnings) is $100 or less. The Excess Amount will not be distributed.
Former employees affected by the Excess Amounts failure (check one):
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted, and corrective contributions will be made to their SIMPLE IRA
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s
last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the
use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the
Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee
is not found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the
affected employee’s SIMPLE IRA account at that time.
2008–35 I.R.B.546September 2, 2008

PART II. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
PART III. REQUEST(S) FOR EXCISE TAX RELIEF
(check if applicable)
□
Excise tax pursuant to § 4972. The Plan Sponsor requests that the Service not pursue the excise tax under § 4972. (This
applies to situations where corrective contributions made in accordance with this submission would be nondeductible
contributions for the year of correction and subject to the excise tax under § 4972. See section 6.09(3) of Rev. Proc.
2008–50. Please enclose a written explanation in supportof your request for relief from this excise tax.)
PART IV. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•The applicable plan document. (This could be an IRS form document, such as a 5305–SIMPLE or 5304–SIMPLE, or a prototype
document developed by a financial institution. If a prototype plan document is used, please send a copy of the most recent
opinion letter issued with respect to such plan document.)
•A written explanation of how and why the failure(s) described in this submission occurred, including a description of the ad-
ministrative procedures applicable to the failure(s) in effect at the time the failure(s) occurred.
•For failures that involve corrective contributions or corrective distributions, a description of assumptions and supporting calcu-
lations used to determine the amount needed for correction:
1) For failures to make required Employer Contributions and for failures to provide eligible employees with the opportunity
to make elective deferrals:
a) Computations in support of the corrective contribution amounts attributable to each participant. In the case of a failure
to provide eligible employees with the opportunity to make elective deferrals, please include computations showing
how the average deferral percentage, missed deferral, and corrective contribution amount was determined.
b) Calculations showing how the earnings adjustment and the ultimate corrective contribution on behalf of affected
employees will be determined. (Please use estimates, including an estimated correction date, if corrective
contributions have not been made yet.)
2) For failures involving the contribution of Excess Amounts:
a) Computations in support of the excess contribution amounts attributable to each participant.
b) Calculations showing how the earnings adjustment and the ultimate corrective distribution amounts are determined.
(Please use estimates, including an estimated correction date, if corrective distributions have not been made yet.)
•Explanations in support of requests for excise tax relief.
•Any other information that would be useful for the purposeof understanding the proposals made under the submission.
September 2, 20085472008–35 I.R.B.

APPENDIX F, SCHEDULE 5
Plan Loan Failures
(Qualified Plans and 403(b) Plans)
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE
The plan identified above did not comply with the requirements of § 72(p)(2) of the Internal Revenue Code. (Note: The conditions
of § 72(p)(2) must be satisfied for a participant loan to be exempt from being treated as a distribution to the participant under
§ 72(p)(1).) The failure occurred for the following reason(s) (check applicable boxes and provide the information requested):
□
A. The loan(s) exceeded the limit under § 72(p)(2)(A)
Plan Year
Number of
participants
affected
Total number of loans
issued that
violated § 72(p)(2)(A)
□
B. Loan terms did not satisfy the limits on the duration of the loan under § 72(p)(2)(B)
Plan Year
Number of
participants
affected
Total number of loans
issued that
violated § 72(p)(2)(B)
□
C. Loan terms did not satisfy § 72(p)(2)(C) relating to the frequency and amortization of payments
Plan Year
Number of
participants
affected
Total number of loans
issued that
violated § 72(p)(2)(C)
2008–35 I.R.B.548September 2, 2008

□
D. Defaulted loan(s) (where the loan terms satisfied the requirements of § 72(p)(2), but default(s) occurred because loan
payments were not made in accordance with the terms of the loan)
Plan Year
of loan defaults
Number of
participants
affected
Total number of
loans in default
PART II. ELIGIBILITY FOR USE OF APPENDIX F, SCHEDULE 5
Yes No
A.
□□
Is any affected participant either a key employee (as defined in § 416(i)(1)) or an owner-employee (as defined in
§ 401(c)(3))?
If ”Yes,”proceed to Part II B.
If ”No,”skip Part II B and proceed to Part II C.
B.
□□
Is the purpose of this request limited to permitting the Plan Sponsor to report the loan as a deemed distribution in
the year of correction insteadof the year of the failure?
If ”Yes,”complete part III and then proceed directly to part IV D. (Parts IV A, B, and C do not apply.)
If ”No,”STOP — do NOT use this schedule. Any request for relief should be made by filing an application
using the format described in Appendix D.
C.
□□
Will correction be completed beforethe maximum period for repayment of the loan (pursuant to § 72(p)(2)(B))
has expired? (Note: The maximum period is determined from the original date of the loan. Generally, this period
is five years from the original date of the loan, except forhome loans as described in § 72(p)(2)(B)(ii).) If ”Yes,”
and the Plan Sponsor wants relief from reporting the loan as a deemed distribution,complete Part III and then
answer applicable questions in Parts IV A through IV C.If”No,”complete Part III and then proceed to Part IV D.
PART III. EXPLANATION OF HOW AND WHY THE PLAN LOAN FAILURES OCCURRED
September 2, 20085492008–35 I.R.B.

PART IV. DESCRIPTION OF PROPOSED METHOD OF CORRECTION
If the Plan Sponsor is requesting relief from reporting loans as deemed distributions, then complete Parts IV A, B,
or C, as applicable.
If the Plan Sponsor is only requesting postponement of reporting loans as deemed distributions on Form 1099–R, then
proceed directly to Part IV D.
A.
Correction for Loans in Excess of § 72(p)(2)(A)
Any participant affected by this failure will make a corrective repayment to the plan. After repaying the excess of the loan
amount over the maximum loan amount under § 72(p)(2)(A) (the “excess loan amount”), the remaining balance of the
loan will be paid over the remaining period of the original loan (not beyond the period permitted under § 72(p)(2)(B),
determined from the original date of the loan) in a manner thatcomplies with the frequency and level payment requirements
of § 72(p)(2)(C). The excess loan amount that will be repaid bythe participant is determined based on how previously made
payments have been applied to the loan. The previous loan payments were applied as follows (check applicable box, and
complete necessary information)
□
Prior loan payments were made in accordance with an amortization schedule that complied with the requirements of
§ 72(p)(2)(B) relating to the terms of the loan and § 72(p)(2)(C) relating to frequency, and level loan payments. For the
purpose of determining the excess loan amount and the remaining outstanding amount of the loan to be repaid over the
remaining period of the loan, the previously made loan payments will be applied as follows (check box that applies)
□
1. Solely to reduce the portion of the loan that did not exceed the maximum loan amount under § 72(p)(2)(A) of the
Code. Result: The corrective repayment would equal the excess loan amount plus interest thereon.
□
2. To reduce the excess loan amount to the extent of the interest thereon, with the remainder of the repayments applied
to reduce the portion of the loan thatdid not exceed the maximum loan amountunder § 72(p)(2)(A). Result: The
corrective repayment would equal the excess loan amount.
□
3.Pro rataagainst the excess loan amount and the maximum loan amount under § 72(p)(2)(A). Result: The corrective
repayment would equal the outstanding balance remaining on the excess loan amount on the date that corrective
repayment is made.
□
Prior loan payments were not made in accordance with an amortization schedule that complied with the requirements of
§72(p)(2)(B) or (C):
Methodology for determining the excess loan amount that will be repaid and the remaining outstanding balance of the
loan that will be amortized over the remaining period of the loan:
After the corrective repayment is made:
(Check one of the two options listed below)
□
Option 1:The remaining loan balance will be repaid according to the original amortization schedule. (This option is
available only if the original amortization schedule would result in the loan being paid within the maximum period
permitted under §72(p)(2)(B) determined from the original date of the loan.)
□
Option 2:The loan will be reformed to amortize the remaining principal balance as of the date of repayment over the
remaining period of the original loan, provided that the recalculated payments over the remaining period comply with
the requirements of § 72(p)(2)(B) determined from the original date of the loan.
2008–35 I.R.B.550September 2, 2008

B.
Correction for loans with terms that: (i) provided for arepayment period that exceeded the period permitted under
§ 72(p)(2)(B) and/or (ii) provided for payments that did not provide for substantially level amortization with payments not
less frequently than quarterly, as provided under § 72(p)(2)(C).
□
1. The loan balance will be reamortized with payments madeon a substantially level basis (per § 72(p)(2)(C)), made
at least quarterly.
□
2. The reamortized loan balance will be paid over a remaining period that does not extend beyond five years from the
date of the original loan (per § 72(p)(2)(B)).
C.
Correction for defaulted loans with terms that complied with the requirements of § 72(p)(2)(A), (B), and (C): (check
the box that applies)
□
1. A lump sum repayment will be made to the plan in an amount equal to the additional repayments that the affected
participant would have made to the plan if there had beenno failure to repay the plan, plus interest accrued on
the missed repayments.
□
2. The outstanding balance of the loan, including accrued interest, will be reamortized over a remaining period that does
not extend beyond five years from the date of the original loan.
□
3. The Applicant will use a combination of the methods described in #1 and #2 above, as follows:
Determination of Interest Accrued on Missed Repayments:(check the box that applies)
□
Plan loan rate[insert rate]
□
Rate of return of investments under plan[insert rate]
Note: “Rate of return of investments” option may only be usedif the rate of investment return under the plan equals or
exceeds the plan loan rate.
Actual Interest Rate used[insert rate]
The interest rate for missed payments was determined as follows:
The additional unpaid interest (will be/has been(circle one)) paid by the: (check the box that applies)
□
Plan Sponsor
□
Affected participants
(Note: Irrespective of the Plan Sponsor’s election to have the affected participants pay the unpaid interest, in
accordance with section 6.02(6) of Rev. Proc. 2008–50, the Service may, based on the facts and circumstances,
determine that the Plan Sponsor should pay all or a portion of the additional unpaid interest. If the Service makes this
determination, the Plan Sponsor will be requested to revise this submission.)
September 2, 20085512008–35 I.R.B.

D.
Correction for Deemed Distributions(check if applicable)
□
The Plan Sponsor is not eligible to or will not correct inaccordance with Parts IV A through IV C of this Appendix F,
Schedule 5. The Plan Sponsor proposes that the loans be reported as deemed distributions (using Form 1099 R) for the
year of correction instead of the year of the failure. The Plan Sponsor shall pay any applicable income tax withholding
amount that was required to be paid in connection with the failure. (See Income Tax Regulations § 1.72(p)–1, Q&A–15.)
PART V. DESCRIPTION OF STEPS TAKEN TO ENSURE THAT THE FAILURE DOES NOT RECUR
PART VI. REQUEST FOR RELIEF
Yes No
□□
The Plan Sponsor requests relief from reporting participant loans as deemed distributions.
□□
The Plan Sponsor requests that the plan be permitted to report the participant loans as deemed distributions in the
year of correction instead of the year of the failure.
PART VII. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•Loan amortization schedules for affected participants (A sample representation may be provided if there are multiple participants
affected.)
•Specific calculations for each affected employee or a representative sample of affected employees (The sample calculations must
be sufficient to demonstrate each aspect of the correction method proposed (e.g., for a failure with respect to a loan that exceeds
the maximum amount permitted by § 72(p)(2)(A), the calculations must include the amounts of the excess loan amounts that will
be repaid to the plan, determination of the outstanding loan balance, and the proposed method of repayment of the outstanding
loan balance; for the correction of a defaulted loan, the enclosure should set forth the periods of such loan defaults.))
2008–35 I.R.B.552September 2, 2008

APPENDIX F, SCHEDULE 6
Employer Eligibility Failure (401(k) and 403(b) Plans only)
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE
The following failure occurred with respect to the plan identified above (check failure that applies)
□
403(b) Plans
The plan was intended to satisfy the requirements of § 403(b)but was adopted by a Plan Sponsor that was not a tax-exempt
organization described in § 501(c)(3) ora public educational organization described in § 170(b)(1)(A)(ii). The type of
organization sponsoring the Plan during the period of the failure was:
.
The failure occurred during the following plan years:
.
□
Section 401(k) Plans
The plan intended to include a qualified cash or deferred arrangement and satisfy the requirements of §§ 401(a) and 401(k)
but was adopted by an employer that failed to meet the eligibility requirements to establish a § 401(k) Plan.
Describe why the employer was ineligible to maintain the 401(k) plan:
PART II. DESCRIPTION OF PROPOSED METHOD OF CORRECTION
□
Section 403(b) Plans
1. All contributions under the plan ceased as of
. (Insert date beginning no later than the date the
application under VCP was filed.)
2. No new employee or employer contributions will be permitted in the future.
3. The assets in the plan will remain in the trust, annuity contract, or custodial account and will be distributed no earlier
than the occurrence of one of the permitted events under § 403(b)(7) or § 403(b)(11).
□
Section 401(k) Plans
1. All contributions under the plan ceased as of
. (Insert date beginning no later than the date the
application under VCP was filed.)
2. No new employee or employer contributions will be permitted in the future.
3. The assets in the plan will remain in the trust, annuity contract, or custodial account and will be distributed no earlier
than the occurrence of one of the permitted events under § 401(k).
PART III. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
September 2, 20085532008–35 I.R.B.

APPENDIX F, SCHEDULE 7
Failure to Distribute Elective Deferrals in Excess of the § 402(g) Limit
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE
Calendar Years
(Year of Deferral)
Number of
Affected
Participants
Amount of Excess Deferrals
Distributed (excluding
earnings)
PART II. DESCRIPTION OF THE PROPOSED METHOD OF CORRECTION
The plan will distribute the excess deferral to the employee(s) and report the amount as taxable in the year of deferral and in the
year distributed. In accordancewith Income Tax Regulations § 1.402(g)–1(e)(1)(ii), a distribution toa highly compensated
employee is included in the Average Deferral Percentage (ADP) test; however, a distribution to a nonhighly compensated
employee is not included in the ADP test.
For any distributions attributable to elective deferrals designated as Roth Contributions, all distributions will be reported as
taxable in the year distributed. Designated Roth contributionswill have already been included in income in the year of deferral.
The excess deferral to be distributed will also be adjusted forearnings. Earnings will be determined from the end of the year in
which the failure occurred through the year of correction. Earnings will be included in the distribution amount that is to be
reported as taxable in the year of distribution.
PART III. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
2008–35 I.R.B.554September 2, 2008

PART IV. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•Specific calculations for each affected employee or a representative sample of affected employees (The sample calculations
must be sufficient to demonstrate each aspect of the correction method proposed.)
September 2, 20085552008–35 I.R.B.

APPENDIX F, SCHEDULE 8
Failure to Pay Required Minimum Distributions Timely under § 401(a)(9)
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE
Calendar Years
Number of Affected
Participants
Total Amount of Missed
Required Minimum
Distributions
PART II. DESCRIPTION OF THE PROPOSED METHOD OF CORRECTION
□
DefinedContributionplanonly—The plan will distribute the required minimum distributions to affected participants.
For each affected participant,the amount to be distributed for each year in which the failure occurred will be determined
by dividing the adjusted account balance on the applicable valuation date by the applicable distribution period. For this
purpose, adjusted account balance means the actual account balance, determined in accordance with § 1.401(a)(9)–5
Q&A–3 of the Income Tax Regulations, reduced by the amount of the total missed minimum distributions for prior years.
□
Defined Benefit plan only —The plan will distribute the required minimum distributions plus an interest payment
representing the loss of use of such amounts. The interest adjustment is determined as follows:
PART III. REQUEST FOR RELIEF
A.
□
The Applicant requests relief with regard to excise taxes under § 4974
Yes No
□□
At least one affected participant is either an owner-employee (see § 401(c)(3)), or, if the Plan Sponsor is a
corporation, a 10 percent owner of such corporation
2008–35 I.R.B.556September 2, 2008

If “Yes,” the Applicant submits the following explanation for its request for relief from the § 4974 excise tax:
PART IV. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
PART V. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•Specific calculations for each affected employee or a representative sample of affected employees (The sample calculations
must be sufficient to demonstrate each aspect of the correction method proposed. For a defined benefit plan, these specific
calculations must illustrate the interest rate used to representthe loss of the use of the missed required minimum distributions.)
September 2, 20085572008–35 I.R.B.

APPENDIX F, SCHEDULE 9
Correction by Plan Amendment (in accordance with Appendix B)
Plan Name:
EIN:Plan #:
(Please include the plan name, EIN, and plan number information on each page of the submission.)
PART I. IDENTIFICATION OF FAILURE(S) AND CORRECTION METHOD(S) AS SET FORTH IN REV. PROC.
2008–50, APPENDIX B, SECTION .07
The following failure(s) occurred with respect to the plan identified above (check failure(s) that apply)
□
A. § 401(a)(17) Failure in a Defined Contribution Plan
(check as applicable)
□
Contributions
□
Forfeitures
were allocated on the basis of compensation in excess of the limit under § 401(a)(17) as provided below:
(Enter the plan years in which the failure occurred, the amount of the allocations in excess of § 401(a)(17) made for each
plan year (including earnings), and the number of participants affected by the failure for each plan year:)
Plan Year
Amounts Allocated in
Excess of § 401(a)(17)
Number of
Participants
Affected
Description of Proposed Method of Correction:
An additional amount has been (or will be) contributed to the plan on behalf of each of the employees who received an
allocation for the year of the failure (excluding each employee for whom there was a § 401(a)(17) failure). The amount
contributed for an employee is equal to the employee’s plan compensation for the year of the failure multiplied by a
fraction, the numerator of which is theimproperly allocated amount made on behalf of the employee with the largest
improperly allocated amount, and the denominator of whichis the limit under § 401(a)(17) applicable to the year of the
failure. In addition, the plan will be retroactively amended to reflect the increased contribution and allocation percentages
for the plan’s participants.
2008–35 I.R.B.558September 2, 2008

(Enter the plan years in which the failureoccurred, the fraction used to determine the additional amount allocated to
employees other than those for whom there was a § 401(a)(17) failure, and the total required contribution (before adjusting
for earnings) for each plan year in which the failure occurred:)
Plan Year
FractionUsedto
Determine the
Additional Amount
Allocated
Total Required
Contribution (before
adjusting for
earnings)
The resulting additional amount will be adjusted for earnings from the end of the plan year in which the failure occurred
through the date of the corrective contribution. The methodfor determining the earnings adjustment is as follows:
Former employees affected by the failure (check one)
□
There are no former employees affected by the failure.
□
Affected former employees will be contacted and contributions will be made to the plan on their behalf. To the
extent that an affected former employee cannot be located following a mailing to the employee’s last known
address, the Plan Sponsor will take reasonable actionsto locate that employee. Such actions include the use of
the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social
Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not
found but is subsequently located on a later date, the PlanSponsor will make corrective contributions on behalf of the
affected employee at that time.
□
B.
Hardship Distribution Failure
Hardship distributions were made to participants under the plan. All plan participants were entitled to request hardship
distributions, and all requests were evaluated in accordancewith uniform eligibility standards, as described below:
September 2, 20085592008–35 I.R.B.

(Enter the plan years in which the failure occurred, the number of hardship distributions made for each plan year, and
the number and amount of distributions made to highly compensated employees (HCEs) and nonhighly compensated
employees (NHCEs) respectively, affected by the failure for each plan year.)
Plan Year
Number of
Hardship
Distributions
Made During the
Plan Year
Number of
Hardship
Distributions Made
to NHCEs
Amount
of Distributions
Number of
Hardship
Distributions Made
to HCEs
Amount of
Distribution
Description of the Proposed Method of Correction:
The failure was (or will be) corrected by retroactively amending the plan to provide for the hardship distributions that
were made available. The effective date of the corrective amendment is: ________________________.
□
C. Plan Loan Failure
Plan loans were made to participants under the plan. All plan participants were entitled to request plan loans under
uniform standards of eligibility, and all plan loans made satisfied the requirements of § 72(p).
(Enter the plan years in which the failure occurred, the number of participant plan loans made for each plan year, and the
number and amount of plan loans made to highly compensated employees (HCEs) and nonhighly compensated employees
(NHCEs) respectively, affected by the failure for each plan year.)
Plan Year
Number of Plan
Loans Made
During the Plan
Year
Number of Plan
Loans Made to
NHCEs
Amount of
Plan Loans
Number of Plan
Loans Made to
HCEs
Amount of
Plan Loans
Description of the Proposed Method of Correction:
The failure was (or will be) corrected byretroactively amending the plan to provide for the plan loans that were made
available. The effective date of the corrective amendment is: ________________________.
□
D.
Early Inclusion of Otherwise Eligible Employee Failure
Employees:
(check the applicable box(es))
□
Who had not satisfied the plan’s minimum age or service requirements were treated as eligible participants on a date
prior to their being eligible under the plan and were entitled to the same benefits under the plan to which they would
have been entitled had they completed the minimum age or service requirements of the plan.
□
Who had completed the plan’s minimum age or service requirements were treated as eligible participants prior to
the applicable plan entry date and wereentitled to the same benefits under the plan to which they would have been
entitled had they entered the plan timely.
2008–35 I.R.B.560September 2, 2008

The plan’s minimum age or service requirements and plan entry date, as applicable, for the years of the failure were as
follows:
(Enter the plan years in which the failureoccurred and the number of participants affected by the failure, broken down by
type of employee (highly compensated employee (HCE) or nonhighly compensated employees (NHCE) respectively, for
each plan year.)
Plan Year
Number of NHCEs
Affected by the
Failure During the
Plan Year
Number of HCEs
Affected by the
Failure During the
Plan Year
Description of the Proposed Correction Method:
The failure was (or will be) corrected by retroactively amending the plan to provide for the inclusion of the ineligible
employees. The effective date of the corrective amendment is:
.
PART II. CHANGE IN ADMINISTRATIVE PROCEDURES
Please include an explanation of how and why the failures aroseand a description of the measures that will be implemented
to ensure that the same failures will not occur.
September 2, 20085612008–35 I.R.B.

PART III. ENCLOSURES
In addition to the applicable enclosures listed on Appendix F, the Plan Sponsor encloses the following with this submission:
•Copies of all amendments used to correct the failure(s), either as adopted or in proposed form (required)
•A copy of the plan document in effect prior to any of the amendments used to correct the failure(s) (required)
•For a § 401(a)(17) failure in a defined contribution plan, specific calculations for each affected employee or a representative
sample of affected employees. (The samplecalculations must be sufficient to demonstrate each aspect of the correction method
proposed. For example, the determination of the fraction used to determine the additional amount to be allocated to each em-
ployee (other than those for whom there was a §401(a)(17) failure) must be demonstrated.)
26 CFR 601.601: Rules and regulations.
(AlsoPartI,§163.)
Rev. Proc. 2008–51
SECT
ION 1. PURPOSE
This revenue procedure describes cir-
cumstances in which the Internal Revenue
Service (“Service”) will not treat a debt in-
strument as an applicable high yield dis-
count obligation (“AHYDO”) for purposes
of §§ 163(e)(5) and 163(i) of the Internal
Revenue Code.
This revenue procedure provides cer-
tainty with respect to certain potential tax
issues that may be implicated by the is-
suance of a debt instrument (including a
deemed issuance of a debt instrument un-
der § 1.1001–3 of the Income Tax Regu-
lations) in the circumstances described be-
low. No inference should be drawn about
whether similar consequences would ob-
tain if a debt instrument falls outside the
limited scope of this revenue procedure.
Furthermore, there should be no inference
that, in the absence of this revenue pro-
cedure, a debt instrument within its scope
would be an AHYDO.
SECTION 2. BACKGROUND
.01 Corporations frequently obtain
financing commitments (“Financing
Commitments”) from potential lenders
(“Lenders”) in advance of borrowing
money. These Financing Commitments
ensure that the corporation will have suffi-
cient debt financing at a future date, within
certain parameters (for example, the total
amount to be borrowed, an interest rate
not to exceed a certain level, and the term
of the loan).
.02 In some cases, the Financing Com-
mitments are not ultimately called upon by
the corporation, and the corporation ob-
tains debt financing from other sources (or
doesn’t borrow at all).
.03 In other cases, the Financing Com-
mitments are called upon by the corpora-
tion, and the Lender extends credit pur-
suant to terms negotiated earlier, as part
of the Financing Commitment. In some of
these situations, the corporation will bor-
row on terms that were generally estab-
lished in the Financing Commitment, and
which generally remain fixed (or “perma-
nent”) over the term of the resulting debt
instrument. (The “permanent” nature of
the terms frequently allows the debt to be
quickly sold by the Lender to other hold-
ers.) Alternatively, the corporation will
borrow on terms that are temporary (for
example, in effect for a year or less) but
that change to different, more “permanent”
terms (that is, terms that will last for the
remaining term of the financing arrange-
ment) after this temporary period. (The
corporation may attempt to refinance the
loan during the temporary, or “bridge,” pe-
riod on terms that are more favorable than
the “permanent” terms embedded in the
loan extended pursuant to the Financing
Commitment.)
.04 As recent events have demon-
strated, market conditions can worsen, in
an unanticipated fashion, between the time
a binding Financing Commitment is ob-
tained by the corporation and the time the
corporation calls upon the Lender to per-
form pursuant to the Financing Commit-
ment. This can have a number of collateral
economic consequences, which can poten-
tially result in situations in which the issue
price of a debt instrument is significantly
less than the amount of money actually
received by the corporation, viewing the
transactions as a whole. For example:
(1) In situations in which a corporation
issues debt with “permanent” terms previ-
ously established in the Financing Com-
mitment (that is, debt without temporary,
or “bridge,” terms), the Lender may be un-
able to sell the debt to third parties for
a price equal to (or near) the amount of
money provided to the corporation pur-
suant to the Financing Commitment. In
these situations, the issue price of the debt
may be significantly less than the amount
of money advanced to the corporation. For
example, this result could occur, in certain
circumstances, if the Lender sells a sub-
stantial amount of the debt to third parties
in its capacity as an underwriter within the
meaning of § 1.1273–2(e).
(2) In situations in which a corporation
issues debt with temporary, or “bridge,”
terms previously established in the Fi-
nancing Commitment, the corporation
may be unable to refinance the debt in
the capital markets with new, alternative,
“permanent” debt financing with terms
that are more (or equally) favorable than
the “permanent” terms embedded in the
debt issued pursuant to the Financing
Commitment. Thus, in order to allow
the Lender to sell the debt to third parties
(whether as part of a separately negotiated
transaction or becausethe corporation is
requiredtodosobycontract),theparties
may amend the terms of the debt to make it
more marketable. Depending on the facts
of a given case, such amendments may
constitute a “significant modification”
within the meaning of § 1.1001–3. In this
situation,theissuepriceofthenewdebt,
deemed to have been issued to retire the
olddebt,maybesignificantlylessthanthe
amount of money initially advanced to the
corporation. For example, this result could
occur, in certain circumstances, if the new
debt is traded on an established market
within the meaning of § 1.1273–2(f).
.05 The issuance of a debt instrument
pursuant to a Financing Commitment (or
pursuant to the significant modification
of a debt instrument originally issued
2008–35 I.R.B.562September 2, 2008

pursuant to a Financing Commitment)
potentially raises adverse income tax con-
sequences in situations in which the issue
price of the debt instrument is less than the
cash actually received by the corporation
for the debt instrument issued pursuant to
the Financing Commitment. For example,
interest deductions on the debt instrument
may be disallowed under § 163(e)(5).
SECTION 3. APPLICABLE LAW
.01 Under § 163(e)(5), in the case of
an AHYDO, a corporation is not allowed
a deduction for the disqualified portion of
the original issue discount (“OID”) on the
obligation, and the corporation’s deduc-
tion for the remaining portion of the OID
is deferred until the OID is paid in cash or
in property (other than debt of the issuer
or a related person within the meaning of
§ 453(f)(1)).
.02 Section 163(i) defines an AHYDO
as any debt instrument if:
(1) The maturity date of the debt instru-
ment is more than five years from the date
of issue;
(2) The yield to maturity of the debt
instrument equals or exceeds the sum of
the applicable Federal rate in effect under
§ 1274(d) for the calendar month in which
the instrument is issued plus five percent-
age points; and
(3) The debt instrument has significant
OID.
.03 Under § 163(i)(2), a debt instrument
has significant OID if:
(1) The aggregate amount that would
be includible in gross income with respect
to the debt instrument for periods before
the close of any accrual period (as defined
in § 1275(a)(5)) ending after the date five
years after the date of issue, exceeds
(2) The sum of the aggregate amount of
interest to be paid under the debt instru-
ment before the close of the accrual period,
and the product of the issue price of the
debt instrument (as defined in §§ 1273(b)
and 1274(a)) and its yield to maturity.
.04 For purposes of determining
whether a debt instrument is an AHYDO,
§ 163(i)(3) provides that any payment
under the debt instrument is assumed to
be made on the last day permitted under
the debt instrument, and any payment
to be made in the form of another debt
instrument of the issuer (or a related per-
son within the meaning of § 453(f)(1)) is
assumedtobemadewhensuchdebtin-
strumentisrequiredtobepaidincashorin
property other than such debt instrument.
.05 Section 1.1001–3 provides rules to
determine whether a modification of the
terms of a debt instrument results in an ex-
change of the original debt instrument for
a modified instrument that differs materi-
ally either in kind or in extent. Section
1.1001–3 applies to any modification of a
debt instrument, regardless of the form of
the modification (including an exchange of
a new debt instrument for an existing debt
instrument).
SECTION 4. SCOPE
This revenue procedure applies to a
debt instrument described in either section
4.01, section 4.02, or section 4.03 of this
revenue procedure.
.01Debt Instrument Issued For Money
Pursuant to a Financing Commitment.
The debt instrument is issued by a corpo-
ration and—
(1) The debt instrument is issued for
money and the terms of the debt instrument
are consistent with the general terms of a
binding Financing Commitment obtained
by the corporation from an unrelated party
before January 1, 2009; and
(2) The debt instrument would not be an
AHYDO within the meaning of § 163(i),
if, solely for purposes of making a determi-
nation under this section 4.01(2), the issue
price of the debt instrument were the net
cash proceeds actually received by the cor-
poration for the debt instrument (regard-
less of whether a different issue price is de-
termined under § 1.1273–2).
.02Debt Instrument Exchanged for a
Debt Instrument Issued Pursuant to a Fi-
nancing Commitment. The debt instru-
ment is issued by a corporation and—
(1) The debt instrument is issued in
exchange (including a deemed exchange
under § 1.1001–3) for a debt instrument
(“Old Debt Instrument A”) issued by the
corporation and described in section 4.01
of this revenue procedure;
(2) The debt instrument is issued within
15 months following the issuance of Old
Debt Instrument A;
(3) The debt instrument would not be an
AHYDO within the meaning of § 163(i),
if, solely for purposes of making a deter-
mination under this section 4.02(3), the
issue price of the debt instrument were
the net cash proceeds actually received by
the corporation for Old Debt Instrument
A (regardless of whether a different issue
price is determined under § 1.1273–2 or
§ 1.1274–2, whichever is applicable);
(4) The maturity date of the debt instru-
ment is not more than one year later than
the maturity date of Old Debt Instrument
A; and
(5) The stated redemption price at
maturity of the debt instrument is not
greater than the stated redemption price
at maturity of Old Debt Instrument A
(see § 1.1273–1(b) to determine the stated
redemption price at maturity of a debt
instrument).
.03Debt Instrument Indirectly Ex-
changed for a Debt Instrument Issued
Pursuant to a Financing Commitment.
The debt instrument is issued by a corpo-
ration and—
(1) The debt instrument is issued in
exchange (including a deemed exchange
under § 1.1001–3) for a debt instrument
(“Old Debt Instrument B”) issued by the
corporation and described in section 4.02
of this revenue procedure;
(2) The debt instrument is issued within
15 months following the issuance of Old
Debt Instrument A;
(3) The debt instrument would not be an
AHYDO within the meaning of § 163(i),
if, solely for purposes of making a deter-
mination under this section 4.03(3), the
issue price of the debt instrument were
the net cash proceeds actually received by
the corporation for Old Debt Instrument
A (regardless of whether a different issue
price is determined under § 1.1273–2 or
§ 1.1274–2, whichever is applicable);
(4) The maturity date of the debt instru-
ment is not more than one year later than
the maturity date of Old Debt Instrument
A; and
(5) The stated redemption price at
maturity of the debt instrument is not
greater than the stated redemption price
at maturity of Old Debt Instrument A
(see § 1.1273–1(b) to determine the stated
redemption price at maturity of a debt
instrument).
SECTION 5. APPLICATION
If this revenue procedure applies to a
debt instrument, the Service will not treat
the debt instrument as an AHYDO for pur-
poses of §§ 163(e)(5) and 163(i).
September 2, 20085632008–35 I.R.B.

SECTION 6. EFFECTIVE DATE
This revenue procedure is effective on
August 8, 2008. Sections 4.02(4), 4.02(5),
4.03(4) and 4.03(5) of this revenue proce-
dure do not apply to debt instruments is-
sued before August 8, 2008.
SECTION 7. REQUEST FOR
COMMENTS
The Service invites public comment
related to this revenue procedure. Com-
ments should be submitted no later than
November 15, 2008, to the Internal Rev-
enue Service, CC:PA:LPD:RU (Rev. Proc.
2008–51), room 5203, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044. Comments also may be hand de-
livered between the hours of 8 a.m. and
4 p.m. to the Courier’s Desk, Internal
Revenue Service, 1111 Constitution Av-
enue, NW, Washington, DC 20224, Attn:
CC:PA:LPD:RU (Rev. Proc. 2008–51),
room 5203. Alternatively, comments
may be submitted via the Internetat
Notice.Comments@irscounsel.treas.gov.
Include the revenue procedure number
(Rev. Proc. 2008–51) in the subject
line. All comments will be available for
public inspection and copying in their
entirety. Therefore, comments received by
the IRS and Treasury should not include
taxpayer-specific information or of a
confidential nature. Comments should
include the name and telephone number of
a person to contact.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is William E. Blanchard of the
Office of Associate Chief Counsel (Finan-
cial Institutions and Products). For further
information, contact Mr. Blanchard at
(202) 622–3950 (not a toll-free call).
2008–35 I.R.B.564September 2, 2008

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking
Postponement of Certain
Tax-Related Deadlines by
Reason of Presidentially
Declared Disaster or
Terroristic or Military Actions
REG–142680–06
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
a proposed regulation that proposes to
amend existing regulations issued under
section 7508A of the Internal Revenue
Code (Code). The purpose of the proposed
regulation is to clarify rules relating to the
postponement of certain tax-related acts
by reason of a Presidentially declared dis-
aster or terroristic or military action. The
proposed regulation clarifies the scope of
relief under section 7508A and specifies
that interest may be suspended during the
postponement period. These changes are
necessary to reflect changes in the law
made by the Victims of Terrorism Tax
Relief Act and current IRS practice. The
proposed regulation will affect taxpayers
determined by the Secretary to be affected
by a Presidentially declared disaster or
terroristic or military action.
DATES: Written or electronically gener-
ated comments and requests for a public
hearing must be received by October 14,
2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–142680–06),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–142680–06),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically,
viatheFederaleRulemaking
Portal atwww.regulations.gov(IRS
REG–142680–06).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulation Mary Ellen Keys (202) 622–4570,
concerning submission of comments
Oluwafunmilayo Taylor, (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Admin-
istration Regulations (26 CFR part 301).
Section 7508A of the Internal Revenue
Code (Code) relates to the postponement
of certain tax-related acts by reason of
Presidentially declareddisaster or terroris-
tic or military action. Section 7508A was
added by section 911(a) of the Taxpayer
Relief Act of 1997, Public Law 105–34
(111 Stat. 788, 877–78 (1997)) (the 1997
Act), which was effective for any period
for performing an act that had not expired
before December 5, 1997.
Section 7508A authorizes the Secretary
to postpone the deadlines for the perfor-
mance of certain tax-related acts for tax-
payers determined to be affected by a Pres-
identially declared disaster or a terroristic
or military action. Section 301.7508A–1
provides guidance for taxpayers seeking
relief under section 7508A.
Since the publication of §301.7508A–1
on December 14, 2000, section 7508A was
amended by the Victims of Terrorism Tax
Relief Act of 2001, Public Law 107–134
(115 Stat. 2427, 2433–35 (2002)) (the
2002 Act). The 2002 Act amended the
statute by extending the time period dur-
ing which the Secretary may postpone cer-
tain tax-related acts and allowing the Sec-
retary to suspend the accrual of interest,
penalties, additional amounts, or additions
to the tax during the period of postpone-
ment. The proposed regulation incorpo-
rates amendments to section 7508A.
Explanation of Provisions
The proposed regulation reflects that
the period of time the Secretary may post-
pone certain tax-related acts has been
increased from 90 days to one year. Ad-
ditionally, the proposed regulation reflects
that the Secretary is authorized under sec-
tion 7508A to suspend interest, penalties,
additional amounts, and additions to tax
which would normally accrue during the
time the tax-related act is postponed. Be-
fore the 2002 Act, generally, a taxpayer
was responsible for interest that accrued
during the postponement period (with a
limited exception under former section
6404(h) when the taxpayer received both
an extension of time to file under section
6081 and an extension of time to pay under
section 6161).
The proposed regulation sets forth how
the IRS generally implements postpone-
ments of time under section 7508A. The
proposed regulation provides, however,
that the IRS may grant further relief to
taxpayers under section 7508A by rev-
enue ruling, revenue procedure, notice,
announcement, news release or other guid-
ance published in the Internal Revenue
Bulletin, in addition to that relief provided
by the proposed regulation.
The proposed regulation demonstrates
that although specific tax-related acts may
be due on different dates within the post-
ponement period, the acts may be post-
poned under section 7508A until the last
day of the period. Under the proposed
regulation, when an affected taxpayer is
required to perform a tax-related act by
a due date that falls within the postpone-
ment period, the taxpayer is entitled to
postponement of the act and is eligible for
relief from interest, penalties, additional
amounts, and additions to tax during the
postponement period.
The proposed regulation provides that
the postponement period under section
7508A runs concurrently with extensions
of time to file or pay, if any, under other
sections of the Code. Thus, when the orig-
inal due date falls within the postponement
period, an affected taxpayer has until the
last day of the postponement period to
file for an extension of time to file or pay,
but any resulting extension runs from the
original due date.
The proposed regulation also provides
that, where the extended due date, but
not the original due date, falls within the
postponement period, relief under section
7508A is specific to the type of extension
received. Thus, an affected taxpayer who
received an extension of time to file, but
not an extension of time to pay, is eligible
September 2, 20085652008–35 I.R.B.

for a postponement of time to file and
relief from penalties relating to the failure
to file. The taxpayer is not eligible for
penalty and interest relief relating to the
failure to pay, as the payment due date was
not extended.
The regulation also clarifies that a post-
ponement of time under section 7508A to
perform a tax-related act does not extend
the due date to perform the act, but instead,
merely allows the IRS to disregard a time
period of up to one year for performance
of the act.
Proposed Effective Date
The regulation, as proposed, applies to
Presidentially declared disasters or terror-
istic or military actions occurring on or af-
ter the date of publication of a Treasury de-
cision adopting these rules as final regula-
tions in theFederal Register.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Or-
der 12866. Therefore, a regulatory assess-
ment is not required. It has been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to this regulation. The
regulation does not impose a collection
of information requirement on small busi-
ness entities, thus the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before this proposed regulation is
adopted as a final regulation, consideration
will be given to any written (a signed orig-
inal and eight (8) copies) and electronic
comments that are submitted timely to the
IRS. All comments will be available for
public inspection and copying. A public
hearing will be scheduled if requested in
writing by any person that timely submits
comments. If a public hearing is sched-
uled, notice of the date, time, and place for
the public hearing will be published in the
Federal Register.
Drafting Information
The principal authors of this pro-
posed regulation are Melissa Quale and
Mary Ellen Keys of the Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Amendments to the Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.7508A–1 is
amended by
1. Revising paragraphs (b) and (e).
2. Adding paragraph (d)(3).
3. Removing paragraph (f) and redes-
ignating paragraphs (g) and (h) as para-
graphs (f) and (g) respectively and revising
them.
The revisions and addition read as fol-
lows.
§301.7508A–1 Postponement of certain
tax-related deadlines by reasons of
a Presidentially declared disaster or
terroristic or military action.
*****
(b)Postponed deadlines—(1)In gen-
eral. In the case of a taxpayer determined
by the Secretary to be affected by a Pres-
identially declared disaster (as defined
insection1033(h)(3))oraterroristic
or military action (as defined in section
692(c)(2)), the Secretary may specify a
postponement period (as defined in para-
graph (d)(1) of this section) of up to one
year that may be disregarded in determin-
ing under the internal revenue laws, in
respect of any tax liability of the affected
taxpayer (as defined in paragraph (d)(1) of
this section)—
(i) Whether any or all of the acts de-
scribed in paragraph (c) of this section
were performed within the time pre-
scribed;
(ii) The amount of interest, penalty, ad-
ditional amount, or addition to the tax; and
(iii) The amount of credit or refund.
(2)Effect of postponement period.
When an affected taxpayer is required to
perform a tax-related act by a due date
that falls within the postponement period,
the affected taxpayer is eligible for post-
ponement of time to perform the act until
the last day of the period. The affected
taxpayer is eligible for relief from interest,
penalties, additional amounts, or additions
to tax during the postponement period.
(3)Interaction between postponement
period and extensions of time to file or
pay—(i)In general. The postponement
period under section 7508A runs concur-
rently with extensions of time to file and
pay, if any, under other sections of the In-
ternal Revenue Code.
(ii)Original due date prior to, but ex-
tended due date within, the postponement
period. When the original due date pre-
cedes the first day of the postponement
period and the extended due date falls
within the postponement period, the fol-
lowing rules apply. If an affected taxpayer
received an extension oftime to file, filing
will be timely on or before the last day
of the postponement period, and the tax-
payer is eligible for relief from penalties
or additions to tax related to the failure
to file during the postponement period.
Similarly, if an affected taxpayer received
an extension of time to pay, payment will
be timely on or before the last day of the
postponement period, and the taxpayer is
eligible for relief from interest, penalties,
additions to tax and additional amounts
related to the failure to pay during the
postponement period.
(4)Due date not extended. The post-
ponement of the deadline of a tax-related
act does not extend the due date for the act,
but merely allows the IRS to disregard a
time period of up to one year for perfor-
mance of the act. To the extent that other
statutes may rely on the date a return is due
to be filed, the postponement period will
not change the due date of the return.
(5)Additional relief. The rules of this
paragraph (b) demonstrate how the IRS
generally implements section 7508A. The
IRS may determine, however, that addi-
tional relief to taxpayers is appropriate and
may provide additional relief to the extent
allowed under section 7508A. To the ex-
tent that the IRS grants additional relief,
the IRS will provide specific guidance on
the scope of relief in the manner provided
in paragraph (e) of this section.
2008–35 I.R.B.566September 2, 2008

*****
(d) * * *
(3)Postponement periodmeans the pe-
riod of time (up to one year) that the IRS
postpones deadlines for performing tax-re-
lated acts under section 7508A.
(e)Notice of postponement of certain
acts. If a tax-related deadline is postponed
under section 7508A and this section, the
IRS will publish a revenue ruling, revenue
procedure, notice, announcement, news
release, or other guidance in the Internal
Revenue Bulletin (see §601.601(d)(2) of
this chapter) describing the acts postponed,
the postponement period, and the location
of the covered disaster area. Guidance
under this paragraph (e) will be published
as soon as practicable after the occurrence
of a terroristic or military action or decla-
ration of a Presidentially declared disaster.
(f)Examples. The rules of this section
are illustrated by the following examples:
Example 1. (i) Corporation X, a calendar year
taxpayer, has its principal place of business in County
M in State W. Pursuant to a timely filed request for
extension of time to file, Corporation X’s 2005 Form
1120, “U.S. Corporation Income Tax Return,” is due
on September 15, 2006. Also due on September
15, 2006, is Corporation X’s third quarter estimated
tax payment for 2006. Corporation X’s 2006 third
quarter Form 720, “Quarterly Federal Excise Tax
Return,” and third quarter Form 941, “Employer’s
QUARTERLY Federal Tax Return,” are due on Oc-
tober 31, 2006. In addition, Corporation X has an
employment tax deposit due on September 15, 2006.
(ii) On September 1, 2006, a hurricane strikes
County M in State W. On September 6, 2006, the
President declares a disaster within the meaning of
section 1033(h)(3). Also on September 6, 2006, the
IRS determines that County M in State W is a cov-
ered disaster area and publishes guidance announcing
that the time period for affected taxpayers to file re-
turns, pay taxes and perform other time-sensitive acts
falling on or after September 1, 2006, and on or before
November 30, 2006, has been postponed to Novem-
ber 30, 2006, pursuant to section 7508A.
(iii) Because Corporation X’s principal place of
business is in County M, Corporation X is an affected
taxpayer. Accordingly, Corporation X’s 2005 Form
1120 will be timely if filed on or before November
30, 2006. Corporation X’s 2006 third quarter esti-
mated tax payment will be timely if made on or before
November 30, 2006. In addition, pursuant to para-
graph (c) of this section, Corporation X’s 2006 third
quarter Form 720 and third quarter Form 941 will be
timely if filed on or before November 30, 2006. How-
ever, because deposits of taxes are excluded from the
scope of paragraph (c) of this section, Corporation
X’s employment tax deposit is due on September 15,
2006. In addition, Corporation X’s deposits relating
to the third quarter Form 720 are not postponed. Ab-
sent reasonable cause, Corporation X is subject to the
failure to deposit penalty under section 6656 and ac-
crual of interest.
Example 2. The facts are the same as inExample
1, except that because of the severity of the hurricane
the IRS determines that postponement of government
acts is necessary under these circumstances and pub-
lishes guidance accordingly. During 2006, Corpora-
tion X’s 2002 Form 1120 is being examined by the
IRS. Pursuant to a timely filed request for extension
of time to file, Corporation X timely filed its 2002
Form 1120 on September 17, 2003 (because March
15, 2003, falls on a Saturday, Corporation X’s 2002
Form 1120 was due to be filed on March 17, 2003).
Without application of this section, the statute of limi-
tation on assessment for the 2002 income tax year will
expire on September 17, 2006. However, pursuant to
paragraph (c) of this section, assessment of tax is one
of the government acts for which up to one year may
be disregarded. Because September 17, 2006, falls
within the period in which government acts are post-
poned, the statute of limitation on assessment for Cor-
poration X’s 2002 income tax will expire on Novem-
ber 30, 2006. Because Corporation X did not timely
file an extension to pay, payment of its 2002 income
tax was due on March 17, 2003. As such, Corporation
X will be subject to the failure to pay penalty and re-
lated interest beginning on March 18, 2003. The due
date for payment of Corporation X’s 2002 income tax
preceded the postponement period. Therefore, Cor-
poration X is not entitled to the suspension of interest
or penalties during the disaster period with respect to
its 2002 income tax liability.
Example 3. The facts are the same as inExam-
ple 2, except that the examination of the 2002 taxable
year was completed earlier in 2006, and on July 28,
2006, the IRS mailed a statutory notice of deficiency
to Corporation X. Without application of this section,
Corporation X has 90 days (or until October 26, 2006)
to file a petition with the Tax Court. However, pur-
suant to paragraph (c) of this section, filing a peti-
tion with the Tax Court is one of the taxpayer acts for
which a period of up to one year may be disregarded.
Because Corporation X is an affected taxpayer, Cor-
poration X’s petition to the Tax Court will be timely
if filed on or before November 30, 2006, the last day
of the postponement period.
Example 4. (i) H and W, individual calendar year
taxpayers, intend to file a joint Form 1040, “U.S. In-
dividual Income Tax Return,” for the 2007 taxable
year and are requiredto file a Schedule H, “House-
hold Employment Taxes.” The joint return is due on
April 15, 2008. H’s and W’s principal residence is in
County M in State Q.
(ii) On April 2, 2008, a severe ice storm strikes
County M. On April 5, 2008, the President declares
a disaster within the meaning of section 1033(h)(3).
Also on April 5, 2008, the IRS determines that
County M in State Q is a covered disaster area and
publishes guidance announcing that the time period
for affected taxpayers to file returns, pay taxes and
perform other time-sensitive acts falling on or after
April 2, 2008, and on or before June 2, 2008, has
been postponed to June 2, 2008.
(iii) Because H’s and W’s principal residence is in
County M, H and W are affected taxpayers. April 15,
2008, the due date for the filing of H’s and W’s 2007
Form 1040 and Schedule H, falls within the postpone-
ment period described in the IRS published guidance.
Thus, H’s and W’s return will be timely if filed on or
before June 2, 2008. If H and W request an extension
of time to file under section 6081 on or before June
2, 2008, the extension is deemed to have been filed
by April 15, 2008. Thus, H’s and W’s return will be
timely if filed on or before October 15, 2008.
(iv) April 15, 2008, is also the due date for the
payment due on the return. This date falls within the
postponement period described in the IRS published
guidance. Thus, the payment of tax due with the re-
turn will be timely if paid on or before June 2, 2008,
the last day of the postponement period. If H and W
fail to pay the tax due on the 2007 Form 1040 by June
2, 2008, and do not receive an extension of time to
pay under section 6161, H and W will be subject to
failure to pay penalties and accrual of interest begin-
ning on June 3, 2008.
Example 5. (i) H and W, residents of County D in
State G, intend to file an amended return to request a
refund of 2007 taxes. H and W timely filed their 2007
income tax return on April 15, 2008. Under section
6511(a), H’s and W’s amended 2007 tax return must
be filed on or before April 15, 2011.
(ii) On April 1, 2011, an earthquake strikes
County D. On April 5, 2011, the President declares
a disaster within the meaning of section 1033(h)(3).
Also on April 5, 2011, the IRS determines that
County D in State G is a covered disaster area and
publishes guidance announcing that the time period
for affected taxpayers to file returns, pay taxes and
perform other time-sensitive acts falling on or after
April 1, 2011, and on or before September 28, 2011,
has been postponed to September 28, 2011.
(iii) Under paragraph (c) of this section, filing a
claim for refund of tax is one of the taxpayer acts for
which up to one year may be disregarded. The post-
ponement period for this disaster begins on April 1,
2011, and ends on September 28, 2011. Accordingly,
H’s and W’s claim for refund for 2007 taxes will
be timely if filed on or before September 28, 2011.
Moreover, in applying the lookback period in sec-
tion 6511(b)(2)(A), which limits the amount of the al-
lowable refund, the period from September 28, 2011,
back to April 1, 2011, is disregarded under paragraph
(b)(1)(C) of this section. Thus, if the claim is filed
on or before September 28, 2011, amounts deemed
paid on April 15, 2008, under section 6513(b), such
as estimated tax and tax withheld from wages, will
have been paid within the lookback period of section
6511(b)(2)(A).
Example 6. (i) A is an unmarried, calendar year
taxpayer whose principal residence is located in
County W in State Q. A intends to file a Form 1040
for the 2007 taxable year. The return is due on April
15, 2008. A timely files Form 4868, “Application for
Automatic Extension of Time To File U.S. Individual
Income Tax Return.” Due to A’s timely filing of
Form 4868, the extended filing deadline for A’s 2007
tax return is October 15, 2008. Because A timely
requested an extension of time to file, A will not be
subject to the failure to file penalty under section
6651(a)(1), if A files the 2007 Form 1040 on or
before October 15, 2008. However, A failed to pay
the tax due on the return by April 15, 2008, and did
not receive an extension of time to pay under section
6161. Absent reasonable cause, A is subject to the
failure to pay penalty under section 6651(a)(2) and
accrual of interest.
(ii) On September 30, 2008, a blizzard strikes
County W. On October 3, 2008, the President declares
a disaster within the meaning of section 1033(h)(3).
Also on October 3, 2008, the IRS determines that
September 2, 20085672008–35 I.R.B.

County W in State Q is a covered disaster area and
announces that the time period for affected taxpayers
to file returns, pay taxes and perform other time-sen-
sitive acts falling on or after September 30, 2008, and
on or before December 2, 2008, has been postponed
to December 2, 2008.
(iii) Because A’s principal residence is in County
W, A is an affected taxpayer. Because October 15,
2008, the extended due date to file A’s 2007 Form
1040, falls within the postponement period described
in the IRS’s published guidance, A’s return is timely
if filed on or before December 2, 2008. However, the
payment due date, April 15, 2008, preceded the post-
ponement period. Thus, A will continue to be subject
to failure to pay penalties and accrual of interest dur-
ing the postponement period.
Example 7. (i) H and W, individual calendar year
taxpayers, intend to file a joint Form 1040 for the
2007 taxable year. The joint return is due on April
15, 2008. After credits for taxes withheld on wages
and estimated tax payments, H and W owe tax for the
2007 taxable year. H’s and W’s principal residence is
in County J in State W.
(ii) On March 1, 2008, severe flooding strikes
County J. On March 5, 2008, the President declares
a disaster within the meaning of section 1033(h)(3).
Also on March 5, 2008, the IRS determines that
County J in State W is a covered disaster area and
publishes guidance announcing that the time period
for affected taxpayers to file returns, pay taxes and
perform other time-sensitive acts falling on or after
March 1, 2008, and on or before May 30, 2008, has
been postponed to May 30, 2008.
(iii) Because H’s and W’s principal residence is in
County J, H and W are affected taxpayers. Pursuant
to the IRS’s grant of relief under section 7508A, H
and W received a postponement of the time to file
the joint return and pay the tax due until May 30,
2008. Therefore, H’s and W’s joint return without
extension is timely if filed on or before May 30, 2008.
Similarly, H’s and W’s 2007 income taxes will be
timely paid if paid on or before May 30, 2008.
(iv) On April 30, 2008, H and W timely file Form
4868, “Application for Automatic Extension of Time
To File U.S. Individual Income Tax Return.” H and
W’s extension will be deemed to have been filed on
April 15, 2008. Thus, H’s and W’s 2007 income tax
return is timely filed if filed on or before October 15,
2008.
(v) H and W did not request or receive an exten-
sion of time to pay. Therefore, pursuant to section
7508A, H’s and W’s 2007 income tax payment is due
on May 30, 2008. H and W will be subject to the fail-
ure to pay penalty under section 6651(a)(2) and in-
terest if H and W do not pay the tax due on the 2007
joint return on or before May 30, 2008. H and W will
be subject to failure to pay penalties and accrual of
interest beginning on May 31, 2008.
Example 8. ThefactsarethesameasinExam-
ple 7except that H and W filethe joint 2007 return
and pay the tax due on June 15, 2008. Later, H and
W discover additional deductions that would lower
their taxable income for 2007. On June 15, 2011, H
and W file a claim for refund under section 6511(a).
The amount of H and W’s overpayment exceeds the
amount of taxes paid on June 15, 2008, the amount
paid within three years of filing the claim. Section
6511(a) requires that a claim for refund be filed within
three years from the time the return was filed or two
years from the time the tax was paid, whichever pe-
riod expires later. Section 6511(b)(2)(A) includes
within the lookback period the period of an exten-
sion of time to file. Thus, payments that H and W
made on or after May 30, 2008, would be eligible to
be refunded. Since the period from April 15, 2008,
to May 30, 2008, is disregarded, payments H and W
made on April 15, 2008, (including withholding or es-
timated tax payments deemed to have been made on
April 15, 2008) would also be included in the section
6511(b)(2)(A) lookback period. Thus, H and W are
entitled to a full refund in the amount of their over-
payment.
(g)Proposed effective date. The regula-
tion, as proposed, applies to Presidentially
declared disasters or terroristic or military
actions occurring on or after the date of
publication of the Treasury decision adopt-
ing these rules as final regulations in the
Federal Register.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 14, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 15, 2008, 73 F.R. 40471)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2008–79
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed,
contributions from individuals and orga-
nizations described in section 170(c)(2)
that are otherwise allowable will continue
to be deductible. Protection under sec-
tion 7428(c) would begin on September 2,
2008, and would end on the date the court
first determines that the organization is
not described in section 170(c)(2) as more
particularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
Ohio Taekwondo Association, Inc.
Cincinnati, OH
The Johnson Foundation
Sandy, UT
Chaim Ministries, Inc.
Los Alamitos, CA
Yes I Can
Burlington, NC
Surviving the System, Inc.
Peoria, AZ
Gravette Medical Center Hospital
Gravette, AR
D & L Carousel Pre-School
Los Angeles, CA
Christmas in April
Mobile, AL
Foundation for Life Enhancement
Dallas, TX
Colgate Residences, Inc.
Houston, TX
Help Ministries, Inc.
Mesa, AZ
CCC Centers
San Antonio, TX
Sunlight Ministries, Inc.
Brookhaven, MS
Consumer Credit Counseling Services of
Huntsville, Inc.
Huntsville, AL
Universal Training Center Nonprofit
Corporation
Highland, CA
Deep South Community Development
Corporation
Decatur, GA
2008–35 I.R.B.568September 2, 2008

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.
September 2, 2008i2008–35 I.R.B.

Numerical Finding List
1
Bulletins 2008–27 through 2008–35
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
2008-73, 2008-33 I.R.B.391
2008-74, 2008-33 I.R.B.392
2008-75, 2008-33 I.R.B.392
2008-76, 2008-33 I.R.B.393
2008-77, 2008-33 I.R.B.394
2008-78, 2008-34 I.R.B.453
2008-79, 2008-35 I.R.B.568
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
2008-68, 2008-34 I.R.B.418
2008-69, 2008-34 I.R.B.419
2008-71, 2008-35 I.R.B.462
Proposed Regulations:
REG-164965-04, 2008-34 I.R.B.450
REG-143453-05, 2008-32 I.R.B.310
REG-142680-06, 2008-35 I.R.B.565
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
REG-142040-07, 2008-34 I.R.B.451
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-115457-08, 2008-33 I.R.B.390
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-36, 2008-33 I.R.B.340
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
2008-49, 2008-34 I.R.B.423
2008-50, 2008-35 I.R.B.464
2008-51, 2008-35 I.R.B.562
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
2008-45, 2008-34 I.R.B.403
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9407, 2008-33 I.R.B.330
9408, 2008-33 I.R.B.323
9409, 2008-29 I.R.B.118
9410, 2008-34 I.R.B.414
9411, 2008-34 I.R.B.398
9413, 2008-34 I.R.B.404
9414, 2008-35 I.R.B.454
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
2008–35 I.R.B.iiSeptember 2, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–35
Announcements:
2008-64
Corrected by
Ann. 2008-71, 2008-32 I.R.B.321
2008-72
Corrected by
Ann. 2008-78, 2008-34 I.R.B.453
Notices:
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
Proposed Regulations:
REG-129243-07
Corrected by
Ann. 2008-75, 2008-33 I.R.B.392
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
REG-101258-08
Corrected by
Ann. 2008-73, 2008-33 I.R.B.391
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
Revenue Procedures— Continued:
2002-9
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2005-29
Superseded by
Rev. Proc. 2008-49, 2008-34 I.R.B.423
2006-27
Modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-49
Section 3 modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2007-50
Superseded by
Rev. Proc. 2008-36, 2008-33 I.R.B.340
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
76-273
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
Revenue Rulings— Continued:
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
82-105
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
Treasury Decisions:
9391
Corrected by
Ann. 2008-74, 2008-33 I.R.B.392
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
September 2, 2008iii2008–35 I.R.B.

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