Internal Revenue Bulletin 2001-45 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

INCOME TAX
Rev. Rul. 2001–52, page 434.
Federal rates; adjusted federal rates; adjusted feder-
al long-term rate and the long-term exempt rate. For
purposes of sections 382, 1274, 1288, and other sections
of the Code, tables set forth the rates for November 2001.
EMPLOYEE PLANS
Rev. Rul. 2001–51, page 427.
Limitations on benefits and contributions.This ruling
provides guidance on the limitations under section 415 of
the Code, as amended by the Economic Growth and Tax
Relief Reconciliation Act of 2001. Rev. Rul. 98–1 modified.
T.D. 8966, page 422.
Final regulations under section 125 of the Code relate to the
effect of the Family and Medical Leave Act on the operation
of cafeteria plans.
REG–142499–01, page 476.
Catch-up contributions for individuals age 50 or over.
Proposed regulations under section 414(v) of the Code pro-
vide guidance concerning the requirements for retirement
plans providing catch-up contributions for individuals age 50
or over. A public hearing is scheduled for February 21,
2002.
Announcement 2001–109, page 485.
Revision of Forms 5300, 5307, 5309, 6406, and
Schedule Q (Form 5300). The 2001 revisions of applica-
tion forms used to request certain determination letters are
now available on the IRS Web Site.
EXEMPT ORGANIZATIONS
Announcement 2001–110, page 486.
Northwest Childrens Institute of Seattle, WA, no longer qual-
ifies as an organization to which contributions are deductible
under section 170 of the Code.
EXCISE TAX
Announcement 2001–111, page 486.
The Service invites comments from the public on issues
that the IRS may address in proposed regulations (REG–
143219–01) relating to claims for credit or refund of the
gasoline tax.
ADMINISTRATIVE
Notice 2001–70, page 437.
Additional disaster relief for taxpayers on account of
the September 11, 2001, terrorist attack; deprecia-
tion, mid-quarter convention relief.This notice
announces that the Treasury Department and the IRS intend
to issue regulations permitting taxpayers to elect not to
apply the mid-quarter convention rules contained in section
168(d)(3) of the Code to certain property placed in service
in the tax year that includes September 11, 2001. This
notice also provides guidance on making the election before
regulations are issued.
Rev. Proc. 2001–50, page 437.
Rules and specifications for private printing of substi-
tute forms. This procedure provides requirements for
reproducing paper substitutes and for furnishing substitute
recipient statements for Forms 1096, 1098, 1099, 5498,
W-2G, and 1042-S. It will be reproduced as the next revision
of Publication 1179. Rev. Proc. 2000–28 superseded.
Internal Revenue
bbuulllleettiinn
Bulletin No. 2001–45
November 5, 2001
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.
Department of the Treasury
Internal Revenue Service
Announcements of Declaratory Judgment Proceedings Under Section 7428 begin on page 487.
Finding Lists begin on page ii.
Index for July through October begins on page iv.

November 5, 20012001–45 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, 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 consolidated 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,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of in-
ternal management 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 pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and proce-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal 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,
Legislation 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 Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The first 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 first Bulletin of the succeeding semi-
annual period, respectively.
The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents 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.

November 5, 20014222001–45 I.R.B.
Section 42.—Low Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2001. See Rev. Rul. 2001–52, page 434.
Section 125.—Cafeteria Plans
26 CFR 1.125–3: Effect of the Family and Medical
Leave Act (FMLA) on the operation of cafeteria plans.
T.D. 8966
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Effect of the Family and Medical
Leave Act on the Operation of
Cafeteria Plans
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to cafeteria plans
that reflect changes made by the Family
and Medical Leave Act of 1993 (Act).
The final regulations provide the public
with guidance needed to comply with the
Act and affect employees who participate
in cafeteria plans.
DATES: Effective Date: These regula-
tions are effective October 17, 2001.
Applicability Date:These regulations
are applicable for cafeteria plan years be-
ginning on or after January 1, 2002.
FOR FURTHER INFORMATION CON-
TACT: Shoshanna Chaiton at (202) 622-
6080 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains additions to
the Income Tax Regulations (26 CFR Part
1) under section 125 of the Internal Rev-
enue Code of 1986 (Code). These addi-
tions conform the cafeteria plan regula-
tions to the Family and Medical Leave
Act of 1993 (FMLA), Public Law 103–3,
29 U.S.C. 2601 et seq.FMLA imposes
certain requirements on employers re-
garding coverage, including family cover-
age, under group health plans for employ-
ees taking FMLA leave and regarding the
restoration of benefits to employees who
return from FMLA leave. Proposed regu-
lations, EE–20–95 (1996–1 C.B. 758),
published in the Federal Register on De-
cember 21, 1995 (60 FR 66229), ad-
dressed a number of the principal ques-
tions that were raised about how these
FMLA requirements affect the operation
of cafeteria plans (including flexible
spending arrangements) maintained under
section 125. These final regulations are
based on the 1995 proposed regulations,
and include clarifications and other
changes resulting from comments re-
ceived on the proposed regulations.
Summary of Changes
A number of comments that were made
in response to the 1995 proposed regula-
tions relate to FMLA. The requirements
pertaining to FMLA leave, including the
employer’s obligation to maintain cover-
age under a group health plan during
FMLA leave and to restore benefits upon
return from FMLA leave, are established
by FMLA, not the Code. The U.S. De-
partment of Labor, in 29 CFR part 825,
has published rules interpreting the re-
quirements of FMLA, and the Department
of Labor has jurisdiction relating to those
rights or obligations. These final regula-
tions do not interpret FMLA or the rules
published by the Department of Labor.
Rather, they provide guidance on the cafe-
teria plan rules that apply to an employee
in circumstances to which FMLA and the
Labor Regulations thereunder also apply.
Accordingly, these final regulations in-
clude a number of changes intended to
clarify which particular conditions must
be satisfied to comply with FMLA and
with the cafeteria plan rules.
The Department of the Treasury, includ-
ing the Internal Revenue Service (IRS),
discussed these final regulations with the
Department of Labor to ensure that they
do not conflict with, and are not inconsis-
tent with, the provisions of FMLA or the
Labor regulations thereunder, at 29 CFR
Part 825. In response to those discussions
and comments made by the public, these
cafeteria plan regulations have been
changed to clarify the circumstances under
which an employer is required to maintain
coverage and an employee is required to
continue paying premiums. These
changes are described below.
As a general matter, under FMLA, an
employer has the obligation to offer cov-
erage under any group health plan for the
duration of FMLA leave, whether paid or
unpaid, and under the same conditions as
coverage would have been provided if the
employee had been continuously working
during the entire leave period. The em-
ployee has the right to keep this coverage
by continuing to pay the premium. Dur-
ing the period of FMLA leave, the em-
ployer is required to continue payment of
its share of the costs of group health in-
surance coverage, but may condition such
continued payments on the employee pay-
ing his or her share of the costs under one
of the methods set forth at 29 CFR
825.210. See also the notice requirements
at 29 CFR 825.301(b)(1)(iv).
Furthermore, the employer must either
allow the employee to revoke coverage
while on unpaid FMLA leave, or continue
coverage but allow the employee to dis-
continue his or her share of the premium
payments while the employee is on unpaid
leave. Although ordinarily health plan
coverage would cease if an employee does
not make his or her share of the premium
payments, FMLA does not give the em-
ployee a right to require that the employer
terminate coverage. The FMLA permits an
employer to continue health plan coverage
while the employee is on unpaid FMLA
leave by paying both the employer’s and
the employee’s share of group health plan
contributions. In this event, the employer
may recover the employee’s share of the
contributions when the employee returns
from leave or, if the employee fails to re-
turn from leave, the employer may recover
the employee’s share of contributions and
may also recover its own share as well
under the circumstances set forth in 29
CFR 825.213(a). However, under the
FMLA, an employee who chooses to dis-
continue premium payments may not be
required to make contributions until the
unpaid FMLA leave ends.
Upon return from leave, FMLA re-
quires that the employee have the right to
be reinstated under the same terms as if
the employee had worked during the en-
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

2001–45 I.R.B.423November 5, 2001
tire leave period without any break in
coverage. An employee who has revoked
coverage or has failed to make required
payments therefore has the right to be re-
instated in the group health plan upon re-
turn from leave. If the employee does not
elect to be reinstated in the group health
plan upon return from FMLA leave, the
employer may nevertheless require the
employee to resume participation if the
employer also requires employees who
return from unpaid non-FMLA leave to
resume participation upon return from
leave. This reflects a change in position
from the 1995 proposed regulations,
which specifically prohibited an employer
from requiring an employee whose cover-
age has terminated while on FMLA leave
to reinstate coverage under a health FSA
upon return from FMLA leave. Several
commentators disagreed with this posi-
tion, and suggested that the FMLA regu-
lations do not require this rule. In re-
sponse to these comments, the rule has
been modified as described above.
One commentator questioned whether
an employee on paid FMLA leave may
change or revoke an election. Whether an
employer is required to permit an em-
ployee on paid FMLA leave to revoke an
election is governed by the FMLA and the
Labor Regulations thereunder, rather than
these regulations. As described above, the
FMLA permits an employer to require that
the employee continue coverage during an
FMLA leave if the employer is continuing
the employee’s pay during the FMLA
leave and does not treat employees on
paid FMLA leave differently from other
employees on paid leave. If these two
conditions are satisfied, as described in
Q&A-4, an employer may require that an
employee who goes on paid FMLA leave
continue to pay premiums by the method
normally used during any paid leave.
In response to comments, the rule in
the 1995 regulations concerning the
catch-up payment option was modified.
Under the 1995 regulations, an employee
who elected to use the catch-up payment
option before going on FMLA leave was
required to enter into an advance agree-
ment with the employer specifying that
the employee wanted to continue health
coverage while on unpaid FMLA leave,
that the employer would pay the premi-
ums during the FMLA leave, and that the
employee would repay these amounts
upon return. Commentators noted that
this rule did not provide enough flexibil-
ity for employers attempting to recoup
payments in situations where employees
originally elected the pay-as-you-go
method but then were not able to make
those required payments. Accordingly,
the rule under the final regulations elimi-
nates the requirement that an employee
who elects the catch-up payment option
enter into an advance agreement with the
employer. The new rule adds flexibility
and permits continued coverage because,
although employees may still use either
the catch-up payment option or the after-
tax pay-as-you-go method from the out-
set, now employers may continue cover-
age and, under the catch-up payment
option, recoup any amounts paid on an
employee’s behalf if the employee cannot
make all the payments under the pay-as-
you-go method.
The 1995 proposed regulations in-
cluded a special proration rule for cases in
which health coverage under a flexible
spending arrangement (FSA) did not con-
tinue during an FMLA leave because the
employee revoked coverage or failed to
make required payments, and then the
employee elects to resume the coverage
when the leave ends during the same year.
The proposed regulation permitted the
employee’s coverage to be reduced after
the employee resumes work if the em-
ployee did not have coverage during the
FMLA leave. Based on information pro-
vided by the Department of Labor con-
cerning FMLA, the final regulations re-
quire that, where an employee does not
have coverage under the FSA during
FMLA leave because the employee
chooses to revoke coverage or does not
pay required premiums for any reason
during FMLA leave, the employer must
provide the employee upon return from
FMLA leave a choice between: (1) re-
suming coverage at the original level and
making up the unpaid premium payments
or (2) resuming coverage at a level that is
reduced under the proration rule and re-
suming premium payments at the original
level. Where the employee selects the
prorated method and the plan has already
made disbursements to the employee that
exceed the premiums that will be paid for
the year, the employer may not require the
employee to pay any more than the re-
maining premiums due. If health FSA
coverage does continue during the leave
(whether due to an FMLA coverage con-
tinuation election by the employee or be-
cause the employer’s plan requires health
FSA coverage to be continued during a
leave), there would of course be no prora-
tion.
Commentators requested clarification
regarding whether employers are required
to obtain elections from employees who
are on FMLA leave when an open enroll-
ment period occurs. In response to this
comment, the final regulations clarify that
employees on FMLA leave have the same
rights during the leave period as employ-
ees participating in a cafeteria plan who
are not on FMLA leave. Accordingly,
employers are required to give employees
on FMLA leave the right to enroll in a
plan or change their election while they
are on leave in the same manner as for ac-
tive employees, rather than waiting for
the employees on FMLA leave to return
to work.
These final regulations supplement the
regulations that were issued at §1.125–4
(T.D. 8878, 2000–15 I.R.B. 857, issued in
March of 2000 (65 FR 15548) and T.D.
8921, 2001–7 I.R.B. 532, issued in Janu-
ary of 2001 (66 FR 1837)) setting forth
the conditions under which a cafeteria
plan can permit an employee to make an
election change during the year. Thus, as
provided at §1.125–4(g), if an employee
goes on an FMLA leave, section 125 al-
lows a cafeteria plan to permit the em-
ployee to make an election change if the
conditions in either these final regulations
or the regulations at §1.125–4 are satis-
fied. Further, as described above, FMLA
requires that an employee who goes on an
FMLA leave have the same election rights
under a group health plan as an employee
who is not on FMLA leave. Thus, a cafe-
teria plan that is subject to FMLA must
allow an employee who goes on an
FMLA leave to be able to make the same
election changes as an employee who is
not on an FMLA leave.
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 assess-
ment is not required. It also has been de-
termined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.

November 5, 20014242001–45 I.R.B.
chapter 5) and the Regulatory Flexibility
Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regu-
latory Flexibility Analysis is not required.
Pursuant to section 7805(f) of the Code,
these regulations will be submitted to the
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 Christine Keller, Division Coun-
sel/Associate Chief Counsel (Office of
Tax Exempt and Government Entities).
However, other personnel from the IRS
and Department of the Treasury partici-
pated in their development.
* * * * *
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority for part 1
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.125–3 is added to
read as follows:
§1.125–3 Effect of the Family and
Medical Leave Act (FMLA) on the
operation of cafeteria plans.
The following questions and answers
provide guidance on the effect of the
Family and Medical Leave Act (FMLA),
29 U.S.C. 2601 et. seq., on the operation
of cafeteria plans:
Q-1: May an employee revoke cover-
age or cease payment of his or her share
of group health plan premiums when tak-
ing unpaid FMLA leave?
A-1: Yes. An employer must either
allow an employee on unpaid FMLA
leave to revoke coverage, or continue
coverage but allow the employee to dis-
continue payment of his or her share of
the premium for group health plan cover-
age (including a health flexible spending
arrangement (FSA)) under a cafeteria
plan for the period of the FMLA leave.
See 29 CFR 825.209(e). FMLA does not
require that an employer allow an em-
ployee to revoke coverage if the employer
pays the employee’s share of premiums.
As discussed in Q&A-3, if the employer
continues coverage during an FMLA
leave, the employer may recover the em-
ployee’s share of the premiums when the
employee returns to work. FMLA also
provides the employee a right to be rein-
stated in the group health plan coverage
(including a health FSA) provided under a
cafeteria plan upon returning from FMLA
leave if the employee’s group health plan
coverage terminated while on FMLA
leave (either by revocation or due to non-
payment of premiums). Such an em-
ployee is entitled, to the extent required
under FMLA, to be reinstated on the same
terms as prior to taking FMLA leave (in-
cluding family or dependent coverage),
subject to any changes in benefit levels
that may have taken place during the pe-
riod of FMLA leave as provided in 29
CFR 825.215(d)(1). See 29 CFR
825.209(e) and 825.215(d). In addition,
such an employee has the right to revoke
or change elections under §1.125–4 (e.g.,
because of changes in status or cost or
coverage changes as provided under
§1.125–4) under the same terms and con-
ditions as are available to employees par-
ticipating in the cafeteria plan who are
working and not on FMLA leave.
Q-2: Who is responsible for making
premium payments under a cafeteria plan
when an employee on FMLA leave con-
tinues group health plan coverage?
A-2: FMLA provides that an employee
is entitled to continue group health plan
coverage during FMLA leave whether or
not that coverage is provided under a
health FSA or other component of a cafete-
ria plan. See 29 CFR 825.209(b). FMLA
permits an employer to require an em-
ployee who chooses to continue group
health plan coverage while on FMLA leave
to be responsible for the share of group
health premiums that would be allocable to
the employee if the employee were work-
ing, and, for this purpose, treats amounts
paid pursuant to a pre-tax salary reduction
agreement as amounts allocable to the em-
ployee. However, FMLA requires the em-
ployer to continue to contribute the share
of the cost of the employee’s coverage that
the employer was paying before the em-
ployee commenced FMLA leave. See 29
CFR 825.100(b) and 825.210(a).
Q-3: What payment options are re-
quired or permitted to be offered under a
cafeteria plan to an employee who contin-
ues group health plan coverage while on
unpaid FMLA leave, and what is the tax
treatment of these payments?
A-3: (a) In general.Subject to the lim-
itations described in paragraph (b) of this
Q&A-3, a cafeteria plan may offer one or
more of the following payment options,
or a combination of these options, to an
employee who continues group health
plan coverage (including a health FSA)
while on unpaid FMLA leave; provided
that the payment options for employees
on FMLA leave are offered on terms at
least as favorable as those offered to em-
ployees not on FMLA leave. These op-
tions are referred to in this section as pre-
pay, pay-as-you-go, and catch-up. See
also the FMLA notice requirements at 29
CFR 825.301(b)(1)(iv).
(1)Pre-pay. (i) Under the pre-pay op-
tion, a cafeteria plan may permit an em-
ployee to pay, prior to commencement of
the FMLA leave period, the amounts due
for the FMLA leave period. However,
FMLA provides that the employer may
not mandate that an employee pre-pay the
amounts due for the leave period. See 29
CFR 825.210(c)(3) and (4).
(ii) Contributions under the pre-pay op-
tion may be made on a pre-tax salary re-
duction basis from any taxable compensa-
tion (including from unused sick days or
vacation days). However, see Q&A-5 of
this section regarding additional restric-
tions on pre-tax salary reduction contribu-
tions when an employee’s FMLA leave
spans two cafeteria plan years.
(iii) Contributions under the pre-pay
option may also be made on an after-tax
basis.
(2) Pay-as-you-go. (i) Under the pay-
as-you-go option, employees may pay
their share of the premium payments on
the same schedule as payments would
have been made if the employee were not
on leave or under any other payment
schedule permitted by the Labor Regula-
tions at 29 CFR 825.210(c) (e.g., on the
same schedule as payments are made
under section 4980B (relating to coverage
under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) 26 U.S.C.
4980B), under the employer’s existing
rules for payment by employees on leave
without pay, or under any other system
voluntarily agreed to between the em-
ployer and the employee that is not incon-

2001–45 I.R.B.425November 5, 2001
sistent with this section or with 29 CFR
825.210(c)).
(ii) Contributions under the pay-as-
you-go option are generally made by the
employee on an after-tax basis. However,
contributions may be made on a pre-tax
basis to the extent that the contributions
are made from taxable compensation
(e.g., from unused sick days or vacation
days) that is due the employee during the
leave period.
(iii) An employer is not required to
continue the group health coverage of an
employee who fails to make required pre-
mium payments while on FMLA leave,
provided that the employer follows the
notice procedures required under FMLA.
See 29 CFR 825.212. However, if the
employer chooses to continue the health
coverage of an employee who fails to pay
his or her share of the premium payments
while on FMLA leave, FMLA permits the
employer to recoup the premiums (to the
extent of the employee’s share). See 29
CFR 825.212(b). Such recoupment may
be made as set forth in paragraphs
(a)(3)(i) and (ii) of this Q&A-3. See also
Q&A-6 of this section regarding coverage
under a health FSA when an employee
fails to make the required premium pay-
ments while on FMLA leave.
(3) Catch-up. (i) Under the catch-up
option, the employer and the employee
may agree in advance that the group cov-
erage will continue during the period of
unpaid FMLA leave, and that the em-
ployee will not pay premiums until the
employee returns from the FMLA leave.
Where an employee is electing to use the
catch-up option, the employer and the
employee must agree in advance of the
coverage period that: the employee elects
to continue health coverage while on un-
paid FMLA leave; the employer assumes
responsibility for advancing payment of
the premiums on the employee’s behalf
during the FMLA leave; and these ad-
vance amounts are to be paid by the em-
ployee when the employee returns from
FMLA leave.
(ii) When an employee fails to make re-
quired premium payments while on
FMLA leave, an employer is permitted to
utilize the catch-up option to recoup the
employee’s share of premium payments
when the employee returns from FMLA
leave. See,e.g., 29 CFR 825.212(b). If
the employer chooses to continue group
coverage under these circumstances, the
prior agreement of the employee, as set
forth in paragraph (a)(3)(i) of this Q&A-
3, is not required.
(iii) Contributions under the catch-up
option may be made on a pre-tax salary
reduction basis from any available taxable
compensation (including from unused
sick days and vacation days) after the em-
ployee returns from FMLA leave. The
cafeteria plan may provide for the catch-
up option to apply on a pre-tax salary re-
duction basis if premiums have not been
paid on any other basis (i.e., have not
been paid under the pre-pay or pay-as-
you-go options or on a catch-up after-tax
basis).
(iv) Contributions under the catch-up
option may also be made on an after-tax
basis.
(b) Exceptions. Whatever payment op-
tions are offered to employees on non-
FMLA leave must be offered to employ-
ees on FMLA leave. In accordance with
29 CFR 825.210(c), cafeteria plans may
offer one or more of the payment options
described in paragraph (a) of this Q&A-3,
with the following exceptions:
(1) FMLA does not permit the pre-pay
option to be the sole option offered to em-
ployees on FMLA leave. However, the
cafeteria plan may include pre-payment as
an option for employees on FMLA leave,
even if such option is not offered to em-
ployees on non-FMLA leave-without-pay.
(2) FMLA allows the catch-up option
to be the sole option offered to employees
on FMLA leave if and only if the catch-up
option is the sole option offered to em-
ployees on non-FMLA leave-without-pay.
(3) If the pay-as-you-go option is of-
fered to employees on non-FMLA leave-
without-pay, the option must also be of-
fered to employees on FMLA leave. The
employer may also offer employees on
FMLA leave the pre-pay option and/or the
catch-up option.
(c) Voluntary waiver of employee pay-
ments. In addition to the foregoing pay-
ment options, an employer may voluntar-
ily waive, on a nondiscriminatory basis,
the requirement that employees who elect
to continue group health coverage while
on FMLA leave pay the amounts the em-
ployees would otherwise be required to
pay for the leave period.
(d)Example. The following example
illustrates this Q&A-3:
Example. (i) Employer Y allows employees to
pay premiums for group health coverage during an
FMLA leave on an after-tax basis while the em-
ployee is on unpaid FMLA leave. Under the terms
of Y’s cafeteria plan, if an employee elects to con-
tinue health coverage during an unpaid FMLA leave
and fails to pay one or more of the after-tax premium
payments due for that coverage, the employee’s
salary after the employee returns from FMLA leave
is reduced to cover unpaid premiums (i.e.the premi-
ums that were to be paid by the employee on an
after-tax basis during the FMLA leave, but were
paid by the employer instead).
(ii) In this Example,Y’s cafeteria plan satisfies
the conditions in this Q&A-3. Y’s cafeteria plan
would also satisfy the conditions in this Q&A-3 if
the plan provided for coverage to cease in the event
the employee fails to make a premium payment
when due during an unpaid FMLA leave.
Q-4: Do the special FMLA require-
ments concerning payment of premiums
by an employee who continues group
health plan coverage under a cafeteria
plan apply if the employee is on paid
FMLA leave?
A-4: No. The Labor Regulations pro-
vide that, if an employee’s FMLA leave is
paid leave as described at 29 CFR
825.207 and the employer mandates that
the employee continue group health plan
coverage while on FMLA leave, the em-
ployee’s share of the premiums must be
paid by the method normally used during
any paid leave (e.g., by pre-tax salary re-
duction if the employee’s share of premi-
ums were paid by pre-tax salary reduction
before the FMLA leave began). See 29
CFR 825.210(b).
Q-5: What restrictions apply to contri-
butions when an employee’s FMLA leave
spans two cafeteria plan years?
A-5: (a) No amount will be included in
an employee’s gross income due to partic-
ipation in a cafeteria plan during FMLA
leave, provided that the plan complies
with other generally applicable cafeteria
plan requirements. Among other require-
ments, a plan may not operate in a man-
ner that enables employees on FMLA
leave to defer compensation from one
cafeteria plan year to a subsequent cafete-
ria plan year. See section 125(d)(2).
(b) The following example illustrates
this Q&A-5:
Example.(i) Employee A elects group health
coverage under a calendar year cafeteria plan main-
tained by Employer X. Employee A’s premium for
health coverage is $100 per month throughout the
12-month period of coverage. Employee A takes
FMLA leave for 12 weeks beginning on October 31
after making 10 months of premium payments total-
ing $1,000 (10 months x $ 100 = $1,000). Em-
ployee A elects to continue health coverage while on

November 5, 20014262001–45 I.R.B.
FMLA leave and utilizes the pre-pay option by ap-
plying his or her unused sick days in order to make
the required premium payments due while he or she
is on FMLA leave.
(ii) Because A cannot defer compensation from
one plan year to a subsequent plan year, A may pre-
pay the premiums due in November and December
(i.e., $100 per month) on a pre-tax basis, but A can-
not pre-pay the premium payment due in January on
a pre-tax basis. If A participates in the cafeteria plan
in the subsequent plan year, A must either pre-pay
for January on an after-tax basis or use another op-
tion (e.g., pay-as-you-go, catch-up, reduction in un-
used sick days, etc.) to make the premium payment
due in January.
Q-6: Are there special rules concerning
employees taking FMLA leave who par-
ticipate in health FSAs offered under a
cafeteria plan?
A-6: (a) In general. (1) A group health
plan that is a flexible spending arrange-
ment (FSA) offered under a cafeteria plan
must conform to the generally applicable
rules in this section concerning employ-
ees who take FMLA leave. Thus, to the
extent required by FMLA (see 29 CFR
825.209(b)), an employer must – –
(i) Permit an employee taking FMLA
leave to continue coverage under a health
FSA while on FMLA leave; and
(ii) If an employee is on unpaid FMLA
leave, either – –
(A) Allow the employee to revoke cov-
erage; or
(B) Continue coverage, but allow the
employee to discontinue payment of his
or her share of the premium for the health
FSA under the cafeteria plan during the
unpaid FMLA leave period.
(2) Under FMLA, the plan must permit
the employee to be reinstated in health
coverage upon return from FMLA leave
on the same terms as if the employee had
been working throughout the leave pe-
riod, without a break in coverage. See 29
CFR 825.214(a) and 825.215(d)(1) and
paragraph (b)(2) of this Q&A-6. In addi-
tion, under FMLA, a plan may require an
employee to be reinstated in health cover-
age upon return from a period of unpaid
FMLA leave, provided that employees
who return from a period of unpaid leave
not covered by the FMLA are also re-
quired to resume participation upon return
from leave.
(b) Coverage. (1) Regardless of the
payment option selected under Q&A-3 of
this section, for so long as the employee
continues health FSA coverage (or for so
long as the employer continues the health
FSA coverage of an employee who fails
to make the required contributions as de-
scribed in Q&A-3(a)(2)(iii) of this sec-
tion), the full amount of the elected health
FSA coverage, less any prior reimburse-
ments, must be available to the employee
at all times, including the FMLA leave
period.
(2) (i) If an employee’s coverage under
the health FSA terminates while the em-
ployee is on FMLA leave, the employee is
not entitled to receive reimbursements for
claims incurred during the period when
the coverage is terminated. If an em-
ployee subsequently elects or the em-
ployer requires the employee to be rein-
stated in the health FSA upon return from
FMLA leave for the remainder of the plan
year, the employee may not retroactively
elect health FSA coverage for claims in-
curred during the period when the cover-
age was terminated. Upon reinstatement
into a health FSA upon return from
FMLA leave (either because the em-
ployee elects reinstatement or because the
employer requires reinstatement), the em-
ployee has the right under FMLA: to re-
sume coverage at the level in effect before
the FMLA leave and make up the unpaid
premium payments, or to resume cover-
age at a level that is reduced and resume
premium payments at the level in effect
before the FMLA leave. If an employee
chooses to resume health FSA coverage at
a level that is reduced, the coverage is
prorated for the period during the FMLA
leave for which no premiums were paid.
In both cases, the coverage level is re-
duced by prior reimbursements.
(ii) FMLA requires that an employee on
FMLA leave have the right to revoke or
change elections (because of events de-
scribed in §1.125–4) under the same terms
and conditions that apply to employees
participating in the cafeteria plan who are
not on FMLA leave. Thus, for example, if
a group health plan offers an annual open
enrollment period to active employees,
then, under FMLA, an employee on
FMLA leave when the open enrollment is
offered must be offered the right to make
election changes on the same basis as
other employees. Similarly, if a group
health plan decides to offer a new benefit
package option and allows active employ-
ees to elect the new option, then, under
FMLA, an employee on FMLA leave
must be allowed to elect the new option on
the same basis as other employees.
(3) The following examples illustrate
the rules in this Q&A-6:
Example 1. (i) Employee B elects $1,200 worth
of coverage under a calendar year health FSA pro-
vided under a cafeteria plan, with an annual pre-
mium of $1,200. Employee B is permitted to pay
the $1,200 through pre-tax salary reduction amounts
of $100 per month throughout the 12-month period
of coverage. Employee B incurs no medical ex-
penses prior to April 1. On April 1, B takes FMLA
leave after making three months of contributions to-
taling $300 (3 months x $ 100 = $300). Employee
B’s coverage ceases during the FMLA leave. Con-
sequently, B makes no premium payments for the
months of April, May, and June, and B is not entitled
to submit claims or receive reimbursements for ex-
penses incurred during this period. Employee B re-
turns from FMLA leave and elects to be reinstated in
the health FSA on July 1.
(ii) Employee B must be given a choice of re-
suming coverage at the level in effect before the
FMLA leave (i.e., $1,200) and making up the un-
paid premium payments ($300), or resuming health
FSA coverage at a level that is reduced on a pro-
ratabasis for the period during the FMLA leave for
which no premiums were paid (i.e., reduced for 3
months or 1/4 of the plan year) less prior reim-
bursements (i.e., $0) with premium payments due
in the same monthly amount payable before the
leave (i.e., $100 per month). Consequently, if B
chooses to resume coverage at the level in effect
before the FMLA leave, B’s coverage for the re-
mainder of the plan year would equal $1,200 and
B’s monthly premiums would be increased to $150
per month for the remainder of the plan year, to
make up the $300 in premiums missed ($100 per
month plus $50 per month ($300 divided by the re-
maining 6 months)). If B chooses prorated cover-
age, B’s coverage for the remainder of the plan
year would equal $900, and B would resume mak-
ing premium payments of $100 per month for the
remainder of the plan year.
Example 2. (i) Assume the same facts as Example
1except that B incurred medical expenses totaling
$200 in February and obtained reimbursement of
these expenses.
(ii) The results are the same as inExample 1, ex-
cept that if B chooses to resume coverage at the
level in effect before the FMLA leave, B’s coverage
for the remainder of the year would equal $1,000
($1,200 reduced by $200) and the monthly payments
for the remainder of the year would still equal $150.
If instead B chooses prorated coverage, B’s cover-
age for the remainder of the plan year would equal
$700 ($1,200 prorated for 3 months, and then re-
duced by $200) and the monthly payments for the
remainder of the year would still equal $100.
Example 3.(i) Assume the same facts as Exam-
ple 1except that, prior to taking FMLA leave, B
elects to continue health FSA coverage during the
FMLA leave. The plan permits B (and B elects) to
use the catch-up payment option described in Q&A-
3 of this section, and as further permitted under the
plan, B chooses to repay the $300 in missed pay-
ments on a ratable basis over the remaining 6-month
period of coverage (i.e., $50 per month).
(ii) Thus, B’s monthly premium payments for the
remainder of the plan year will be $150 ($100 +
$50).

2001–45 I.R.B.427November 5, 2001
Q-7: Are employees entitled to non-
health benefits while taking FMLA leave?
A-7: FMLA does not require an em-
ployer to maintain an employee’s non-
health benefits (e.g., life insurance) during
FMLA leave. An employee’s entitlement to
benefits other than group health benefits
under a cafeteria plan during a period of
FMLA leave is to be determined by the em-
ployer’s established policy for providing
such benefits when the employee is on non-
FMLA leave (paid or unpaid). See 29 CFR
825.209(h). Therefore, an employee who
takes FMLA leave is entitled to revoke an
election of non-health benefits under a cafe-
teria plan to the same extent as employees
taking non-FMLA leave are permitted to re-
voke elections of non-health benefits under
a cafeteria plan. For example, election
changes are permitted due to changes of sta-
tus or upon enrollment for a new plan year.
See § 1.125–4. However, FMLA provides
that, in certain cases, an employer may con-
tinue an employee’s non-health benefits
under the employer’s cafeteria plan while
the employee is on FMLA leave in order to
ensure that the employer can meet its re-
sponsibility to provide equivalent benefits
to the employee upon return from unpaid
FMLA. If the employer continues an em-
ployee’s non-health benefits during FMLA
leave, the employer is entitled to recoup the
costs incurred for paying the employee’s
share of the premiums during the FMLA
leave period. See 29 CFR 825.213(b). Such
recoupment may be on a pre-tax basis. A
cafeteria plan must, as required by FMLA,
permit an employee whose coverage termi-
nated while on FMLA leave (either by revo-
cation or nonpayment of premiums) to be
reinstated in the cafeteria plan on return
from FMLA leave. See 29 CFR 825.214(a)
and 825.215(d).
Q-8: What is the applicability date of
the regulations in this section?
A-8: This section is applicable for cafe-
teria plan years beginning on or after Jan-
uary 1, 2002.
Par. 3. Section 1.125-4 is amended by
adding a sentence at the end of paragraph
(g) to read as follows:
§ 1.125–4 Permitted election changes.
* * * * *
(g)Special requirements relating to the
Family and Medical Leave Act.* * * See
§ 1.125–3 for additional rules.
* * * * *
David A. Mader,
Acting Deputy Commissioner
of Internal Revenue.
Approved October 9, 2001.
Mark Weinberger,
Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register on Octo-
ber 16, 2001, 8:45 a.m., and published in the issue of
the Federal Register for October 17, 2001, 66 F.R.
52676)
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 2001.
See Rev. Rul. 2001–52, page 434.
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of November 2001. See Rev.
Rul. 2001–52, page 434.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2001. See Rev. Rul. 2001–52, page
434.
Section 415.—Limitations on
Benefits and Contributions
Under Qualified Plans
Limitations on benefits and contri-
butions.This ruling provides guidance
on the limitations under section 415 of the
Code, as amended by the Economic
Growth and Tax Relief Reconciliation Act
of 2001.
Rev. Rul. 2001–51
I. Purpose
This revenue ruling provides guidance
relating to the increases in the limitations
of § 415 of the Internal Revenue Code
(Code) enacted as part of the Economic
Growth and Tax Relief Reconciliation Act
of 2001 (EGTRRA), Pub. L. 107–16.
Specifically, this revenue ruling provides
questions and answers on:
• Benefit increases that may be pro-
vided as a result of the increased
§ 415 limitations under EGTRRA;
• Plan amendments that may be
adopted to take into account the in-
creased § 415 limitations under
EGTRRA;
• The effect of the increased § 415 lim-
itations under EGTRRA on other
qualification requirements; and
• How the “sunset” provision of
EGTRRA is taken into account for
purposes of §§ 412 and 404.
II. Background
Rules in Effect Prior to EGTRRA
Section 415 of the Code imposes limi-
tations on contributions and benefits
under qualified plans. The benefits that
may be provided to a participant under a
defined benefit plan must not exceed the
limitations of § 415(b). Section 415(b)
provides that benefits provided to a par-
ticipant under a defined benefit plan must
not exceed the lesser of the defined bene-
fit dollar limitation of § 415(b)(1)(A) and
the defined benefit compensation limita-
tion of § 415(b)(1)(B), both adjusted as
required under § 415(b). The defined
benefit dollar limitation prior to the effec-
tive date of the EGTRRA amendment is
$90,000, adjusted annually for cost-of-
living increases under § 415(d), with the
adjusted limit effective January 1 of the
following calendar year. The defined
benefit dollar limitation in effect for a cal-
endar year (e.g., $140,000, effective Janu-
ary 1, 2001) applies to all limitation years
that end with or within the calendar year.
Prior to the effective date of the EGTRRA
amendment, the defined benefit dollar
limitation is adjusted under § 415(b)(2)
for commencement of benefits before or
after a participant’s social security retire-
ment age. Under § 415(b)(5), the defined
benefit dollar limitation is adjusted for
less than 10 years of participation. The
defined benefit compensation limitation is
equal to a participant’s high 3-year aver-
age compensation, adjusted, if applicable,
under § 415(b)(5) for less than 10 years of
service. The limitations of § 415 as in ef-
fect immediately prior to the effective
date for a plan of changes enacted under

November 5, 20014282001–45 I.R.B.
EGTRRA are referred to in this revenue
ruling as the “pre-EGTRRA § 415 limita-
tions.”
Annual additions credited to a partici-
pant’s account under a defined contribu-
tion plan must not exceed the limitations
of § 415(c). Section 415(c) provides that
annual additions credited on behalf of a
participant under a defined contribution
plan must not exceed the lesser of the de-
fined contribution dollar limitation of
§ 415(c)(1)(A), or the defined contribu-
tion compensation limitation of
§ 415(c)(1)(B). Prior to the effective date
of the EGTRRA amendment, the defined
contribution dollar limitation is $30,000,
adjusted annually under § 415(d) for cost-
of-living increases, with the adjusted limit
effective January 1 of the following cal-
endar year. The defined contribution dol-
lar limitation in effect for a calendar year
(e.g., $35,000, effective January 1, 2001)
applies to all limitation years that end
with or within the calendar year. Prior to
the effective date of the EGTRRA amend-
ment, the defined contribution compensa-
tion limitation is 25 percent of a partici-
pant’s compensation.
Section 411(a) prescribes rules as to
when an employee’s right to his or her
normal retirement benefit must become
nonforfeitable under a qualified plan.
Section 411(d)(6) generally prohibits a
plan amendment, except for an amend-
ment described in § 412(c)(8), that has the
effect of decreasing a participant’s ac-
crued benefits under the plan.
Section 1106(h) of the Taxpayer Reform
Act of 1986, Pub. L. 99–514, provides that
notwithstanding any other provision of
law, except as provided in regulations pre-
scribed by the Secretary of the Treasury, a
plan may incorporate by reference the lim-
itations under § 415 of the Code. In Notice
87–21 (1987–1 C.B. 458) Q&A–11, the
Service provided guidance for plans to in-
corporate by reference the limitations of
§ 415, for limitation years beginning on or
after January 1, 1987.
Section 401(a)(4) prescribes nondis-
crimination rules for qualified plans. Sec-
tion 1.401(a)(4)–2 of the Income Tax
Regulations imposes requirements relat-
ing to nondiscrimination in amount of
employer contributions under a defined
contribution plan. For this purpose,
§ 1.401(a)(4)–2(b) provides two safe har-
bor tests, and § 1.401(a)(4)–2(c) provides
a general test. In order to satisfy either of
the safe harbors, a plan must provide for
either a uniform allocation formula or a
uniform points allocation formula as de-
scribed in the regulation.
Section 1.401(a)(4)–3 imposes require-
ments relating to nondiscrimination in
amount of benefits under a defined bene-
fit plan. For this purpose, § 1.401(a)
(4)–3(b) provides several safe harbor
tests, and § 1.401(a)(4)–3(c) provides a
general test. In order to satisfy any of the
safe harbors, a plan must provide for a
uniform normal retirement benefit, uni-
form post-normal retirement benefit, and
uniform subsidies. Plans that satisfy the
general test may do so by testing benefits
with or without the application of the
§ 415 limitations.
Changes Under EGTRRA
Section 611(a)(1) of EGTRRA in-
creased the defined benefit dollar limita-
tion of § 415(b) of the Code to $160,000,
effective for limitation years ending after
December 31, 2001. Under section
611(a)(2) of EGTRRA, effective for limi-
tation years ending after December 31,
2001, the § 415(b) dollar limitation is re-
duced for commencement of benefits
prior to age 62, rather than for com-
mencement of benefits prior to a partici-
pant’s social security retirement age, and
no adjustment to the dollar limitation is
required where a participant’s benefit
commences after age 62 and not later than
age 65. Under section 611(a)(3) of
EGTRRA, effective for limitation years
ending after December 31, 2001, the
§ 415(b) dollar limitation is increased
when benefits commence after age 65,
rather than for benefits that commence
after a participant’s social security retire-
ment age.
Specific amendments affecting multi-
employer plans (as defined in § 414(f))
were made to §§ 415(b)(11) and 415(f) of
the Code, respectively, by sections 654(a)
and (b) of EGTRRA to provide, respec-
tively, that: (1) the defined benefit com-
pensation limit of § 415(b)(1)(B) does not
apply to a multiemployer plan, effective
for limitation years beginning after De-
cember 31, 2001; and (2) multiemployer
plans are not combined or aggregated (a)
with any other plan which is not a multi-
employer plan for purposes of applying
§ 415(b)(1)(B) to such other plan, or (b)
with any other multiemployer plan for
purposes of applying the limitations of
§ 415, effective for limitation years begin-
ning after December 31, 2001.
Section 611(b) of EGTRRA increased
the defined contribution dollar limitation
of § 415(c)(1)(A) of the Code to $40,000,
effective for limitation years beginning
after December 31, 2001. Section 632(a)
of EGTRRA increased the “25 percent” in
the defined contribution compensation
limitation of § 415(c)(1)(B) of the Code
to “100 percent,” effective for years be-
ginning after December 31, 2001.
Section 611 of EGTRRA also made
changes to the methodology for determin-
ing cost-of-living increases under
§ 415(d) of the Code.
Section 901(a) of EGTRRA provides a
“sunset” provision under which all provi-
sions of, and amendments made by,
EGTRRA shall not apply to taxable, plan,
or limitation years beginning after De-
cember 31, 2010.
The Conference Report (H.R.Conf.
Rep. No. 84,107th Cong., 1st Sess. 212,
214 (2001)) that accompanies EGTRRA
provides that in adopting rules regarding
the application of the increases in the de-
fined benefit plan limits, it is intended
that the Secretary will apply rules similar
to those adopted in Notice 99-44 (1999–2
C.B. 326) regarding benefit increases due
to the repeal of the combined plan limit
under former § 415(e).
III. Questions and Answers on § 415
Changes Under EGTRRA
Q-1:What is the effective date of the in-
crease in the dollar limitation for defined
benefit plans under section 611(a) of
EGTRRA?
A-1:In accordance with section 611(i)(2)
of EGTRRA, the increase in the dollar
limitation for defined benefit plans under
section 611(a) of EGTRRA is effective
for the first limitation year ending after
December 31, 2001. Thus, the defined
benefit dollar limitation applicable to any
limitation year ending in 2002 is
$160,000.
With respect to limitation years ending
after December 31, 2001, a defined benefit
plan will not fail to satisfy § 415 solely be-
cause the plan provides that the benefit of
any participant exceeds the pre-EGTRRA
§ 415(b) limitations. Accordingly, the pre-

2001–45 I.R.B.429November 5, 2001
EGTRRA § 415 limitations will not limit
the benefit of a participant in a defined
benefit plan whose benefit has not com-
menced as of the first day of the first limi-
tation year ending after December 31,
2001. For rules regarding the application
of the pre-EGTRRA § 415(b) limitations to
a participant in a defined benefit plan
whose benefit has commenced as of that
date, see Q&A-5.
Example 1
Plan A is a defined benefit plan with a
calendar year limitation year. When
will the dollar limit applicable to the
benefits of participants under Plan A be
increased to $160,000 under EGTR-
RA?
For participants of Plan A, the increase
in the dollar limitation to $160,000 is
effective for the limitation year begin-
ning January 1, 2002 (and ending
December 31, 2002).
Example 2
Plan B is a defined benefit plan with a
limitation year that begins February 1.
When will the dollar limit applicable to
the benefits of participants under Plan
B increase to $160,000 under EGTR-
RA?
For participants of Plan B, the increase
in the dollar limitation to $160,000 is
effective for the limitation year begin-
ning February 1, 2001 (and ending
January 31, 2002).
Q-2:If a defined benefit plan is not
amended to take into account the
increased § 415 limitations under
EGTRRA, how may the benefits of plan
participants be affected?
A-2:If a defined benefit plan is not
amended to take into account the
increased § 415 limitations under
EGTRRA, the effect on the benefits of
plan participants will depend on the plan’s
existing provisions for applying the limi-
tations of § 415 and any other relevant
plan provisions. In some circumstances, a
plan’s existing provisions could result in
automatic benefit increases for partici-
pants as of the effective date of the in-
creased § 415 limitations for the plan.
For example, the increased § 415 limita-
tions under EGTRRA could result in auto-
matic benefit increases for participants in
defined benefit plans that incorporate by
reference the limitations of § 415.
Example
Participant B, a participant in a defined
benefit plan (Plan R) with a limitation
year beginning March 1, 2001, and
ending February 28, 2002, retires on
April 1, 2001, at age 65 (Participant B’s
social security retirement age) and
receives a single-sum distribution of his
benefit on May 1, 2001. On retirement,
Participant B’s annual benefit in the
form of an annuity under the plan for-
mula was $170,000, but Participant B’s
accrued benefit under the plan was lim-
ited to $140,000 to satisfy § 415.
Participant B received the single-sum
equivalent of an annual benefit of
$140,000. The terms of Plan R incor-
porate the limitations of § 415 of the
Code by reference. What effect does
the increase in the defined benefit dol-
lar limitation under EGTRRA have on
Participant B’s benefit?
The defined benefit dollar limitation in
effect for 2001 ($140,000) was used in
the calculation of the single sum dis-
tributed on May 1, 2001. The increase
in the defined benefit dollar limitation
to $160,000 under EGTRRA is effec-
tive for Plan R for the limitation year
beginning March 1, 2001, and ending
February 28, 2002. Therefore, the
$160,000 dollar limitation applies to
Participant B’s benefit, and Participant
B’s benefit must increase. Participant
B must receive an additional lump sum
amount to reflect the higher dollar lim-
itation applicable to Participant B’s
benefit. The additional lump sum ben-
efit is calculated as the actuarial equiv-
alent of the excess of (1) Participant B’s
accrued benefit in the form of a straight
life annuity when the dollar limitation
applicable at Participant B’s retirement
age under EGTRRA is taken into
account, over (2) Participant B’s
accrued benefit in the form of a straight
life annuity when the pre-EGTRRA
dollar limitation applicable at Par-
ticipant B’s retirement age is taken into
account.
Q-3:How do the increased § 415(b) lim-
itations under EGTRRA affect the
methodology used to apply the § 415(b)
limitations to a benefit under a defined
benefit plan that is not payable in the form
of an annual straight life annuity within
the meaning of § 415(b)(2)(A)?
A-3:The determination as to whether
such a benefit satisfies the 415(b) limita-
tions generally follows the same steps
and procedures as those used in Q&A-7
and Q&A-8, as applicable, of Rev. Rul.
98–1 (1998–1 C.B. 249), with the fol-
lowing modifications. As in Rev. Rul.
98–1, to satisfy the limitations of
§ 415(b), a participant’s benefit must not
exceed the lesser of the § 415(b) dollar
limitation applicable to the participant
and the § 415(b) compensation limitation
applicable to the participant. See Rev.
Rul. 98–1 for a more detailed description
of the methodology used in the steps
below.
Step 1, the determination of the annual
benefit in the form of a straight life annu-
ity commencing at the same age that is ac-
tuarially equivalent to the plan benefit, is
unchanged from Q&A-7 and Q&A-8, as
applicable, of Rev. Rul. 98–1.
Step 2, the determination of the § 415(b)
dollar limitation that applies at the age
the benefit is payable under Q&A-7 and
Q&A-9, as applicable, of Rev. Rul.
98–1, is modified to reflect the increase
of the defined benefit dollar limitation
to $160,000, and the amendment of
§ 415(b)(2)(C) and § 415(b)(2)(D),
as described in the following two
paragraphs.
Effective for limitation years ending after
December 31, 2001, § 415(b)(2)(C) as
amended by EGTRRA provides that the
§ 415(b) dollar limitation is reduced when
a participant’s benefit commences prior to
age 62, rather than for a benefit that com-
mences prior to a participant’s social se-
curity retirement age, and there are no age
adjustments to the dollar limitation where
a participant’s benefit commences after
age 62 and no later than age 65. Where a
participant’s benefit commences prior to
age 62, the § 415(b) dollar limitation ap-
plicable to the participant at the earlier
age is the annual benefit payable in the
form of a straight life annuity commenc-
ing at the earlier age that is actuarially
equivalent to the § 415(b) dollar limita-
tion applicable to the participant at age
62, calculated using assumptions that sat-
isfy § 415(b)(2)(E).

November 5, 20014302001–45 I.R.B.
Effective for limitation years ending after
December 31, 2001, § 415(b)(2)(D) as
amended by EGTRRA provides that the
§ 415(b) dollar limitation is increased
when a participant’s benefit commences
after age 65, rather than for a benefit that
commences after a participant’s social se-
curity retirement age. Where a partici-
pant’s benefit commences after age 65,
the § 415(b) dollar limitation applicable
to the participant at the later age is the an-
nual benefit payable in the form of a
straight life annuity commencing at the
later age that is actuarially equivalent to
the § 415(b) dollar limitation applicable
to the participant at age 65, calculated
using assumptions that satisfy § 415(b)
(2)(E).
Step 3, the determination of the § 415(b)
compensation limitation applicable to the
participant, is unchanged. However, see
Q&A-8 of this revenue ruling for new
rules relating to multiemployer plans.
Q-4:What special considerations for a
defined benefit plan that has a normal re-
tirement age less than 65 must be taken
into account once the amendments to
§ 415 under EGTRRA are effective for
the plan?
A-4:In the case of a defined benefit plan
with a normal retirement age less than 65,
the requirements for nonforfeitability of
benefits and actuarial increase for delayed
retirement of § 411 of the Code must be
coordinated with the requirements of
§ 415. Under § 411, if benefits are not
paid to a participant after the participant
attains the plan’s normal retirement age,
and the plan’s terms do not provide for the
“suspension” of the participant’s benefits
in accordance with § 411(a)(3)(B) of the
Code and 29 C.F.R. § 2530.203–3, then
the participant’s benefit must be actuari-
ally increased for late retirement to avoid
any forfeiture of the participant’s benefit.
However, under § 415 as amended by
EGTRRA, the dollar limitation applicable
to a participant does not increase between
ages 62 and 65. If a participant continues
to work past a plan’s normal retirement
age that is less than 65, and the partici-
pant’s benefit equals the § 415 dollar lim-
itation at an age between 62 and 65, any
actuarial increase to the participant’s ben-
efit after that age and prior to age 65
would violate § 415. In such a case, in
order to satisfy §§ 415 and 411, the terms
of the plan must either provide for the in-
service payment of the participant’s bene-
fit (where the participant has attained nor-
mal retirement age and has a benefit that
cannot be actuarially increased without
violating § 415), or provide for the sus-
pension of benefits in accordance with
§ 411(a)(3)(B) of the Code and 29 C.F.R.
§ 2530.203–3.
Q-5:May a defined benefit plan provide
for benefit increases to reflect the in-
creased § 415 limitations under EGTRRA
for a current or former employee who has
commenced benefits under the plan prior
to the effective date of such increases?
A-5:A defined benefit plan may provide
for benefit increases to reflect the in-
creased § 415 limitations under EGTRRA
for a current or former employee who has
commenced benefits under the plan prior
to the effective date of the § 415 increases
under EGTRRA, but only if the employee
or former employee is a participant in the
plan on or after that effective date. For
this purpose, an employee or former em-
ployee is a participant in the plan on a
date if the employee or former employee
has an accrued benefit (other than an ac-
crued benefit resulting from a benefit in-
crease that arises solely as a result of the
increases in the § 415 limitations under
EGTRRA) on that date. Thus, benefit in-
creases to reflect the increases in the
§ 415 limitations under EGTRRA cannot
be provided to current or former employ-
ees who do not have accrued benefits
under the plan on or after the effective
date of the § 415 increases under
EGTRRA for the plan. However, if a cur-
rent or former employee accrues addi-
tional benefits under the plan that could
have been accrued without regard to
the increased § 415 limitations under
EGTRRA (including benefits that accrue
as a result of a plan amendment) on or
after the effective date of the increased
§ 415 limitations under EGTRRA for the
plan, then the current or former employee
may receive a benefit arising from
the increased § 415 limitations under
EGTRRA.
Q-6:How is the maximum permissible
benefit increase calculated for a current or
former employee who has commenced
benefits under a defined benefit plan in a
form not subject to § 417(e)(3) prior to
the effective date of the increased § 415
limitations under EGTRRA?
A-6:For any limitation year beginning
on or after the effective date for the plan
of the increased § 415 limitations under
EGTRRA, the benefit payable to any cur-
rent or former employee who has com-
menced benefits under the plan prior to
such effective date in a form not subject
to § 417(e)(3) may be increased to a bene-
fit that is no greater than the benefit that
could have been provided had the provi-
sions of EGTRRA been in effect at the
time of the commencement of benefit.
Thus, the annual benefit for limitation
years beginning on or after the effective
date for the plan of the increased § 415
limitations under EGTRRA is limited to
the § 415(b) limitation for the employee
(increased for cost-of-living adjustments,
if the plan provides for such adjustments)
based on the employee’s age at the time of
commencement. Benefits attributable to
limitation years beginning before the ef-
fective date for the plan of the increased
§ 415 limitations under EGTRRA cannot
reflect benefit increases that could not be
paid for those years because of § 415(b).
In addition, any plan amendment to pro-
vide an increase as a result of the in-
creased § 415 limitations under EGTRRA
can be effective no earlier than the effec-
tive date of the increased § 415 limita-
tions under EGTRRA for the plan.
Example
Plan A has a calendar year limitation
year, and provides that retiree benefits
limited by § 415 are increased as
COLA adjustments are made under
§ 415(d). Participant S, a participant of
Plan A, retired in 2000 at age 60 with
20 years of participation. Participant
S’s social security retirement age is 66.
Participant S’s annual benefit under the
plan formula before limitation for § 415
was $180,000, and this benefit was lim-
ited by the defined benefit dollar limit
to $85,252 (the applicable mortality
table and 6 percent are used under the
plan for early retirement purposes).
The defined benefit compensation limi-
tation applicable to Participant S was
$200,000 and, thus, did not limit
Participant S’s benefit. How will
Participant S’s benefit be affected by

2001–45 I.R.B.431November 5, 2001
the changes made to § 415 under sec-
tion 611 of EGTRRA?
Following the increase in the § 415(b)
dollar limit on January 1, 2001, to
$140,000, Participant S’s benefit was
increased to $88,409 [$85,252 x
($140,000/$135,000)]. After the
§ 415(b) increase in the dollar limit
under EGTRRA is applicable to Plan A
for the limitation year beginning
January 1, 2002, Participant S’s annual
benefit may be increased to an amount
equal to the annual benefit commenc-
ing at age 60 that is actuarially equiva-
lent (calculated using actuarial assump-
tions that satisfy § 415(b)(2)(E)) to an
annual benefit of $160,000 payable at
age 62. In other words, Participant S’s
benefit may be increased to an amount
equal to the benefit that a 60 year old
could receive if the defined benefit dol-
lar limit is $160,000 (with no reduction
in the dollar limit for benefits that com-
mence before age 65 and on or after age
62, but reduced actuarially for benefits
that commence before age 62).
Participant S’s annual benefit may
be increased to $134,720. However,
Participant S may not receive this
increased benefit until January 1, 2002.
Q-7:How is the maximum permissible
benefit increase calculated for a current or
former employee under a defined benefit
plan whose benefit is payable in a form
subject to § 417(e)(3) prior to the effec-
tive date of the increased § 415 limita-
tions under EGTRRA?
A-7:In the case of a form of benefit that
is subject to § 417(e)(3), the benefit
payable for any limitation year beginning
on or after the effective date for the plan
of the increased § 415 limitations under
EGTRRA may be increased by an amount
that is actuarially equivalent to the
amount of increase that could have been
provided had the benefit been paid in the
form of a straight life annuity. Benefits
attributable to limitation years beginning
before the effective date for the plan of
the increased § 415 limitations under
EGTRRA cannot reflect benefit increases
that could not be paid for those years be-
cause of § 415(b). In addition, any plan
amendment to provide an increase as a re-
sult of the increased § 415 limitations
under EGTRRA can be effective no ear-
lier than the effective date of the in-
creased § 415 limitations under EGTRRA
for the plan.
Example
Participant D, a participant in a defined
benefit plan (Plan T) with a calendar
year limitation year and plan year,
retires on January 1, 2001, D’s 64th
birthday, with 25 years of service and
participation. Participant D’s social
security retirement age is 65. The
terms of Plan T provide for increases in
retiree benefits (that are limited by
§ 415(b)) as the § 415 limits are
increased for COLAs under § 415(d).
On retirement, D’s annual benefit in the
form of an annuity under the plan for-
mula, before limitation for § 415, is
$200,000. Participant D’s accrued ben-
efit under the plan in the form of an
annuity is limited to $130,667
[(140,000) x (1–(5/9)(12)(.01)] to satis-
fy § 415(b). Participant D’s benefit is
payable in the form of 10 equal annual
installments commencing January 1,
2001. For purposes of actuarial equiv-
alence for early commencement and
optional forms, the plan provides for
the use of the applicable mortality table
and the applicable interest rate
(assumed to be 6 percent for purposes
of this example). What is the maxi-
mum benefit increase that D can
receive under Plan T as a result of the
increased § 415 limitations under
EGTRRA?
When D’s benefits began, the benefit
was calculated as a straight life annuity
of $130,667 per year, adjusted for pay-
ment as 10 annual payments. The
annuity benefit of $130,667 was multi-
plied by an age 64 annuity factor (cal-
culated using the applicable mortality
table and the applicable interest rate),
and the resulting amount was spread
over 10 years, using the applicable
interest rate. Participant D has an
accrued benefit under Plan T when
EGTRRA becomes effective for Plan T
on January 1, 2002. If Plan T is amend-
ed to provide for such increases to
retired participants, then D’s benefit, if
payable in the form of a straight life
annuity, could be increased to a straight
life annuity of $160,000 in the limita-
tion year beginning January 1, 2002.
As of January 1, 2002, D has nine
remaining installment payments. The
remaining nine installment payments
could be increased by the actuarial
equivalent (spread over a period of nine
years) of the value of the increase in the
straight life annuity that would have
been payable beginning January 1,
2002, if D had elected a straight life
annuity on retirement rather than the
installment payment option. That is,
the maximum increase that D is permit-
ted to receive in 2002 as a result of the
§ 415(b) increase under EGTRRA is
the amount equal to the product of
$29,333 ($160,000 – $130,667) times
an age 65 annuity factor (derived using
the applicable mortality table and the
applicable interest rate), spread over 9
years at an assumed interest rate equal
to the applicable interest rate.
Q-8:In addition to the changes enacted
to § 415 under section 611 of EGTRRA,
how did the § 415(b) limitation specifical-
ly applicable to multiemployer defined
benefit plans change under EGTRRA?
A-8:As provided in section 654 of
EGTRRA, the compensation limitation of
§ 415(b)(1)(B) of the Code does not apply
to multiemployer defined benefit plans for
limitation years beginning after December
31, 2001. Additionally, the § 415 aggre-
gation rules affecting multiemployer
plans were changed to provide that, for
limitation years beginning after December
31, 2001, a multiemployer plan is not
combined or aggregated (1) with a non-
multiemployer plan for purposes of apply-
ing the § 415(b)(1)(B) compensation limit
to the non-multiemployer plan, or (2) with
any other multiemployer plan for purpos-
es of applying the § 415 limitations.
Q-9:What is the effective date of the in-
crease in the § 415(c)(1)(A) dollar limita-
tion for defined contribution plans?
A-9:As provided in section 611(b) of
EGTRRA, the increase in the
§ 415(c)(1)(A) dollar limitation for de-
fined contribution plans under EGTRRA
is effective for the first limitation year be-
ginning after December 31, 2001.
Example
Plan C is a defined contribution plan
with a limitation year that begins
February 1. What is the § 415(c)(1)(A)

limitation applicable to Plan C for the
limitation years beginning February 1,
2001, and February 1, 2002?
Reg. § 1.415–6 (Limitation for defined
contribution plans) provides that the
dollar limitation of § 415(c)(1)(A) is
adjusted for cost-of-living increases
under § 415(d), and the COLA-adjust-
ed dollar limitation is effective as of
January 1 of each calendar year and
applies to limitation years that end dur-
ing that calendar year. The limitation
year beginning February 1, 2001, ends
in the calendar year 2002 (on January
31, 2002), so the defined contribution
dollar limitation that applies to the lim-
itation year is the defined contri-
bution dollar limit in effect January 1,
2002, without regard to EGTRRA
($35,000, increased if applicable, to
reflect increases in the cost-of-living,
announced by the Service). The de-
fined contribution dollar limit effective
January 1, 2002, has not yet been
announced. The increase in the defined
contribution dollar limitation to
$40,000 under EGTRRA (adjusted
under § 415(d), if applicable) is first
effective for Plan C for the limitation
year beginning February 1, 2002, and
ending January 31, 2003.
Q-10:What is the effective date for the
increase in the compensation limitation
for defined contribution plans under
§ 415(c)(1)(B)?
A-10:As provided in section 632(a) of
EGTRRA, the 25 percent compensation
limitation in § 415(c)(1)(B) of the Code is
increased to 100 percent, effective for the
first limitation year beginning after De-
cember 31, 2001.
Q-11:How will a defined contribution or
defined benefit plan that takes into ac-
count the increased § 415 limitations
under EGTRRA as of the first day of the
first limitation year for which the in-
creases are effective for the plan, satisfy
the nondiscrimination in amount of bene-
fits requirement?
A-11:A defined contribution or defined
benefit plan that uses a safe harbor and
takes into account the increased § 415
limitations under EGTRRA as of the first
day of the first limitation year for which
the increases are effective for the plan,
will not fail to satisfy the uniformity re-
quirements of §§ 1.401(a)(4)–2(b) or
1.401(a)(4)–3(b)(2) merely because the
increased § 415 limitations under
EGTRRA are taken into account under
the plan.
For purposes of the general test for
nondiscrimination in amount of contribu-
tions, increased contributions allocated
under the terms of a defined contribution
plan due to the increased § 415 limitations
under EGTRRA must be taken into ac-
count in accordance with the rules of
§ 1.401(a)(4)–2(c)(2)(ii) for the plan year
for which the increased allocations are
made. For purposes of the general test for
nondiscrimination in amount of benefits,
increased benefits provided to an em-
ployee under the terms of a defined bene-
fit plan due to the increased § 415 limita-
tions under EGTRRA must be included as
increases in the employee’s accrued bene-
fit (within the meaning of § 411(a)
(7)(A)(i)) and the employee’s most valu-
able optional form of payment of the ac-
crued benefit (within the meaning of
§ 1.401(a)(4)–3(d)(1)(ii)) in accordance
with the rules of § 1.401(a)(4)–3(d), and
must be included in the computation of
both the normal and most valuable ac-
crual rates for any measurement period
that includes the plan year for which the
increase occurs. If the limitations of
§ 415 are taken into account in testing the
plan for limitation years for which the in-
creased § 415 limitations under EGTRRA
are effective for the plan, those limitations
must reflect the increased § 415 limita-
tions under EGTRRA.
Q-12:If benefit increases are provided to
employees and former employees under a
plan as a result of the increased § 415 lim-
itations under EGTRRA, how are the re-
quirements of §§ 1.401(a)(4)–5 and
1.401(a)(4)–10 satisfied?
A-12:If benefit increases resulting from
the increased § 415 limitations under
EGTRRA are provided as of the effective
date of the increased § 415 limitations
under EGTRRA for the plan to either (1)
all current and former employees who
have an accrued benefit under the plan
immediately before the effective date of
the increased § 415 limitations under
EGTRRA, or (2) all employees participat-
ing in the plan that have one hour of ser-
vice after the effective date of the in-
creased § 415 limitations under EGTRRA
for the plan, through the adoption of a
plan amendment, then the timing of such
an amendment satisfies the requirements
of § 1.401(a)(4)–5, and the requirements
of § 1.401(a)(4)–10(b) are satisfied. If, as
of the effective date of the increased
§ 415 limitations under EGTRRA for the
plan, benefit increases are provided to ei-
ther of the two groups described in the
preceding sentence through the operation
of the plan’s existing provisions, then the
requirements of §§ 1.401(a)(4)–5 and
1.401(a)(4)–10(b) are satisfied. If benefit
increases due to the increased § 415 limi-
tations under EGTRRA are provided only
to a certain group of current or former
employees not described in the preceding
paragraph through the adoption of a plan
amendment, or if a plan amendment to re-
flect the increased § 415 limitations under
EGTRRA is effective as of a later date
than the effective date of the increased
§ 415 limitations under EGTRRA for the
plan, then the timing of such an amend-
ment (considered in conjunction with the
effect of the increased § 415 limitations
under EGTRRA) must satisfy a facts-and-
circumstances determination under
§ 1.401(a)(4)–5(a)(2), and the require-
ments of § 1.401(a)(4)–10 must be applied.
Q-13:May a plan be amended to limit the
extent to which a participant’s benefit
would otherwise automatically increase
under the terms of the plan as a result of
the increased § 415 limitations under
EGTRRA?
A-13:A plan may be amended to limit the
extent to which a participant’s benefit
would otherwise automatically increase
under the terms of the plan as a result of
the increased § 415 limitations under
EGTRRA, if the amendment is adopted
before the effective date of the increased
§ 415 limitations for the plan. However,
see Q&A-14 for certain qualification
requirements that may be affected by such
an amendment. A plan sponsor may wish
to make a plan amendment to preclude a
benefit increase that would otherwise
occur as a result of the increased § 415
limitations under EGTRRA in order to
provide time for the plan sponsor to con-
sider the extent to which a benefit
increase relating to the increased § 415
limitations under EGTRRA should or
November 5, 20014322001–45 I.R.B.

should not be provided at some later date
consistent with all relevant qualification
requirements. A plan amendment to limit
the extent to which such a benefit increase
would otherwise occur that is not both
adopted prior to, and effective as of, the
first day of the first limitation year for
which the increased § 415 limitations
under EGTRRA are effective for the plan
may fail to satisfy § 411(d)(6). Therefore,
a plan amendment that is intended to limit
such a benefit increase should be both
adopted prior to, and effective as of, the
first day of the first limitation year for
which the increased § 415 limitations
under EGTRRA are effective for the plan.
The following is an example of language
that could be used by a plan sponsor, on
an interim or permanent basis, in amend-
ing a defined benefit plan that would oth-
erwise provide for a benefit increase due
to the increased § 415 limitations under
EGTRRA, to retain the effect of the pre-
EGTRRA § 415 limitations in determin-
ing a participant’s accrued benefit under
the plan (without failing to satisfy
§ 411(d)(6)):
Effective as of the first day of the first
limitation year for which the
increased § 415 limitations under
EGTRRA are effective for the plan
(the “Effective Date”), and notwith-
standing any other provision of the
Plan, the accrued benefit for any par-
ticipant shall be determined by
applying the terms of the Plan imple-
menting the limitations of § 415 as if
the limitations of § 415 continued to
include the limitations of § 415 as in
effect on the day immediately prior to
the Effective Date.
Q-14:Are there qualification require-
ments that may not be satisfied if a plan
continues to limit benefits after the first
day of the first limitation year for which
the increased § 415 limitations under
EGTRRA are effective for the plan using
the pre-EGTRRA § 415 limitations?
A-14:There are some qualification re-
quirements that may not be satisfied if a
plan continues to limit benefits using the
pre-EGTRRA § 415 limitations after the
first day of the first limitation year for
which the increased § 415 limitations
under EGTRRA are effective for the plan.
Any exception from the otherwise applic-
able qualification rules that is permitted
solely in order to satisfy the maximum
limitations on contributions or benefits
under § 415 with respect to a participant
does not apply if the participant’s contri-
butions or benefits are below the limita-
tions of § 415. Thus, such an exception is
not permitted where a plan limits benefits
in a manner that is more restrictive than
required under § 415. For example, at any
time on or after the first day of the first
limitation year beginning on or after Janu-
ary 1, 2002, a qualified defined contribu-
tion plan could not provide that the provi-
sions of § 1.415–6(b)(6) would be applied
to place an amount that does not exceed
the limitations under § 415, but that does
exceed the pre-EGTRRA § 415 limita-
tions, in an unallocated suspense account
as an excess annual addition. Similarly, a
qualified cash or deferred arrangement
could not provide that the provisions of
§ 1.415–6(b)(6)(iv) would be applied to
permit the distribution of elective defer-
rals that do not exceed the limitations
under § 415, but that exceed the pre-
EGTRRA § 415 limitations. The qualifi-
cation issues described in this Q&A-14
may arise whenever a lower limitation is
applied under a plan in lieu of a statutory
§ 415 limitation that applies for the limi-
tation year.
Q-15:How may a plan that continues to
limit benefits after the first day of the first
limitation year for which the increased
§ 415 limitations under EGTRRA are ef-
fective for the plan, using the pre-
EGTRRA § 415 limitations, satisfy the
nondiscrimination in amount of benefits
requirement?
A-15:Section 1.401(a)(4)–2(b)(4)(iv)
provides that the use of safe harbors by
defined contribution plans, for nondis-
crimination in amount of contributions
purposes, is not precluded by plan provi-
sions (which must apply uniformly to all
employees) that (1) limit allocations oth-
erwise provided under the allocation for-
mula to a maximum dollar amount or a
maximum percentage of plan year com-
pensation, (2) limit the dollar amount of
plan year compensation taken into ac-
count in determining the amount of allo-
cations, or (3) apply the restrictions of
§ 409(n) or the limits of § 415. Section
1.401(a)(4)–3(b)(6)(v) provides that the
use of safe harbors by defined benefit
plans, for nondiscrimination in amount of
benefits purposes, is not precluded by
plan provisions (which must apply uni-
formly to all employees) that (1) limit
benefits otherwise provided under the
benefit formula or accrual method to a
maximum dollar amount or to a maxi-
mum percentage of average annual com-
pensation or in accordance with
§ 401(a)(5)(D), (2) apply the limits of
§ 415, or (3) limit the dollar amount of
compensation taken into account in deter-
mining benefits. Because the pre-
EGTRRA § 415 limitations uniformly
limit allocations or benefits to a maxi-
mum dollar amount or percentage of com-
pensation, a plan that continues to apply
the pre-EGTRRA § 415 limitations does
not fail to satisfy a safe harbor solely be-
cause it continues to apply such limita-
tions.
If a plan continues to limit benefits using
the pre-EGTRRA § 415 limitations, on or
after the first day of the first limitation
year for which the increased § 415 limita-
tions under EGTRRA are effective for the
plan, the annual additions or accrued ben-
efits that are taken into account in per-
forming the general tests for nondiscrimi-
nation in amount of contributions or
benefits must reflect the plan provisions
that limit benefits in this manner.
Q-16:How are the increased § 415 limi-
tations under EGTRRA treated under the
plan for purposes of § 412?
A-16:For purposes of § 412, any increase
in the liabilities of a plan as a result of the
increased § 415 limitations under
EGTRRA must be treated as occurring
pursuant to a plan amendment effective
no earlier than the first day of the first
limitation year for which the increased
§ 415 limitations under EGTRRA are ef-
fective for the plan (whether the increase
in liabilities under the terms of the plan
arises pursuant to a plan amendment, or
pursuant to existing plan provisions, i.e.,
where benefits automatically increase as
of the date the increased § 415 limitations
under EGTRRA are effective for the
plan). Accordingly, any amortization
base that is established under § 412 for an
increase in liabilities under a plan result-
ing from the increased § 415 limitations
under EGTRRA must have an amortiza-
tion period of 30 years. A plan amend-
2001–45 I.R.B.433November 5, 2001

ment that makes the increased § 415 limi-
tations under EGTRRA effective for a
plan cannot be taken into account for pur-
poses of § 412 prior to the effective date
of the increased § 415 limitations under
EGTRRA for the plan.
Q-17: How is the sunset provision of sec-
tion 901 of EGTRRA taken into account
for purposes of §§ 412 and 404 of the
Code, and with respect to the calculation
of benefit payments that must not exceed
the limitations of § 415?
A-17:The “sunset” provision of section
901 of EGTRRA is not taken into account
for purposes of § 412 of the Code for
years beginning on or before December
31, 2010. Thus, for example, projected
benefits under a defined benefit plan are
computed assuming that the increase in
the dollar limitation to $160,000, as ad-
justed under § 415(d), remains in effect
for limitation years beginning after De-
cember 31, 2010. Section 404(j) provides
that benefits or contributions in excess of
the limitations of § 415 are not taken into
account in computing the amount of any
deduction allowable under paragraphs
(1), (2), (3), (4), (7), or (9) of § 404(a).
For years beginning on or before Decem-
ber 31, 2010, the determination that con-
tributions do not exceed the limitation of
§ 404(j) is made without regard to the
sunset provision of section 901 of
EGTRRA. Until further guidance is pro-
vided, a participant’s benefit will be
tested for satisfaction of the § 415 limita-
tions using the limitations currently in ef-
fect and applicable to the participant.
IV. Effect on Other Documents
Rev. Rul. 98–1 is modified.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Ann Trichilo of Employee Plans.
For further information regarding this
revenue ruling, please contact the Em-
ployee Plans’ taxpayer assistance tele-
phone service at 1-877-829-5500, be-
tween the hours of 8:00 a.m. and 9:30
p.m. Eastern time, Monday through Fri-
day (a toll-free number). Ms. Trichilo
may be reached at (202) 283-9695 (not a
toll-free number).
Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 2001. See Rev. Rul. 2001–52, on this page.
Section 468.—Special Rules for
Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 2001. See Rev. Rul. 2001–52, on this page.
Section 482.—Allocation of
Income and Deductions Among
Taxpayers
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 2001.
See Rev. Rul. 2001–52, on this page.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
November 2001. See Rev. Rul. 2001–52, on this page.
Section 642.—Special Rules for
Credits and Deductions
Federal short-term, mid-term, and long-term
rates are set forth for the month of November 2001.
See Rev. Rul. 2001–52, on this page.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for the
month of November 2001. See Rev. Rul. 2001–52,
on this page.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for the
month of November 2001. See Rev. Rul. 2001–52,
on this page.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal Rates; adjusted federal
rates; adjusted federal long-term rate
and the long-term exempt rate.For pur-
poses of sections 382, 1274, 1288, and
other sections of the Code, tables set forth
the rates for October 2001.
Rev. Rul. 2001–52
This revenue ruling provides various
prescribed rates for federal income tax
purposes for November 2001 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Inter-
nal Revenue Code. Table 2 contains the
short-term, mid-term, and long-term ad-
justed applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(2) for buildings placed in
service during the current month. Finally,
Table 5 contains the federal rate for deter-
mining the present value of an annuity, an
interest for life or for a term of years, or a
remainder or a reversionary interest for
purposes of section 7520.
November 5, 20014342001–45 I.R.B.

REV. RUL. 2001–52 TABLE 1
Applicable Federal Rates (AFR) for November 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR2.73% 2.71%2.70%2.69%
110% AFR3.00% 2.98%2.97%2.96%
120% AFR3.28% 3.25%3.24% 3.23%
130% AFR 3.55% 3.52% 3.50% 3.49%
Mid-Term
AFR4.13%4.09%4.07%4.06%
110% AFR4.55%4.50%4.47%4.46%
120% AFR4.97%4.91%4.88%4.86%
130% AFR5.39%5.32%5.29%5.26%
150% AFR6.23%6.14%6.09%6.06%
175% AFR7.29%7.16%7.10%7.06%
Long-Term
AFR5.31%5.24%5.21%5.18%
110% AFR5.84%5.76%5.72%5.69%
120% AFR6.39%6.29%6.24%6.21%
130% AFR6.93%6.81%6.75%6.72%
2001–45 I.R.B.435November 5, 2001
REV. RUL. 2001–52 TABLE 2
Adjusted AFR for November 2001
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR2.39%2.38%2.37%2.37%
Mid-term
adjusted AFR3.41%3.38%3.37%3.36%
Long-term
adjusted AFR 4.74%4.69% 4.66%4.64%
REV. RUL. 2001–52 TABLE 3
Rates Under Section 382 for November 2001
Adjusted federal long-term rate for the current month4.74%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the
adjusted federal long-term rates for the current month and the prior two months.)4.85%
REV. RUL. 2001–52 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for November 2001
Appropriate percentage for the 70% present value low-income housing credit 8.10%
Appropriate percentage for the 30% present value low-income housing credit3.47%

Section 1288.—Treatment of
Original Issue Discount on Tax-
Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2001. See Rev. Rul. 2001–52, page
434.
Section 7520.—Valuation Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2001. See Rev. Rul. 2001–52, page
434.
Section 7872.—Treatment of
Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of November 2001. See Rev. Rul. 2001–52, page
434.
November 5, 20014362001–45 I.R.B.
REV. RUL. 2001–52 TABLE 5
Rate Under Section 7520 for November 2001
Applicable federal rate for determining the present value of an annuity, an interest for life or a term
of years, or a remainder or reversionary interest5.0%

Additional Disaster Relief for
Taxpayers Affected by the
September 11, 2001, Terrorist
Attack – Mid-Quarter Convention
Relief
Notice 2001–70
This notice announces that the Treasury
Department and the Internal Revenue Ser-
vice intend to issue regulations permitting
taxpayers to elect not to apply the mid-
quarter convention rules contained in
§ 168(d)(3) of the Internal Revenue Code
to certain property placed in service in the
taxable year that includes September 11,
2001. This notice also provides taxpayers
a mechanism for making the election be-
fore regulations are issued.
Section 168(d)(3) generally provides
that, except as provided in regulations,
if the aggregate basis of property placed
in service during the last three months of
the taxable year exceeds 40 percent of
the aggregate basis of property (other
than property described in
§ 168(d)(3)(B)) placed in service during
the taxable year, the applicable depreci-
ation convention for all property (other
than property described in § 168(d)(2))
to which § 168 applies placed in service
during the taxable year is the mid-quar-
ter convention.
Many taxpayers time the acquisition
and placing in service of property within a
taxable year to avoid application of the
mid-quarter convention. Treasury and the
Service have been made aware that, as a
result of events related to the September
11, 2001, terrorist attacks, many taxpay-
ers have encountered difficulty complet-
ing the acquisition and placing in service
of property in accordance with plans de-
veloped earlier in the year, and certain
taxpayers would choose to delay acquisi-
tion and placing of property in service
during the last quarter of their taxable
year if failing to delay would result in ap-
plication of the mid-quarter convention.
Accordingly, if the third quarter of the
taxpayer’s 2001 taxable year includes
September 11, 2001, then the taxpayer
may elect to apply the half-year conven-
tion to all property (other than property
described in § 168(d)(2)) placed in ser-
vice during the taxpayer’s 2001 taxable
year for purposes of § 168(d).
To make the election under this notice,
a taxpayer must write “Election Pursuant
to Notice 2001–70” across the top of its
Form 4562, Depreciation and Amortiza-
tion, for the taxpayer’s taxable year that
includes September 11, 2001.
Treasury and the Service intend to
amend the regulations under § 168 to in-
corporate the guidance set forth in this no-
tice. Until the regulations are amended,
taxpayers may rely on the guidance set
forth in this notice.
The principal author of this notice is
Bernard P. Harvey of the Office of Asso-
ciate Chief Counsel, Passthroughs and
Special Industries. For further informa-
tion regarding this notice contact Mr. Har-
vey at (202) 622-3110 (not a toll-free
call).
2001–45 I.R.B.437November 5, 2001
Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.602: Forms and instructions. (Also Part 1, Sections 220, 408, 408A, 529, 530(h), 1441, 6041, 6041A, 6042, 6043, 6044, 6045, 6047, 6049, 6050A,
6050B, 6050D, 6050E, 6050H, 6050J, 6050N, 6050P, 6050Q, 6050R, 6050S, 1.408–5, 1.408–7, 1.408A–7, 1.1441–1 through 1.1441–5, 1.6041–1, 7.6041–1,
1.6042–2, 1.6042–4, 1.6044–2, 1.6044–5, 1.6045–1, 5f.6045–1, 1.6045–2, 1.6045–4, 1.6047–1, 1.6049–4, 1.6049–6, 1.6049–7, 1.6050A–1, 1.6050B–1, 1.6050D–1,
1.6050E–1, 1.6050H–1, 1.6050H–2, 1.6050J–1T, 1.6050N–1, 1.6050P–1).
NOTE: This revenue procedure will be reprinted as the next revision of IRS Publication 1179, Rules and Specifications for
Private Printing of Substitute Forms 1096, 1098, 1099, 5498, W-2G (and 1042-S).
Rev. Proc. 2001–50
TABLE OF CONTENTS
PART 1 - GENERAL INFORMATION
Section 1.1 - Overview of Revenue Procedure 2001–50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .438
Section 1.2 - General Requirements for Acceptable Substitute Forms 1096, 1098, 1099,
5498, W-2G, and 1042-S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .440
Section 1.3 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .441
PART 2 - SPECIFICATIONS FOR SUBSTITUTE FORMS 1096 AND COPIES A OF FORMS 1098, 1099, AND 5498
(ALL FILED WITH THE IRS)
Section 2.1 - Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .441
Section 2.2 - Instructions for Preparing Paper Forms That Will Be Filed With the IRS . . . . . . . . . . . . . . . . . .444
PART 3 - SPECIFICATIONS FOR SUBSTITUTE FORM W-2G (FILED WITH THE IRS)
Section 3.1 - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .445
Section 3.2 - Specifications for Copy A of Form W-2G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .445

PART 4 - SUBSTITUTE STATEMENTS TO FORM RECIPIENTS AND FORM RECIPIENT COPIES
Section 4.1 - Specifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .446
Section 4.2 - Composite Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .448
Section 4.3 - Required Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .449
Section 4.4 - Miscellaneous Instructions for Copies B, C, D, 1, and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .450
PART 5 - ADDITIONAL INSTRUCTIONS FOR SUBSTITUTE FORMS 1098, 1099, 5498, W-2G, and 1042-S
Section 5.1 - Paper Substitutes for Form 1042-S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .451
Section 5.2 - OMB Requirements for All Forms in This Revenue Procedure . . . . . . . . . . . . . . . . . . . . . . . . . .453
Section 5.3 - Reproducible Copies of Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .453
Section 5.4 - Effect on Other Revenue Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454
PART 6 - EXHIBITS
Section 6.1 - Exhibits of Forms in the Revenue Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454
Part 1
General Information
Section 1.1 - Overview of Revenue Procedure 2001–50
1.1.1 PurposeThe purpose of this revenue procedure is to set forth the requirements for the year 2001 for:
•Using official Internal Revenue Service (IRS) forms to file information returns with the IRS,
•Preparing acceptable substitutes of the official IRS forms to file information returns with the IRS,
and
•Using official or acceptable substitute forms to furnish information to recipients.
1.1.2 Which This revenue procedure contains specifications for these information returns:
Forms Are
FormTitle
Covered?
1096 Annual Summary and Transmittal of U.S. Information Returns
1098Mortgage Interest Statement
1098-EStudent Loan Interest Statement
1098-TTuition Payments Statement
1099-AAcquisition or Abandonment of Secured Property
1099-BProceeds From Broker and Barter Exchange Transactions
1099-CCancellation of Debt
1099-DIVDividends and Distributions
1099-GCertain Government and Qualified State Tuition Program Payments
1099-INTInterest Income
1099-LTCLong-Term Care and Accelerated Death Benefits
1099-MISCMiscellaneous Income
1099-MSADistributions From an Archer MSA or Medicare+Choice MSA
1099-OIDOriginal Issue Discount
1099-PATRTaxable Distributions Received From Cooperatives
November 5, 20014382001–45 I.R.B.

1099-RDistributions From Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, etc.
1099-SProceeds From Real Estate Transactions
5498IRA Contribution Information
5498-MSAArcher MSA or Medicare+Choice MSA Information
W-2GCertain Gambling Winnings
1042-SForeign Person’s U.S. Source Income Subject to Withholding
1.1.3 ScopeFor purposes of this revenue procedure, a substitute form or statement is one that is not printed by the
IRS. For a substitute form or statement to be acceptable to the IRS, it must conform to the official form
or the specifications outlined in this revenue procedure. Do not submit any substitute forms or state-
ments listed above to the IRS for approval. Privately printed forms may not state “This is an IRS ap-
proved form.”
Filers making payments to certain recipients during a calendar year (or in some cases, filers receiving
payments) are required by the Internal Revenue Code (the Code) to file information returns with the IRS
for these payments. These filers must also provide this information to their recipients. See Part 4for
specifications that apply to recipient statements (generally Copy B).
In general, section 6011 of the Code contains requirements for filers of information returns. A filer must
file information returns on magnetic media, through electronic filing, or on paper. A filer who is required
to file 250 or more information returns of any one type during a calendar year must file those returns by
magnetic media or electronic filing.
Exception.Filers are not required to use magnetic media or electronic filing when filing 250 or more
Forms 1098-Eor 1098-T.
Although not required, small volume filers (fewer than 250 returns during a calendar year) and Form
1098-E and 1098-T filers may file the forms on magnetic media or electronically. See the legal re-
quirements for filing information returns (and providing a copy to a payee) in the 2001 General In-
structions for Forms 1099, 1098, 5498, and W-2G and the2001 Instructions for Form 1042-S.In
addition, see Pub. 1220,Specifications for Filing Forms 1098, 1099, 5498, and W-2G Magnetically or
Electronically.
1.1.4 For More The IRS prints and provides the forms on which various payments must be reported. Alternatively,
Informationfilers may prepare substitute copies of these IRS forms and use such forms to report payments to the IRS.
•For copies of the official forms and the instruction booklet for the reporting year, call our toll-free
number at 1-800-TAX-FORM (1-800-829-3676).
•The IRS operates a central call site in Martinsburg, WV, to answer questions related to information
returns, penalties, and backup withholding. Call 304-263-8700 Monday through Friday 8:30 a.m. to
4:30 p.m. eastern time. The TTY/TDD number is 304-267-3367.
1.1.5 Changes to the The following changes have been made to this year’s Revenue Procedure:
Revenue Procedure
•Rules and specifications for Form 1042-S,Foreign Person’s U.S. Source Income Subject to With-
holding, were added to the Revenue Procedure as Section 5.1. Exhibit U also shows an example of
the form.
•Form 1099-MISCwas reformatted to 2, instead of 3, forms per page. Also: New boxes 14 through
18 were added for improved processing, boxes 11 and 12 were renumbered as 16 and 17, and box 13
was labeled.
•Extra boxes for contact information were added to Form 1096.
•A new box 2 was added to Form 1098-E.
•On Form 1098-T: Boxes 1 and 2 were labeled, new box 3 was added, and boxes 3 and 4 were
renumbered 4 and 5.
•New box 2c was added, and boxes 2c and 2d were renumbered 2d and 2e on Form 1099-DIV.
2001–45 I.R.B.439November 5, 2001

•New box 4 was added, and box 4 was renumbered 5 on Form1099-LTC.
•New box 4 was added, a checkbox was removed from box 6, and boxes 4-10 were renumbered 5-11
on Form 5498.
1.1.6 Some Some changes anticipated for the 2002 forms are:
Changes for 2002•New Form 1099-Q,Qualified Tuition Program Payments (Under Section 529), is being developed.
•The title of Form 1099-Gis being changed to Certain Government Payments.
•The title of Form 1099-MSAis being changed to Distributions From an Archer MSA or
Medicare+Choice MSA
•The title of Form 5498is being changed to IRA and Coverdell ESA Contribution Information.
•The title of Form 5498-MSAis being changed to Archer MSA or Medicare+Choice MSA
Information
Section 1.2 - General Requirements for Acceptable Substitute Forms 1096, 1098, 1099, 5498,
W-2G, and 1042-S
1.2.1 IntroductionPaper substitutes for Form 1096 and Copy A of Forms 1098, 1099, 5498, W-2G, and 1042-S that totally
conform to the specifications listed in this revenue procedure may be privately printed and filed as returns
with the IRS. The reference to the Department of the Treasury - Internal Revenue Service should be in-
cluded on all such forms.
If you are uncertain of any specification and want it clarified, you may submit a letter citing the specifi-
cation, stating your understanding and interpretation of the specification, and enclosing an example of the
form (if appropriate) to:
Internal Revenue Service
Attn: Substitute Forms Program
W:CAR:MP:FP:S:SP
1111 Constitution Ave., NW
Room 5244 IR
Washington, DC 20224
Note:Allow at least 45 days for the IRS to respond.
You may also contact the Substitute Forms Program Unit via e-mail at tfp@publish.no.irs.gov
.Please
enter “Substitute Forms” on the Subject Line.
Forms 1096, 1098, 1099, 5498, and W-2G are subject to annual review and possible change. Therefore,
filers are cautioned against overstocking supplies of privately printed substitutes. The specifications
contained in this revenue procedure apply to 2001 forms only.
1.2.2 Copy AProposed substitutes for Copy A that do not conform to the specifications in this revenue procedure are
Specificationsnot acceptable. Further, if you file such forms with the IRS, you may be subject to a penalty for failure to
file an information return under section 6721 of the Code. Generally, the penalty is $50 for each failure
to file a form (up to $250,000) that the IRS cannot accept as a return because it does not meet the provi-
sions in this revenue procedure. No IRS office is authorized to allow deviations from this revenue proce-
dure.
Caution: Overuse of proportional fonts may cause you to be subject to penalties and delays in processing.
1.2.3 Copy B andCopies B and Copies C of the following forms must contain the information in Part 4to be considered a
Copy C Specifications“statement” or “official form” under the applicable provisions of the Code. The format of this informa-
tion is at the discretion of the filer with the exception of the location of the tax year, form number, form
name, and the information for composite Form 1099 statements as outlined under Section 4.2.
Copy B of the following forms are:
FormRecipient
1098For Payer
1098-E; 1099-AFor Borrower
November 5, 20014402001–45 I.R.B.

1098-TFor Student
1099-CFor Debtor
1099-LTCFor Policyholder
1099-R; W-2G(These forms may require Copy B to be attached to the Federal
income tax return.)
1099-SFor Transferor
All other Forms 1099For Recipient
5498; 5498-MSAFor Participant
Copy C of the following forms are:
Form Recipient
1099-LTCFor Insured
1099-RFor Recipient’s Records
W-2GFor Winner’s Records
Note: On Copy C, Form 1099-LTC, you may reverse the locations of the policyholder’s and the insured’s
name, street address, city, state, and ZIP code for easier mailing.
Section 1.3 - Definitions
1.3.1 Form RecipientForm recipientmeans the person to whom you are required by law to furnish a copy of the official form
or information statement. The form recipient may be referred to by different names on various Forms
1099 and related forms (“payer,” “borrower,” “student,” “debtor,” “policyholder,” “insured,” “trans-
feror,” “recipient,” “participant,” or, in the case of Form W-2G, the “winner”). See Section 1.2.3 earlier.
1.3.2 FilerFilermeans the person or organization required by law to file a form listed in Section 1.1.2with the IRS.
As outlined earlier, a filer may be a payer, creditor, recipient of mortgage or student loan interest pay-
ments, educational institution, broker, barter exchange, person reporting real estate transactions, trustee
or issuer of any individual retirement arrangement or medical savings account, or lender who acquires an
interest in secured property or who has reason to know that the property has been abandoned.
1.3.3 Substitute FormSubstitute formmeans a paper substitute of Copy A of an official form listed in Section 1.1.2that totally
conforms to the provisions in this revenue procedure.
1.3.4 Substitute Form Substitute form recipient statement means a paper statement of the information reported on a form
Recipient Statementlisted in Section 1.1.2. This statement must be furnished to a person (form recipient), as defined under
the applicable provisions of the Code and the applicable regulations.
1.3.5 Composite Composite substitute statementmeans one in which two or more required statements (e.g., Forms
Substitute Statement1099-INT and 1099-DIV) are furnished to the recipient on one document. However, each statement must
be designated separately and must contain all the requisite Form 1099 information except as provided
under Section 4.2. A composite statement may notbe filed with the IRS.
Part 2
Specifications for Substitute Forms 1096
and Copies A of Forms 1098, 1099,
and 5498 (All Filed With the IRS)
Section 2.1 - Specifications
2.1.1 General Form identifying numbers (e.g., 9191 for Form 1099-DIV) must be printed in nonreflective black carbon-
Requirementsbased ink in print positions 15 through 19 using an OCR A font. The checkboxes to the right of the form
2001–45 I.R.B.441November 5, 2001

identifying numbers must be 10-point boxes. The “VOID” checkbox is in print position 25. The “COR-
RECTED” checkbox is in position 33. Measurements are from the left edge of the paper, not including
the perforated strip. See Exhibits D and K.
The substitute form must be an exact replica of the official IRS form with respect to layout and content.
To determine the correct form measurements, see Exhibits A through U at the end of this publication.
Hot wax and cold carbon spots are not permitted on any of the internal form plies. These spots are per-
mitted on the back of a mailer top envelope ply.
Use of chemical transfer paper for Copy A is acceptable.
The Government Printing Office (GPO) symbol must be deleted.
2.1.2 Color andColor and paper quality for Copy A (cut sheets and continuous pinfeed forms) as specified by JCP Code
Paper Quality0-25, dated November 29, 1978, must be white 100% bleached chemical wood, optical character recogni-
tion (OCR) bond produced in accordance with the following specifications.
Note: Reclaimed fiber in any percentage is permitted provided the requirements of this standard are met.
•Acidity: Ph value, average, not less than................................................................4.5
•Basis Weight: 17 x 22-500 cut sheets ...................................................................... 18-20
Metric equivalent—g/m
2
.........................................................................................75
A tolerance of +5 pct. is allowed.
•Stiffness: Average, each direction, not less than—milligrams ...............................50
•Tearing strength: Average, each direction, not less than—grams...........................40
•Opacity: Average, not less than—percent...............................................................82
•Thickness: Average—inch ...................................................................................... 0.0038
Metric equivalent—mm........................................................................................... 0.097
A tolerance of +0.0005 inch (0.0127 mm) is allowed. Paper cannot vary more than
0.0004 inch (0.0102 mm) from one edge to the other.
•Porosity: Average, not less than—seconds .............................................................10
•Finish (smoothness): Average, each side—seconds ............................................... 20-55
For information only, the Sheffield equivalent—units ............................................170-100
•Dirt: Average, each side, not to exceed—parts per million ...................................8
2.1.3 ChemicalChemical transfer paper is permitted for Copy A only if the following standards are met:
Transfer Paper•Only chemically backed paper is acceptable for Copy A. Front and back chemically treated paper
cannot be processed properly by machine.
•Carbon-coated forms are not permitted.
•Chemically transferred images must be black.
All copies must be clearly legible.Hot wax and cold carbon spots are notpermitted for Copy A. Inter-
leaved carbonshould be black and must be of good quality to assure legibility on all copies and to avoid
smudging. Fading must be minimized to assure legibility.
2.1.4 Printing All print on Copy A of Forms 1098, 1099, 5498,and the print on Form 1096above the statement
“Please return this entire page to the Internal Revenue Service. Photocopies are not acceptable.”must
be in Flint J-6983 red OCR dropout ink or an exact match. However, the four-digit form identifying
number mustbe in nonreflective carbon-based blackink in OCR A font.
The shaded areas of any substitute form should generally correspond to the format of the official form.
The printing for the Form 1096statement and the following text may be in any shade or tone of black
ink. Black ink should only appear on the lower part of the reverse side of Form 1096 where it will not
bleed through and interfere with scanning.
Note: The instructions on the front and back of Form 1096, which include filing addresses, must be
printed.
November 5, 20014422001–45 I.R.B.

Separation between fields must be 0.1 inch.
Except for Form 1099-R and 1099-MISC, the numbered captions are printed as solid with no shaded
background.
Other printing requirements are discussed below.
2.1.5 OCRThe contractor must initiate or have a quality control program to assure OCR ink density. Readings will
Specificationsbe made when printed on approved 20 lb. white OCR bond with a reflectance of not less than 80%. Black
ink must not have a reflectance greater than 15%. These readings are based on requirements of the
“Scan-Optics Series 9000” Optical Scanner using Flint J-6983 red OCR dropout ink or an exact match.
The following testers and ranges are acceptable:
•MacBeth PCM-II.The tested Print Contrast Signal (PCS) values when using the MacBeth PCM-II
tester on the “C” scale must range from .01 minimum to .06 maximum.
•Kidder 082A. The tested PCS values when using the Kidder 082A tester on the Infra Red (IR) scale
must range from .12 minimum to .21 maximum. White calibration disc must be 100%. Sensitivity
must be set at one (1).
•Alternative testers.Alternative testers must be approved by the Government so that tested PCS
values can be established. You may obtain approval by writing to the following address:
Commissioner of Internal Revenue
Attn: W:CAR:MP:M:T:M, Room 1225
Tax Products
1111 Constitution Avenue, NW
Washington, DC 20224
2.1.6 TypographyType must be substantially identical in size and shape to the official form. All rules are either 1/2-point or
3/4-point. Rules must be identical to those on the official IRS form.
Note:The form identifying number must be nonreflective carbon-based black ink in OCR A font.
2.1.7 DimensionsGenerally, three Forms 1098, 1099, or 5498 (Copy A)are contained on a single page, 8 inches wide
(without any snap-stubs and/or pinfeed holes) by 11 inches deep.
Exceptions. Forms 1099-MISC, 1099-R, and 1042-Scontain two documents per page.
There is a .33 inch top margin from the top of the corrected box, and a .25 inch right margin. There is a
1/32 (0.0313) inch tolerance for the right margin. If the right and top margins are properly aligned, the
left margin for all forms will be correct. All margins must be free of print. See Exhibits A through U in
this publication for the correct form measurements.
These measurements are constant for all Forms 1098, 1099, and 5498.These measurements are shown
only once in this publication, on Form 1098 (Exhibit B). Exceptions to these measurements are shown on
the rest of the exhibits.
The depth of the individual trim size of each form on a page must be 3 2/3 inches, the same depth as the
official form.
Exceptions. The depth of Forms 1099-MISCand1099-Ris 5 1/2 inches.
2.1.8 PerforationCopy A (three per page; two per page for Forms 1099-MISCand1099-R) of privately printed continu-
ous substitute forms must be perforated at each 11” page depth. No perforations are allowed between the
3 2/30forms (5 1/20for Forms 1099-MISC or 1099-R) on a single copy page of Copy A.
The words “Do Not Cut or Separate Forms on This Page” must be printed in red dropout ink (as required
by form specifications) between the three forms (two for Forms 1099-MISC or1099-R).
Note: Perforations are required between all the other individual copies (Copies B and C, and Copies 1
and 2 for Forms 1099-Rand 1099-MISC,and Copy D for Forms 1099-LTCand 1099-R) in the set.
2.1.9 What To IncludeYou must include the OMB Number on Copies Aand Form 1096in the same location as on the official
form.
2001–45 I.R.B.443November 5, 2001

The words “For Privacy Act and Paperwork Reduction Act Notice, see the 2001 General Instructions
for Forms 1099, 1098, 5498, and W-2G”must be printed on Copy A; “For more information and the
Privacy Act and Paperwork Reduction Act Notice, see the 2001 General Instructions for Forms
1099, 1098, 5498, and W-2G” mustbe printed on Form 1096.
A postal indicia may be used if it meets the following criteria:
•It is printed in the OCR ink color prescribed for the form, and
•No part of the indicia is within one print position of the scannable area.
The printer’s symbol (GPO) must not be printed on substitute Copy A. Instead, the employer identifica-
tion number (EIN) of the forms printer must be entered in the bottom margin on the face of each individ-
ual form of Copy A,or on the bottom margin on the back of each Form 1096.
The Catalog Number (Cat. No.) shown on the 2001 forms is used for IRS distribution purposes and need
not be printed on any substitute forms.
Section 2.2 - Instructions for Preparing Paper Forms That Will Be Filed With the IRS
2.2.1 Recipient The form recipient’s name, street address, city, state, and ZIP code information should be typed or ma-
Informationchine printed in black inkin the same format as shown on the official IRS form. The city, state, and ZIP
code must be on the same line.
The following rules apply to the form recipient’s name(s):
•The name of the appropriate form recipient must be shown on the first or second name line in the
area provided for the form recipient’s name.
•No descriptive information or other name may precede the form recipient’s name.
•Only oneform recipient’s name may appear on the first name line of the form.
•If the multiple recipients’ names are required on the form, enter on the first name line the recipient
name that corresponds to the recipient taxpayer identification number (TIN) shown on the form.
Place the other form recipients’ names on the second name line (only 2 name lines are allowable).
Because certain states require that trust accounts be provided in a different format, generally filers should
provide information returns reflecting payments to trust accounts with the:
•Trust’s employer identification number (EIN) in the recipient’s TIN area,
•Trust’s name on the recipient’s first name line, and
•Name of the trustee on the recipient’s second name line.
Although handwritten forms will be accepted, the IRS prefers that filers type or machine printdata en-
tries. Also, filers should insert data in the middle of blockswell separated from other printing and guide-
lines, and take measures to guarantee clear, dark black, sharp images. Carbon copies and photocopies are
not acceptable.
2.2.2 Account You should use the account number box for an account number designation. This number must not ap-
Number Boxpear anywhere else on the form, and this box may not be used for any other item.
Showing the account number is optional. However, it may be to your benefit to include the recipient’s ac-
count number or designation on paper documents if your recordkeeping system uses, for identification
purposes, the account number or designation in conjunction with, or instead of, the name, social security
number, or employer identification number.
If you furnish the account number, the IRS will include it in future notices to you about backup withhold-
ing. If you use window envelopes and a reduced rate to mail statements to recipients, be sure the account
number does not appear in the window. Otherwise, the Postal Service may not accept them for mailing.
2.2.3 Specifications Machine-printed forms should be printed using a 6 lines/inch option, and should be printed in 10 pitch
and Restrictionspica (10 print positions per inch) or 12 pitch elite (12 print positions per inch). Proportional spaced
fonts are unacceptable.
Substitute forms prepared in continuous or strip form must be burst and stripped to conform to the size
specified for a single sheet before they are filed with the IRS. The size specified does not include pin-
feed holes.Pinfeed holes must notbe present on forms filed with the IRS.
November 5, 20014442001–45 I.R.B.

Do not:
•Use a felt tip marker. The machine used to “read” paper forms generally cannot read this ink type.
•Use dollar signs ($), ampersands (&), asterisks (*), commas (,), or other special characters in the
numbered money boxes.
Exception.Use decimal points to indicate dollars and cents (e.g., 2000.00 is acceptable).
•Fold Forms 1096, 1098, 1099, or5498mailed to the IRS. Mail these forms flat in an appropriately
sized envelope or box. Folded documents cannot be readily moved through the machine used in IRS
processing.
•Staple Forms 1096 to the transmitted returns. Any staple holes near the return code number may im-
pair the IRS’s ability to machine scan the type of documents.
•Type other information on Copy A.
•Cut or separate the individual forms on the sheet of forms of Copy A (except Forms W-2G).
2.2.4 Where To FileMail completed paper forms to the IRS service center shown in the Instructions for Form 1096and in
the 2001 General Instructions for Forms 1099, 1098, 5498, and W-2G.Specific information needed
to complete the forms mentioned in this revenue procedure are given in the specific form instructions. A
chart is included in the 2001 General Instructions for Forms 1099, 1098, 5498, and W-2G giving a quick
guide to which form must be filed to report a particular payment.
Part 3
Specifications for Substitute Form
W-2G (Filed With the IRS)
Section 3.1 - General
3.1.1 PurposeThe following specifications give the format requirements for substitute Form W-2G (Copy A only),
which is filed with the IRS.
A filer may use a substitute Form W-2G to file with the IRS (referred to as “substitute Copy A”).The
substitute form must be an exact replica of the official form with respect to layout and content.
Section 3.2 - Specifications for Copy A of Form W-2G
3.2.1 Substitute Form You must follow these specifications when printing substitute Copy A of the Form W-2G.
W-2G (Copy A)
ItemSubstitute Form W-2G (Copy A)
Paper Color and QualityPaper for Copy A must be white chemical wood bond, or equivalent,
20 pound (basis 17 x 22-500), plus or minus 5 percent. The paper must
consist substantially of bleached chemical wood pulp. It must be free
from unbleached or ground wood pulp or post-consumer recycled
paper. It also must be suitably sized to accept ink without feathering.
Ink Color and QualityAll printing must be in a high quality nongloss black ink.
TypographyThe type must be substantially identical in size and shape to the offi-
cial form. All rules on the document are either 1/2 point (.007 inch), 1
point (0.015 inch), or 3 point (0.045 inch). Vertical rules must be par-
allel to the left edge of the document, horizontal rules to the top edge.
DimensionsThe official form is 8 inches wide x 3 2/3 inches deep, exclusive of a
2/3 inch snap stub on the left side of the form. Any substitute Copy A
must be the same dimensions. The snap feature is not required on
substitutes. All margins must be free of print. The top and right mar-
gins must be 1/4 inch plus or minus .0313. If the top and right mar-
gins are properly aligned, the left margin for all forms will be correct.
If the substitute forms are in continuous or strip form, they must be
burst and stripped to conform to the size specified for a single form.
2001–45 I.R.B.445November 5, 2001

Hot Wax and Cold Hot wax and cold carbon spots are not permitted on any of the inter-
Carbon Spotsnal form plies. These spots are permitted on the back of a mailer top
envelope ply. Interleaved carbons, if used, should be black and of
good quality to avoid smudging.
Printer’s SymbolThe Government Printing Office (GPO) symbol must not be printed
on substitute Forms W-2G. Instead, the employer identification num-
ber (EIN) of the forms printer must be printed in the bottom margin
on the face of each individual Copy A on a sheet. The form must not
contain the statement “IRS approved” or any similar statement.
Catalog NumberThe Catalog Number (Cat. No.) shown on Form W-2G is
used for IRS distribution purposes and need not be printed on any
substitute forms
Part 4
Substitute Statements to Form Recipients and
Form Recipient Copies
Section 4.1 - Specifications
4.1.1 IntroductionIf you do not use the official IRS form to furnish statements to recipients, you must furnish an acceptable
substitute statement. To be acceptable, your substitute statement must comply with the rules in this sec-
tion. In general, see Regulations sections 1.6042–4, 1.6044–5, 1.6049–6, and 1.6050N–1 to determine
how certain statements must be provided to recipients (statement mailing requirements for most Forms
1099-DIVand 1099-INT,all Forms 1099-OIDand 1099-PATR,and Form 1099-MISCor 1099-Sfor
royalties).
Note: A trustee of a grantor-type trust may choose to file Forms 1099and furnish a statement to the
grantor under Regulations sections 1.671–4(b)(2)(iii) and (b)(3)(ii). The statement required by those
regulations is not subject to the requirements outlined in this section.
4.1.2 Substitute The rules in this section apply to Form 1099-INT(except for interest reportable under section 6041), 1099-
Statements toDIV(except for section 404(k) dividends), 1099-OID,and 1099-PATR only.You may furnish
Recipients forform recipients with Copy Bof the official Form 1099 or a substitute Form 1099 (form recipient state-
Certain Forms ment) if it contains the same language as the official IRS form (such as aggregate amounts paid to the
1099-INT and form recipient, any backup withholding, the name, address, and TIN of the person making the return, and
1099-DIV, and forany other information required by the official form). Except for state income tax withholding informa-
Forms 1099-OID tion, information not required by the official form should not be included on the substitute form.
and 1099-PATR
You may enter a total of the individual accounts listed on the form only if they have been paid by the
same payer. For example, if you are listing interest paid on several accounts by one financial institution
on Form 1099-INT, you may also enter the total interest amount. You may also enter a date next to the
corrected box if that box is checked.
A substitute form recipient statement for Forms 1099-INT, 1099-DIV, 1099-OID, or 1099-PATRmust
comply with the following requirements:
1.Box captions and numbers that are applicable must be clearly identified, using the same wording
and numbering as on the official form.
Note:For Form 1099-INT,if box 3 is not on your substitute form, you may drop “not included in
box 3” from the box 1 caption.
2.The form recipient statement must contain all applicable form recipient instructions provided on the
front and back of the official IRS form. Those instructions may be provided on a separate sheet of
paper.
3.The form recipient statement must contain the following in bold and conspicuous type:
This is important tax information and is being furnished to the Internal Revenue Service. If
you are required to file a return, a negligence penalty or other sanction may be imposed on you
if this income is taxable and the IRS determines that it has not been reported.
November 5, 20014462001–45 I.R.B.

4. The box caption “Federal income tax withheld”must be in boldface type on the form recipient
statement.
5.The form recipient statement must contain the Office of Management and Budget (OMB) number as
shown on the official IRS form. See Part 5.
6.The form recipient statement must contain the tax year (e.g., 2001), form number (e.g., Form 1099-
INT), and form name (e.g., Interest Income) of the official IRS Form 1099. This information must
be displayed prominently together in one area of the statement. For example, the tax year, form
number, and form name could be shown in the upper right part of the statement. Each copy must be
appropriately labeled (such as Copy B, For Recipient). See Section 4.4for applicable labels and
arrangement of assembly of forms.
Note:Do not include the words “Substitute for” or “In lieu of” on the form recipient statement.
7.Layout and format of the form is at the discretion of the filer. However, the IRS encourages the use
of boxes so that the statement has the appearance of a form and can be easily distinguished from
other nontax statements.
8.Each recipient statement of Forms 1099-DIV, 1099-INT, 1099-OID,and 1099-PATRmustinclude
the direct access telephone number of an individual who can answer questions about the statement.
Include that telephone number conspicuously anywhere on the recipient statement.
9.Until new regulations are issued, the IRS will not assess penalties for use of a logo (e.g., the name of
the payer in any typeface, font, or style, and/or a symbolic icon) or slogan on a recipient statement if
the logo or slogan is used by the payer in the ordinary course of its trade or business. In addition,
use of the logo or slogan must not make it less likely for a reasonable payee to recognize the impor-
tance of the statement for tax reporting purposes.
10.A mutual fund family may state separately on one document (e.g., one piece of paper) the dividend
income earned by a recipient from each fund within the family of funds as required by Form 1099-
DIV.However, each fund and its earnings must be stated separately. The form must contain an in-
struction to the recipient that each fund’s dividends and name, not the name of the mutual fund fam-
ily, must be reported on the recipient’s tax return. The form cannot contain an aggregate total of
all funds. In addition, a mutual fund family may furnish a single statement (as a single filer) for
Forms 1099-INT, 1099-DIV,and 1099-OIDinformation. Each fund and its earnings must be
stated separately. The form must contain an instruction to the recipient that each fund’s earnings and
name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The
form cannot contain an aggregate total of all funds
4.1.3 Substitute Statements to form recipients for Forms 1098, 1098-E, 1098-T, 1099-A, 1099-B, 1099-C, 1099-G,
Statements to 1099-LTC, 1099-MISC, 1099-MSA, 1099-R, 1099-S, 5498, 5498-MSA, W-2G, 1099-DIV(only for
Recipients forsection 404(k) dividends reportable under section 6047), and 1099-INT(only for interest of $600 or more
Certain Forms 1098,made in the course of a trade or business reportable under section 6041) can be copies of the official
1099, 5498,forms or an acceptable substitute. To be acceptable, a substitute form recipient statement must meet the
and W-2Gfollowing requirements.
1.The tax year, form number, and form name must be the same as the official form and must be dis-
played prominently together in one area on the statement. For example, they may be shown in the
upper right part of the statement.
2.The filer’s and the form recipient’s identifying information required on the official IRS form must
be included.
3.Each substitute recipient statement for Forms W-2G, 1098, 1098-E, 1098-T, 1099-A, 1099-B,
1099-DIV, 1099-G(excluding state and local income tax refunds), 1099-INT, 1099-LTC, 1099-
MISC(excluding fishing boat proceeds), 1099-OID, 1099-PATR,and 1099-Smustinclude the di-
rect access telephone number of an individual who can answer questions about the statement.Yo u
may include the telephone number conspicuously anywhere on the recipient statement. Al-
though not required, payers reporting on Forms 1099-C, 1099-MSA, 1099-R, 5498,and 5498-
MSAare encouraged to furnish telephone numbers.
4.All applicable money amounts and information, including box numbers, required to be reported to
the form recipient must be titled on the form recipient statement in substantially the same manner as
those on the official IRS form. The box caption“Federal income tax withheld” must be in bold-
face type on the form recipient statement.
Exception. If you are reporting a payment as “Other income” in box 3 of Form 1099-MISC,you
may substitute appropriate language for the box title. For example, for payments of accrued wages
and leave to a beneficiary of a deceased employee, you might change the title of box 3 to “Benefi-
ciary payments” or something similar.
2001–45 I.R.B.447November 5, 2001

November 5, 20014482001–45 I.R.B.
Note: You cannot make this change on Copy A.
5.You must provide appropriate instructions to the form recipient similar to those on the official IRS
form, to aid in the proper reporting on the form recipient’s income tax return. For payments re-
ported on Form 1099-B,the requirement to include instructions substantially similar to those on the
official IRS form may be satisfied by providing form recipients with a single set of instructions for
all Forms 1099-Bstatements required to be furnished in a calendar year.
Note: If Federal income tax is withheld and shown on Form 1099-Ror W-2G, Copy B and Copy C
must be furnished to the recipient. If Federal income tax is not withheld, only Copy C of Form
1099-Rand W-2Gmust be furnished. However, for Form 1099-R,instructions similar to those on
the back of the official Copy B and Copy C of Form 1099-Rmust be furnished to the recipient. For
convenience, you may choose to provide both Copies B and C of Form 1099-Rto the recipient.
6.If you use carbon to produce recipient statements, the quality of the carbon must meet the following
standards:
•All copies must beclearly legible,
•All copies must be able to be photocopied, and
•Fading must not diminish legibility and the ability to photocopy.
In general, black chemical transfer inks are preferred, but other colors are permitted if the above
standards are met. Hot wax and cold carbon spots are not permitted on any of the internal form
plies. The back of a mailer top envelope ply may contain these spots.
7.A mutual fund family may state separately on one document (e.g., one piece of paper) the Form
1099-Binformation for a recipient from each fund as required by Form 1099-B. However, the gross
proceeds, etc., from each transaction within a fund must be stated separately. The form must contain
an instruction to the recipient that each fund’s (not the mutual fund family’s) name and amount must
be reported on the recipient’s tax return. The form cannot contain an aggregate total of all funds.
8.You may use a Uniform Settlement Statement (under the Real Estate Settlement Procedures Act of
1974 (RESPA)) for Form 1099-S.The Uniform Settlement Statement is acceptable as the written
statement to the transferor if you include the legend for Form 1099-Sin Section 4.3.2and indicate
which information on the Uniform Settlement Statement is being reported to the IRS on Form
1099-S.
9.For reporting state income tax withholding and state payments, you may add an additional box(es)
to recipient copies as appropriate.
Note:You cannot make this change on Copy A.
10.On Copy C ofForm 1099-LTC,you may reverse the location of the policyholder’s and the in-
sured’s name, street address, city, state, and ZIP code for easier mailing.
11.Logos are permitted on substitute recipient statements for the forms listed in this section (Section
4.1.3).
Section 4.2 - Composite Statements
4.2.1 Composite A composite form recipient statement is permitted for reportable payments of interest, dividends, origi-
Substitute Statementsnal issue discount, patronage dividends, and royalties (Forms 1099-INT(except for interest reportable
for Certain Forms under section 6041), 1099-DIV(except for section 404(k) dividends), 1099-MISCor 1099-S (for roy-
1099-INT, 1099-DIV,alties only), 1099-OID,or 1099-PATR) when one payer is reporting more than one of these payments
1099-MISC, and 1099-S,during a calendar year to the same form recipient. Generally, do not include any other Form 1099
and for Forms 1099- information (e.g., 1098 or1099-A)on a composite statement with the information required on the
OID and 1099-PATRforms listed in the preceding sentence.
Exception. A filer may include Form 1099-Binformation on a composite form with the forms listed above.
Although the composite form recipient statement may be on one sheet, the format of the composite form
recipient statement must satisfy the following requirements in addition to the requirements listed earlier
in Section 4.1.2.
•All information pertaining to a particular type of payment must be located and blocked together on
the form and separate from any information covering other types of payments included on the form.
For example, if you are reporting interest and dividends, the Form1099-INTinformation must be
presented separately from the Form 1099-DIVinformation.
•The composite form recipient statement must prominently display the tax year, form number, and form
name of the official IRS form together in one area at the beginning of each appropriate block of information.

2001–45 I.R.B.449November 5, 2001
•Any information required by the official IRS forms that would otherwise be repeated in each infor-
mation block is required to be listed only once in the first information block on the composite form.
For example, there is no requirement to report the name of the filer in each information block. This
rule does not apply to any money amounts (e.g., Federal income tax withheld) or to any other infor-
mation that applies to money amounts.
•A composite statement is an acceptable substitute only if the type of payment and the recipient’s tax
obligation with respect to the payment are as clear as if each required statement were furnished sep-
arately on an official form.
4.2.2 Composite A composite form recipient statement for the forms specified in Section 4.1.3is permitted when one filer
Substitute Statementsis reporting more than one type of payment during a calendar year to the same form recipient. A compos-
to Recipients forite statement is not allowed for a combination of forms listed in Section 4.1.3and forms listed in Section
Forms Specified in 4.1.2.
Section 4.1.3
Exceptions. Form 1099-Binformation may be reported on a composite form with the forms specified in
Section 4.1.2as described in Section 4.2.1.In addition, royalties reported on Form 1099-MISCor
1099-Smay be reported on a composite form only with the forms specified in Section 4.1.2.
Although the composite form recipient statement may be on one sheet, the format of the composite form
recipient statement must satisfy the requirements listed in Section 4.2.1 as well as the requirements in
Section 4.1.3. A composite statement of Forms 1098 and1099-INT(for interest reportable under sec-
tion 6049) is notallowed.
Section 4.3 - Required Legends
4.3.1 Required LegendsForm 1098recipient statements (Copy B) must contain the following legends:
for Forms 1098• Form 1098
1.“The information in boxes 1, 2, and 3 is important tax information and is being furnished to the
Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanc-
tion may be imposed on you if the IRS determines that an underpayment of tax results because
you overstated a deduction for this mortgage interest or for these points or because you did not
report this refund of interest on your return.”
2. “Caution: The amount shown may not be fully deductible by you. Limits based on the loan
amount and the cost and value of the secured property may apply. Also, you may only deduct in-
terest to the extent it was incurred by you, actually paid by you, and not reimbursed by another
person.”
•Form 1098-E –“This is important tax information and is being furnished to the Internal Revenue
Service. If you are required to file a return, a negligence penalty or other sanction may be imposed
on you if the IRS determines that an underpayment of tax results because you overstated a deduction
for student loan interest.”
•Form 1098-T – “This is important tax information and is being furnished to the Internal Revenue
Service.”
4.3.2 Required Forms 1099 and W-2G recipient statements must contain the following legends:
Legends for Forms •Forms 1099-A and 1099-C – Copy B
1099 and W-2G“This is important tax information and is being furnished to the Internal Revenue Service. If you are re-
quired to file a return, a negligence penalty or other sanction may be imposed on you if taxable income
results from this transaction and the IRS determines that it has not been reported.”
•Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, and 1099-PATR – Copy
B
“This is important tax information and is being furnished to the Internal Revenue Service. If you are
required to file a return, a negligence penalty or other sanction may be imposed on you if this in-
come is taxable and the IRS determines that it has not been reported.”
•Form 1099-LTC –
Copy B – “This is important tax information and is being furnished to the Internal Revenue Service.
If you are required to file a return, a negligence penalty or other sanction may be imposed on you if
this item is required to be reported and the IRS determines that it has not been reported.”

November 5, 20014502001–45 I.R.B.
Copy C – “Copy C is provided to you for information only. Only the policyholder is required to re-
port this information on a tax return.”
•Form 1099-MSA – Copy B
“This information is being furnished to the Internal Revenue Service.”
•Form 1099-R –
Copy B – “Report this income on your Federal tax return. If this form shows Federal income tax
withheld in box 4, attach this copy to your return. This information is being furnished to the Internal
Revenue Service.”
Copy C – “This information is being furnished to the Internal Revenue Service.”
•Form 1099-S – Copy B
“This is important tax information and is being furnished to the Internal Revenue Service. If you are
required to file a return, a negligence penalty or other sanction may be imposed on you if this item is
required to be reported and the IRS determines that it has not been reported.”
•Form W-2G –
Copy B – “This information is being furnished to the Internal Revenue Service. Report this income
on your Federal tax return. If this form shows Federal income tax withheld in box 2, attach this
copy to your return.”
Copy C –“This is important tax information and is being furnished to the Internal Revenue Service.
If you are required to file a return, a negligence penalty or other sanction may be imposed on you if
this income is taxable and the IRS determines that it has not been reported.”
4.3.3 Required Form 5498 recipient statements (Copy B)must contain the following legends:
Legends for Forms •Form 5498 – “This information is being furnished to the Internal Revenue Service.”
5498Note: If you do not furnish another statement to the participant because no contributions were
made for the year, the statement of the fair market value of the account must contain this legend and
a designation of which information is being furnished to the IRS.
•Form 5498-MSA – “The information in boxes 1 through 6 is being furnished to the Internal Rev-
enue Service.”
Section 4.4 - Miscellaneous Instructions for Copies B, C, D, 1, and 2
4.4.1 CopiesCopies B, C,and in some cases, D, 1, and 2are included in the official assembly for the convenience of
the filer. You are not legally required to include all these copies with the privately printed substitute
forms. Furnishing Copies B and, in some cases, C will satisfy the legal requirement to provide state-
ments of information to form recipients.
Note: If an amount of Federal income tax withheld is shown on Form 1099-R orW-2G, Copy B(to be
attached to the tax return) and Copy Cmust be furnished to the recipient. Copy D (Forms 1099-R and
W-2G)may be used for filer records. Only Copy Ashould be filed with the IRS.
4.4.2 Arrangement Copy A (“For Internal Revenue Service Center”) of all forms must be on top. The rest of the assem-
of Assemblybly must be arranged, from top to bottom, as follows.
For:
•Form 1098—Copy B “For Payer”; Copy C “For Recipient.”
•Form 1098-E—Copy B “For Borrower”; Copy C “For Recipient.”
•Form 1098-T—Copy B “For Student”; Copy C “For Filer.”
•Form 1099-A—Copy B “For Borrower”; Copy C “For Lender.”
•Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-MSA, 1099-OID, and 1099-PATR—Copy B
“For Recipient”; Copy C “For Payer.”
•Form 1099-C—Copy B “For Debtor”; Copy C “For Creditor.”
•Form 1099-LTC—Copy B “For Policyholder”; Copy C “For Insured”; and Copy D “For Payer.”
•Form 1099-MISC—Copy 1 “For State Tax Department”; Copy B “For Recipient”; Copy 2 “To be
filed with recipient’s state income tax return, when required”; and Copy C “For Payer.”
•Form 1099-R—Copy 1 “For State, City, or Local Tax Department”; Copy B “Report this income on
your Federal tax return. If this form shows Federal income tax withheld in box 4, attach this copy to
your return”; Copy C “For Recipient’s Records”; Copy 2 “File this copy with your state, city, or
local income tax return, when required”; Copy D “For Payer.”

2001–45 I.R.B.451November 5, 2001
•Form 1099-S—Copy B “For Transferor”; Copy C “For Filer.”
•Form 5498—Copy B “For Participant”; Copy C “For Trustee or Issuer.”
•Form 5498-MSA—Copy B “For Participant”; Copy C “For Trustee.”
•Form W-2G—Copy 1 “For State Tax Department”; Copy B “Report this income on your Federal
tax return. If this form shows Federal income tax withheld in box 2, attach this copy to your return”;
Copy C “For Winner’s Records”; Copy 2 “Attach this copy to your state income tax return, if re-
quired.”; Copy D “For Payer.”
4.4.3 PerforationsPerforations are required between forms on all copies except Copy A to make separating the forms easier.
(Copy A of Form W-2G may be perforated.)
Part 5
Additional Instructions for Substitute
Forms 1098, 1099, 5498, W-2G, and 1042-S
Section 5.1 - Paper Substitutes for Form 1042-S
5.1.1 PaperPaper substitutes of Copy A for Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding,
Substitutes that totally conform to the specifications contained in this procedure may be privately printed without
prior approval from the Internal Revenue Service. Proposed substitutes not conforming to these specifi-
cations must be submitted for consideration.
Note: Copies B, C, D, and E of Form 1042-S may contain multiple income entries for the same recipient,
i.e. multiple rows of the top boxes 1-8 of the Form.
5.1.2 Time FrameThe request should be submitted by November 15 of the year prior to the year the form is to be used.
For Submission of This is to allow the Service adequate time to respond and the submitter adequate time to make any cor-
Form 1042-Srections. These requests should contain a copy of the proposed form, the need for the specific devia-
tion(s), and the number of information returns to be printed.
5.1.3 RevisionsForm 1042-S is subject to annual review and possible change. Withholding agents and form suppliers are
cautioned against overstocking supplies of the privately printed substitutes.
5.1.4 ObtainingCopies of the official form for the reporting year may be obtained from most Service offices. The Service
Copiesprovides only cut sheets (no carbon interleaves) of these forms. Continuous fan-fold/pinned forms are
not provided.
5.1.5 Instructions Instructions for withholding agents:
For Withholding
Agents•Only original copies may be filed with the Service. Carbon copies and reproductions are not accept-
able.
•The term “Recipient’s U.S. TIN” for an individual means the social security number (SSN) or IRS
individual taxpayer identification number (ITIN), consisting of nine digits separated by hyphens as
follows: 000–00–0000. For all other recipients, the term means employer identification number
(EIN) or qualified intermediary employer identification number (QI-EIN). The EIN and QI-EIN
consist of nine digits separated by a hyphen as follows: 00-0000000. The taxpayer identification
number (TIN) must be in one of these formats.
•Withholding agents are requested to type or machine print whenever possible, provide quality data
entries on the forms (that is, use black ribbon and insert data in the middle of blocks well separated
from other printing and guidelines), and take other measures to guarantee a clear, sharp image.
Withholding agents are not required, however, to acquire special equipment solely for the purpose of
preparing these forms.
•The “VOID,” “CORRECTED,” and “PRO-RATA BASIS REPORTING” boxes must be printed at
the top center of the form under the title and checked, if applicable.
•Substitute forms prepared in continuous or strip form must be burst and stripped to conform to the
size specified for a single form before they are filed with the Service. The dimensions are found
below. Computer cards are acceptable provided they meet all requirements regarding layout, con-
tent, and size.

November 5, 20014522001–45 I.R.B.
5.1.6 Substitute Form PropertySubstitute Form 1042-S Format Requirements
1042-S Format
RequirementsPrintingPrivately printed substitute Forms 1042-S must be exact replicas of
the official forms with respect to layout and content. Only the di-
mensions of the substitute form may differ. The Government Print-
ing Office (GPO) symbol must be deleted. The exact dimensions are
found below.
Box EntriesOnly one item of income may be represented on the copy submitted
to the Service (Copy A). Multiple income items may be used on
copies provided to recipients only. All boxes appearing on the offi-
cial form must be present on the substitute form, with appropriate
captions.
Color and Quality of InkAll printing must be in high quality non-gloss black ink. Bar codes
should be free from picks and voids.
TypographyType must be substantially identical in size and shape to correspond-
ing type on the official form. All rules on the document are either 1
point (0.0150) or 3 point (0.0450). Vertical rules must be parallel to
the left edge of the document; horizontal rules must be parallel to the
top edge.
CarbonsCarbonized forms or “spot carbons” are not permissible. Interleaved
carbons, if used, must be of good quality to preclude smudging and
should be black.
Assembly If all five parts are present, the parts of the assembly shall be
arranged from top to bottom as follows: Copy A (Original) “For In-
ternal Revenue Service,” Copies B, C, and D “For Recipient,” and
Copy E “For Withholding Agent.”
Color Quality of Paper• Paper For Copy A must be white chemical wood bond, or equiva-
lent, 20 pound (basis 17 x 22-500), plus or minus 5 percent; or offset
book paper, 50 pound (basis 25 x 38-500). No optical brighteners
may be added to the pulp or paper during manufacture. The paper
must consist of principally bleach chemical wood pulp or recycled
printed paper. It also must be suitably sized to accept ink without
feathering.
• Copies B, C, D (for Recipient), and E (For Withholding Agent) are
provided in the official assembly solely for the convenience of the
withholding agent. Withholding agents may choose the format, de-
sign, color, and quality of the paper used for these copies.
Dimensions• The official form is 8 inches wide x 5 1/2 inches deep, exclusive of
a 1/2 snap stub on the left side of the form. The snap feature is not
required on substitutes.
• The width of a substitute Copy A must be a minimum of 7 inches
and a maximum of 8 inches, although adherence to the size of the of-
ficial form is preferred. If the width of substitute Copy A is reduced
from that of the official form, the width of each field on the substitute
form must be reduced proportionately. The left margin must be 1/2
inch and free of all printing other than that shown on the official
form.
• The depth of a substitute Copy A must be a minimum of 5 1/6
inches and a maximum of 5 1/2 inches.
Other CopiesCopies B, C, and D must be furnished for the convenience of payees
who must send a copy of the form with other Federal and State re-
turns they file. Copy E may be used as a withholding agent’s
record/copy.

2001–45 I.R.B.453November 5, 2001
Section 5.2 - OMB Requirements for All Forms in This Revenue Procedure
5.2.1 OMB The Paperwork Reduction Act (the Act) of 1995 (Public Law 104–13) requires that:
Requirements•The OMB approves all IRS tax forms that are subject to the Act.
•Each IRS form contains (in or near the upper right corner) the OMB approval number, if any. (The
official OMB numbers may be found on the official IRS printed forms and are also shown on the
forms in the exhibits in Part 6.)
•Each IRS form (or its instructions) states:
1. Why the IRS needs the information,
2. How it will be used, and
3. Whether or not the information is required to be furnished to the IRS.
This information must be provided to any users of official or substitute IRS forms or instructions.
5.2.2 Substitute The OMB requirements for substitute IRS forms are:
Form Requirements•Any substitute form or substitute statement to a recipient must show the OMB number as it appears
on the official IRS form.
•For Copy A, the OMB number must appear exactly as shown on the official IRS form.
•For any copy other than Copy A, the OMB number must use one of the following formats.
1. OMB No. XXXX-XXXX (preferred) or
2. OMB # XXXX-XXXX (acceptable).
5.2.3 Required All substitute forms (Copy A only)must state “For Privacy Act and Paperwork Reduction Act Notice, see
Explanationthe 2001 General Instructions for Forms 1099, 1098, 5498, and W-2G.”(or “For Privacy Act and Pa-
to Usersperwork Reduction Act Notice, see separate instructions.” for Copy A of Form 1042-S).
If no instructions are provided to users of your forms, you must furnish them the exact text of the Privacy
Act and Paperwork Reduction Act Notice.
Section 5.3 - Reproducible Copies of Forms
5.3.1 IntroductionYou can order official IRS forms and information copies of Federal tax materials by calling the IRS Dis-
tribution Center at 1-800-829-3676. Other ways to get Federal tax material include:
•The Internet.
•CD-ROM.
•GPO Superintendent of Documents Bookstores.
Note:Several IRS forms are provided electronically on the IRS home page and on the Federal Tax
Forms CD-ROM, but Copy A of Forms 1096, the 1098series, 1099series, and 5498series cannot be
used for filing with the IRS when printed from a conventional printer. These forms contain drop-out ink
requirements as described in Part 2 of this publication.
5.3.2 InternetYou can download tax materials from the Internet.
You Can Access the Internet by...Using...
File Transfer Protocol (FTP)ftp.irs.gov
World Wide Webwww.irs.gov
5.3.3 IRS Federal The IRS also offers an alternative to downloading electronic files and provides current and prior-year ac-
Tax Forms CD-ROMcess to tax forms and instructions through its Federal Tax Forms CD-ROM. The CD will be available for
the upcoming filing season. Order Pub. 1796,IRS Federal Tax Products CD-ROM, by using the IRS’s
Internet Web Site at www.irs.gov/cdorders or by calling 1-877-CDFORMS (1-877-233-6767).
5.3.4 GPO Supt. of The Government Printing Office (GPO) Superintendent of Documents Bookstores also sell individual
Documents copies of tax forms, instructions, and publications.
Bookstores

November 5, 20014542001–45 I.R.B.
Section 5.4 - Effect on Other Revenue Procedures
5.4.1 Other RevenueRevenue Procedure 2000-28, 2000-27 I.R.B. 60, which provides rules and specifications for private print-
Proceduresing of 2000 substitute forms and statements to recipients, is superseded.
Part 6
Exhibits
Section 6.1 - Exhibits of Forms in the Revenue Procedure
6.1.1 Purpose Exhibits A through U illustrate some of the specifications that were discussed earlier in this revenue pro-
cedure. The dimensions apply to the actual size forms, but the exhibits have been reduced in size.
Generally, the illustrated dimensions apply to all like forms. For example, Exhibit B shows 11.000from
the top edge to the bottom edge of Form 1098 and .850between the bottom rule of the top form and the
top rule of the second form on the page. These dimensions apply to all forms that are printed three to a
page.
6.1.2 GuidelinesKeep in mind the following guidelines when printing substitute forms.
•Closely follow the specifications to avoid delays in processing the forms.
•Always use the specifications as outlined in this revenue procedure and illustrated in the exhibits.
•Do not add the text line “Do Not Cut or Separate Forms on This Page” to the bottom form. This will
cause inconsistency with the specifications.

2001–45 I.R.B.455November 5, 2001

November 5, 20014562001–45 I.R.B.

2001–45 I.R.B.457November 5, 2001

November 5, 20014582001–45 I.R.B.

2001–45 I.R.B.459November 5, 2001

November 5, 20014602001–45 I.R.B.

2001–45 I.R.B.461November 5, 2001

November 5, 20014622001–45 I.R.B.

2001–45 I.R.B.463November 5, 2001

November 5, 20014642001–45 I.R.B.

2001–45 I.R.B.465November 5, 2001

November 5, 20014662001–45 I.R.B.

2001–45 I.R.B.467November 5, 2001

November 5, 20014682001–45 I.R.B.

2001–45 I.R.B.469November 5, 2001

November 5, 20014702001–45 I.R.B.

2001–45 I.R.B.471November 5, 2001

November 5, 20014722001–45 I.R.B.

2001–45 I.R.B.473November 5, 2001

November 5, 20014742001–45 I.R.B.

2001–45 I.R.B.475November 5, 2001

November 5, 20014762001–45 I.R.B.
Notice of Proposed Rulemaking
and Notice of Public Hearing
Catch-Up Contributions for
Individuals Age 50 or Over
REG–142499–01
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY: This document contains
proposed regulations that would provide
guidance concerning the requirements for
retirement plans providing catch-up con-
tributions to individuals age 50 or older
pursuant to the provisions of section
414(v). These proposed regulations
would affect section 401(k) plans, section
408(p) SIMPLE IRA plans, section
408(k) simplified employee pensions,
section 403(b) tax-sheltered annuity con-
tracts, and section 457 eligible govern-
mental plans, and would affect partici-
pants eligible to make elective deferrals
under these plans or contracts. This docu-
ment also contains a notice of public hear-
ing on these proposed regulations.
DATES: Written and electronic comments
and requests to speak (with outlines of
oral comments) at a public hearing sched-
uled for February 21, 2002, must be re-
ceived by January 31, 2002.
ADDRESSES: Send submissions to:
CC:IT&A:RU (REG–142499–01), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand de-
livered Monday through Friday between
the hours of 8 a.m. and 5 p.m. to:
CC:IT&A:RU (REG–142499–01),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers
may submit comments electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or by sub-
mitting comments directly to the IRS In-
ternet site at http://www.irs.gov/tax_
regs/reglist.html. The public hearing will
be held in the IRS Auditorium (7th Floor),
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the regulations, R.
Lisa Mojiri-Azad or John T. Ricotta at
(202) 622-6060 (not a toll-free number);
concerning submissions and the hearing,
and/or to be placed on the building access
list to attend the hearing, Donna Poindex-
ter (202) 622-7180 (not a toll-free num-
ber).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed regu-
lations under section 414(v) of the Inter-
nal Revenue Code of 1986 (Code). Sec-
tion 414(v) was added by section 631 of
the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA)
(Public Law 107–16), enacted on June 7,
2001. Under section 414(v), an individ-
ual age 50 or over is permitted to make
additional elective deferrals (up to a dol-
lar limit provided in that section) under a
plan that otherwise permits elective defer-
rals if certain requirements provided
under that section are satisfied. Section
414(v) also provides that a plan will not
violate any provision of the Code by per-
mitting these additional elective deferrals
to be made.
Explanation of Provisions
These proposed regulations would im-
plement new section 414(v) by providing
that an employer plan is not treated as vi-
olating any provision of the Code solely
because the plan permits a catch-up eligi-
ble participant (as defined in these pro-
posed regulations) to make catch-up con-
tributions. Catch-up contributions
generally are elective deferrals made by a
catch-up eligible participant that exceed
an otherwise applicable limit and that are
treated as catch-up contributions under
the plan, but only to the extent they do not
exceed the maximum amount of catch-up
contributions permitted for the taxable
year. An employer is not required to pro-
vide for catch-up contributions in any of
its plans, even if the plans provide for
elective deferrals. If, however, any plan
of an employer provides for catch-up con-
tributions, all plans of the employer that
provide elective deferrals must comply
with the universal availability require-
ments described below.
A. Eligibility for Catch-up Contributions
Under these proposed regulations, a
participant is a catch-up eligible partici-
pant, and thus is permitted to make catch-
up contributions, if the participant is oth-
erwise eligible to make elective deferrals
under the plan and is age 50 or older. For
purposes of this rule, a participant who is
projected to attain age 50 before the end
of a calendar year is deemed to be age 50
as of January 1 of that year. The effect of
this rule is that all participants who will
attain age 50 during a calendar year are
treated the same beginning January 1 of
that year, without regard to whether the
participant survives to his or her 50
th
birthday or terminates employment dur-
ing the year and without regard to the em-
ployer’s choice of plan year.
A catch-up eligible participant can
make catch-up contributions under a sec-
tion 401(k) plan, a SIMPLE IRA plan as
defined in section 408(p), a simplified
employee pension as defined in section
408(k) (SEP), a plan or contract that satis-
fies the requirements of section 403(b), or
a section 457 eligible governmental plan,
as long as the participant can otherwise
make elective deferrals under the plan or
contract. For this purpose, elective defer-
rals include not only elective deferrals de-
fined in section 402(g)(3), but also any
contribution to a section 457 eligible gov-
ernmental plan.
B. Determination of Catch-up
Contribution
In describing section 631 of EGTRRA,
the Conference report states that “the oth-
erwise applicable dollar limit on elective
deferrals under a section 401(k) plan, sec-
tion 403(b) annuity, SEP, or SIMPLE, or
deferrals under a section 457 plan is in-
creased for individuals who have attained
age 50 by the end of the year.” Conf.
Rep. No. 107–84, at 236 (2001). The leg-
islative history to section 631 of
EGTRRA indicates that the intent of Con-
gress in enacting section 414(v) was to
allow a catch-up eligible participant to
make additional elective deferrals over
and above any otherwise applicable limit,
Part IV. Items of General Interest

2001–45 I.R.B.477November 5, 2001
up to the catch-up contribution limit for
the taxable year. The proposed regula-
tions would provide that elective deferrals
made by a catch-up eligible participant
are treated as catch-up contributions if
they exceed any otherwise applicable
limit, to the extent they do not exceed the
maximum dollar amount of catch-up con-
tributions permitted under section 414(v).
However, the regulations would not re-
quire that a participant have made elective
deferrals in excess of an otherwise applic-
able limit in order to be a catch-up eligi-
ble participant. A plan providing for
$1,000 of catch-up contributions in 2002
could allow a participant who is over age
50 to make elective deferrals in an
amount projected to exceed the otherwise
applicable limit by $1,000 at any time
during 2002.
Under the proposed regulations, catch-
up contributions would be determined by
reference to three types of limits: statu-
tory limits, employer-provided limits, and
the actual deferral percentage (ADP)
limit. A statutory limit is a limit con-
tained in the Code on elective deferrals or
annual additions permitted to be made
under the plan or contract (without regard
to section 414(v)). Statutory limits in-
clude the requirement under section
401(a)(30) that the plan limit all elective
deferrals within a calendar year under the
plan and other plans (or contracts) main-
tained by members of a controlled group
to the amount permitted under section
402(g).
An employer-provided limit is a limit
on the elective deferrals an employee can
make under the plan (without regard to
section 414(v)) that is contained in the
terms of the plan, but that is not a statu-
tory limit. For example, a limit on elec-
tive deferrals of highly compensated
employees to 10% of pay is an employer-
provided limit. The condition that an em-
ployer-provided limit be contained in the
terms of the plan is intended to corre-
spond with the requirements of §1.401–1
that a qualified plan have a definite writ-
ten program and provide for a definite
predetermined formula for allocating con-
tributions made to the plan.
For a section 401(k) plan that would
fail the ADP test of section 401(k)(3) if it
did not correct under section 401(k)(8),
the ADP limit is the highest dollar amount
of elective deferrals that may be retained
in the plan by a highly compensated em-
ployee after the application of section
401(k)(8)(C) (without regard to section
414(v)). For example, if after ADP test-
ing, elective deferrals by highly compen-
sated employees in excess of $8,000
would be required to be distributed or
recharacterized as employee contributions
under the statutory correction set forth
under section 401(k)(8)(C), then the ADP
limit is $8,000. Similar rules apply in the
case of a SEP.
The amount of elective deferrals in ex-
cess of an applicable limit is generally de-
termined as of the end of a plan year by
comparing the total elective deferrals for
the plan year with the applicable limit for
the plan year. For example, if a plan lim-
its elective deferrals to 10% of compensa-
tion, then whether the participant has
elective deferrals in excess of 10% of
compensation is determined at the end of
the plan year. Similarly, elective deferrals
in excess of the ADP limit are determined
as of the end of the plan year. For a limit
that is determined on the basis of a year
other than a plan year (such as the calen-
dar year limit on elective deferrals under
section 401(a)(30)), the determination of
whether elective deferrals are in excess of
the applicable limit is made on the basis
of such other year.
If a plan provides for separate em-
ployer-provided limits on separate por-
tions of compensation during the plan
year, the determination of the amount of
elective deferrals in excess of the em-
ployer-provided limit is still made on an
annual basis, with the applicable limit for
the year equal to the sum of the dollar
limits that apply to the separate portions
of compensation. This situation may
occur, for example, when the plan sets a
deferral percentage limit for each payroll
period.
If the plan limits elective deferrals for
separate portions of the plan year, then,
solely for purposes of determining the
amount that is in excess of an employer-
provided limit, the plan may provide, as
an alternative rule, that the applicable
limit for the plan year is the product of the
employee’s plan year compensation and
the time-weighted average of the deferral
percentage limits. For example, if a plan
using this time-weighted average limits
deferrals to 8 percent of compensation
during the first half of the year and 10
percent of compensation for the second
half of the year, the applicable limit will
be 9 percent of each employee’s plan year
compensation.
Under the proposed regulations, elec-
tive deferrals in excess of an applicable
limit would be treated as catch-up contri-
butions only to the extent that such elec-
tive deferrals do not exceed the catch-up
contribution limit for the taxable year re-
duced by elective deferrals previously
treated as catch-up contributions for the
taxable year. The catch-up contribution
limit for a taxable year is generally the ap-
plicable dollar catch-up limit for such tax-
able year, except that an elective deferral
will not be treated as a catch-up contribu-
tion to the extent that the elective deferral,
when added to all other elective deferrals
for the taxable year under all plans of the
employer, exceeds the participant’s com-
pensation (determined in accordance with
section 415(c)(3)).
These proposed regulations would in-
clude a timing rule for purposes of deter-
mining when elective deferrals in excess
of an applicable limit are treated as catch-
up contributions. This rule is necessary
because the maximum amount of catch-
up contributions is based on a partici-
pant’s taxable year, but the determination
of whether an elective deferral is in ex-
cess of an applicable limit is determined
on the basis of a taxable year, plan year,
or limitation year, depending on the un-
derlying limit. Under the proposed regu-
lations, whether these elective deferrals in
excess of an applicable limit can be
treated as catch-up contributions would
be determined as of the last day of the rel-
evant year, except that if the limit is deter-
mined on a taxable or calendar year basis,
then whether elective deferrals in excess
of the limit can be treated as catch-up
contributions would be determined at the
time they are deferred. This timing rule is
most significant for a plan with a plan
year that is not the calendar year. For ex-
ample, in a plan with a plan year ending
on June 30, 2005, elective deferrals in ex-
cess of the employer-provided limit or the
ADP limit for the plan year ending June
30, 2005, would be treated as catch-up
contributions as of the last day of the plan
year, up to the catch-up contribution limit
for 2005. Any amounts deferred after
June 30, 2005, that are in excess of the
section 401(a)(30) limit for the 2005 cal-

November 5, 20014782001–45 I.R.B.
endar year would also be treated as catch-
up contributions at the time they are de-
ferred, up to the catch-up contribution
limit for 2005 reduced by elective defer-
rals treated as catch-up contributions as of
June 30, 2005.
C. Treatment of Catch-up Contributions
If an elective deferral is treated as a
catch-up contribution, it is not subject to
otherwise applicable limits under the plan
and the plan will not be treated as failing
otherwise applicable nondiscrimination
requirements because of the making of
catch-up contributions. The proposed
regulations would provide guidance on
how catch-up contributions under the plan
are taken into account for purposes of
these various requirements under the
Code. Under the proposed regulations,
catch-up contributions would not be taken
into account in applying the limits of sec-
tion 401(a)(30), 401(k)(11), 402(h),
402A(c)(2), 403(b), 404(h), 408(k),
408(p), 415, or 457 to other contributions
or benefits under the plan offering catch-
up contributions or under any other plan
of the employer.
For purposes of ADP testing, the pro-
posed regulations would provide that any
elective deferral for the plan year that is
treated as a catch-up contribution because
it is in excess of a statutory limit or an
employer-provided limit is disregarded
for purposes of calculating the partici-
pant’s actual deferral ratio (i.e., catch-up
contributions are subtracted from the par-
ticipant’s elective deferrals for the plan
year prior to determining the participant’s
actual deferral ratio). This subtraction ap-
plies without regard to whether the catch-
up eligible participant is a highly com-
pensated employee or a nonhighly
compensated employee. If, after running
the ADP test, a plan needs to take correc-
tive action under section 401(k)(8), the
plan must determine the amount of elec-
tive deferrals that are catch-up contribu-
tions because they are in excess of the
ADP limit. The elective deferrals that are
treated as catch-up contributions must be
retained by the plan. The plan would not
be treated as failing section 401(k)(8) by
reason of this retention of catch-up contri-
butions. Excess contributions treated as
catch-up contributions would neverthe-
less be treated as excess contributions for
purposes of section 411(a)(3)(G). There-
fore, if the plan does not provide for
matching contributions on catch-up con-
tributions, any matching contributions re-
lated to excess contributions treated as
catch-up contributions can be forfeited.
The approach under the proposed regula-
tions would exclude those catch-up con-
tributions that can be identified before
ADP testing, and allow the plan to treat
elective deferrals as catch-up contribu-
tions for those participants who would be
limited under the plan (because the plan
otherwise would be required to distribute
some of their elective deferrals), while
minimizing changes to current plan ad-
ministration.
Catch-up contributions with respect to
the current plan year are not taken into ac-
count for purposes of section 416 or
410(b). However, catch-up contributions
made to the plan in prior years are taken
into account in determining whether a
plan is top-heavy under section 416, and
for purposes of average benefit percent-
age testing to the extent prior years’ con-
tributions are taken into account (i.e., if
accrued to date calculations are used).
A plan does not fail the requirements of
section 401(a)(4) merely because it per-
mits only catch-up eligible participants to
make catch-up contributions. Similarly, if
a plan applies a single matching formula
to elective deferrals whether or not they
are catch-up contributions, the matching
formula as applied to catch-up eligible
participants is not treated as a separate
benefit, right, or feature under
§1.401(a)(4)–4 from the matching for-
mula as applied to the other participants.
However, the matching contributions
under the matching formula must satisfy
the actual contribution percentage test
under section 401(m)(2) taking into ac-
count all matching contributions, includ-
ing matching contributions on catch-up
contributions.
D. Universal Availability
Under the proposed regulations, a plan
that offers catch-up contributions would
satisfy the requirements of section
401(a)(4) only if all catch-up eligible par-
ticipants are provided with the effective
opportunity to make the same dollar
amount of catch-up contributions. There-
fore, if an employer provides for catch-up
contributions under a section 401(k) plan,
all other employer plans in the controlled
group that provide for elective deferrals,
including plans not subject to section
401(a)(4), must provide catch-up eligible
participants with the same effective op-
portunity to make catch-up contributions.
This universal availability requirement
applies solely with respect to catch-up eli-
gible participants. Because the definition
of catch-up eligible participants requires
that the participant be eligible to make
elective deferrals under a plan without re-
gard to section 414(v), the universal
availability requirement will not require
plans that do not otherwise provide for
elective deferrals to provide for catch-up
contributions.
In order to provide catch-up eligible
participants with an effective opportunity
to make catch-up contributions, the plan
would have to permit each catch-up eligi-
ble participant to make sufficient elective
deferrals during the year so that the par-
ticipant has the opportunity to make elec-
tive deferrals up to the otherwise applica-
ble limit plus the catch-up contribution
limit. An effective opportunity could be
provided in several different ways. For
example, a plan that limits elective defer-
rals on a payroll-by-payroll basis might
also provide participants with an effective
opportunity to make catch-up contribu-
tions that is administered on a payroll-by-
payroll basis (i.e., by allowing catch-up
eligible participants to increase their de-
ferrals above the otherwise applicable
limit by a pro-rataportion of the catch-up
limit for the year). However, as discussed
above, whether these elective deferrals
are treated as catch-up contributions
would not be determined until the end of
the year.
A plan would not fail the universal
availability requirement solely because an
employer-provided limit did not apply to
all employees or different employer-pro-
vided limits apply to different groups of
employees. As under current law, a plan
could provide for different employer-pro-
vided limits for different groups of em-
ployees, as long as each limit satisfies the
nondiscriminatory availability require-
ments of §1.401(a)(4)–4 for benefits,
rights, and features. Thus, for example, a
plan could provide for an employer-pro-
vided limit that applies to highly compen-
sated employees, even though no em-
ployer-provided limit applies to
nonhighly compensated employees.

2001–45 I.R.B.479November 5, 2001
However, a plan is not permitted to pro-
vide lower employer-provided limits for
catch-up eligible participants.
The proposed regulations would pro-
vide several exceptions to this universal
availability requirement. First, the pro-
posed regulations would provide for coor-
dination between catch-up contributions
under section 414(v) and the provisions of
section 457(b)(3) in accordance with sec-
tion 414(v)(6)(C). The proposed regula-
tions would also provide transition rules
for collectively bargained employees and
newly-acquired plans.
E. Participants in Multiple Plans
As discussed in Section B above, the
intent of section 414(v) is to permit a
catch-up eligible participant to make elec-
tive deferrals in an amount equal to the
catch-up contribution limit for the year in
addition to the amount of elective defer-
rals that the participant would otherwise
have been allowed to defer under the plan
or plans in which the catch-up eligible
participant participated. Many of the
statutory limits that would otherwise limit
the participant’s elective deferrals are ap-
plied on an aggregated basis, for example,
across all plans within a controlled group.
Accordingly, the proposed regulations
would provide that, for purposes of deter-
mining whether elective deferrals are in
excess of a statutory limit, all elective de-
ferrals in excess of the statutory limit are
aggregated in the same manner as the un-
derlying limit and the aggregate amount
of elective deferrals treated as catch-up
contributions because they exceed the
statutory limit must not exceed the applic-
able dollar catch-up limit.
For example, compliance with section
401(a)(30) is determined based on elec-
tive deferrals under all section 401(k)
plans and all section 403(b) contracts
sponsored by the employer. Therefore, all
section 401(k) plans and section 403(b)
contracts in the controlled group of the
employer would be aggregated for pur-
poses of determining the total amount of
elective deferrals in excess of the section
401(a)(30) limit. The amount of elective
deferrals treated as catch-up contributions
by reason of exceeding the section
401(a)(30) limit under the aggregated
plans or contracts must not exceed the
dollar amount of the catch-up limit for the
taxable year.
In calculating the actual deferral ratio
(ADR) (as defined in §1.401(k)–1(g)) for
a highly compensated employee who par-
ticipates in more than one section 401(k)
plan of the employer during the year, all
section 401(k) plans are treated as one
section 401(k) plan. Consistent with this
approach, if a highly compensated em-
ployee participates in more than one sec-
tion 401(k) plan of an employer, in deter-
mining the elective deferrals in excess of
an employer-provided limit, the proposed
regulations would take into account the
elective deferrals and employer-provided
limits under all section 401(k) plans in
which the employee participates. In such
a case, the proposed regulations would
provide that in determining whether an
employee’s elective deferrals exceed an
employer-provided limit, the applicable
limit for the plan year is the sum of the
dollar amounts of the limits under the sep-
arate plans and the employee’s elective
deferrals under all these plans are com-
bined to determine if that aggregate em-
ployer-provided limit is exceeded.
When the elective deferrals in excess of
a statutory or employer-provided limit
would be determined based on more than
one plan, the aggregate amount of elec-
tive deferrals in excess of that limit made
under all section 401(k) plans of the em-
ployer in which a catch-up eligible partic-
ipant who is a highly compensated em-
ployee participates would be treated as
elective deferrals in excess of an applica-
ble limit under each of those section
401(k) plans. In the case of a highly com-
pensated employee, all elective deferrals
that exceed a statutory or employer-pro-
vided limit and are treated as catch-up
contributions under the section 401(k)
plans of the employer in which the catch-
up eligible participant participates are
subtracted from the participant’s elective
deferrals for purposes of determining the
participant’s ADR. However, if any of
the section 401(k) plans corrects through
distribution of excess contributions under
section 401(k)(8) in order to comply with
section 401(k)(3), only the catch-up con-
tributions made under that plan are per-
mitted to be subtracted from elective de-
ferrals for purposes of this correction.
When the elective deferrals in excess of
a statutory or employer-provided limit are
determined on an aggregated basis, it
must be determined under which plan the
elective deferrals in excess of the limit
were made. The plan under which the
elective deferrals in excess of the limit
were made may be determined in any
manner that is not inconsistent with the
manner in which such amounts were actu-
ally deferred under the plans. For exam-
ple, if a catch-up eligible participant par-
ticipates in a section 401(k) plan only
during the first 6 months of the year and
during the second 6 months of the year,
while participating in a section 403(b)
contract, the participant’s contributions
reach and exceed the section 401(a)(30)
limit for the year, then all elective defer-
rals in excess of the section 401(a)(30)
limit for the year could be treated as made
to the section 403(b) contract.
F. Excludability of Catch–up
Contributions
Catch-up contributions are generally
not treated as exceeding the applicable
dollar amount of section 402(g)(1). The
proposed regulations would also provide
that a catch-up eligible participant who
participates in multiple plans may treat an
elective deferral as a catch-up contribu-
tion (up to the maximum amount of catch-
up contributions permitted for the taxable
year) because it exceeds the catch-up eli-
gible participant’s section 402(g) limit for
the taxable year. This rule would allow a
catch-up eligible participant who partici-
pates in plans of two or more employers
an exclusion from gross income for elec-
tive deferrals that exceed the section
402(g) limit, even though the elective de-
ferrals do not exceed an applicable limit
for either employer’s plan. The treatment
by an individual of such elective deferrals
as catch-up contributions will not have
any impact on either employer’s plan.
This treatment is parallel to the treatment
of excess deferrals for an individual under
age 50 who exceeds the section 402(g)
limit in the plans of two unrelated em-
ployers. Accordingly, the proposed regu-
lations would not provide for the ADP test
to be rerun to disregard elective deferrals
that an individual treats as catch-up con-
tributions because they exceed the section
402(g) limit. However, the total amount
of elective deferrals in excess of the ap-
plicable dollar limit in section
402(g)(1)(B) that are not includible in in-
come because they are treated as catch-up
contributions cannot exceed that limit by

November 5, 20014802001–45 I.R.B.
more than the catch-up contribution limit
for the taxable year.
Proposed Effective Date
The regulations are proposed to apply
to contributions in taxable years begin-
ning on or after January 1, 2002. Taxpay-
ers may rely on these proposed regula-
tions for guidance pending the issuance of
final regulations. If, and to the extent, fu-
ture guidance is more restrictive than the
guidance in these proposed regulations,
the future guidance will be applied with-
out retroactive effect.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore a regula-
tory assessment is not required. It also
has been determined that section 553(b)
of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations, and because these regulations
do not impose a collection of information
on small entities, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Code, these proposed regulations will be
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administra-
tion for comment on its impact on small
business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any electronic or
written comments (preferably a signed
original and eight (8) copies) that are sub-
mitted timely to the IRS. In addition to
the other requests for comments set forth
in this document, the IRS and Treasury
also request comments on the clarity of
the proposed rule and how it may be made
easier to understand. All comments will
be available for public inspection and
copying.
A public hearing has been scheduled
for February 21, 2002, at 10 a.m. in the
IRS Auditorium (7th Floor), Internal Rev-
enue Building, 1111 Constitution Avenue
NW, Washington, DC. Due to building
security procedures, visitors must enter at
the 10
th
street entrance, located between
Constitution and Pennsylvania Avenues,
NW. In addition, all visitors must present
photo identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the immedi-
ate entrance area more than 15 minutes
before the hearing starts. For information
about having your name placed on the
building access list to attend the hearing,
see the “FOR FURTHER INFORMA-
TION CONTACT” section of this pream-
ble.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons who wish to present oral com-
ments at the hearing must submit written
comments and an outline of the topics to
be discussed and the time to be devoted to
each topic (signed original and eight (8)
copies) by January 31, 2002.
A period of 10 minutes will be allotted
to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal authors of these regula-
tions are R. Lisa Mojiri-Azad and John T.
Ricotta of the Office of the Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities). How-
ever, other personnel from the IRS and
Treasury participated in their develop-
ment.
* * * * *
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.414(v)–1 is added to
read as follows:
§1.414(v)–1 Catch-up contributions.
(a) Catch-up contributions—(1) Gen-
eral rule. An applicable employer plan
shall not be treated as failing to meet any
requirement of the Internal Revenue Code
solely because the plan permits a catch-up
eligible participant to make catch-up con-
tributions in accordance with section
414(v) and this section. With respect to
an applicable employer plan, catch-up
contributions are elective deferrals made
by a catch-up eligible participant that ex-
ceed any of the applicable limits set forth
in paragraph (b) of this section and that
are treated under the applicable employer
plan as catch-up contributions, but only to
the extent they do not exceed the catch-up
contribution limit described in paragraph
(c) of this section (determined in accor-
dance with the special rules for employers
that maintain multiple applicable em-
ployer plans in paragraph (f) of this sec-
tion, if applicable). The definitions in
paragraphs (a)(2) through (5) of this sec-
tion apply for purposes of this section.
(2) Applicable employer plan. The
term applicable employer plan means a
section 401(k) plan, a SIMPLE IRA plan
as defined in section 408(p), a simplified
employee pension plan as defined in sec-
tion 408(k) (SEP), a plan or contract that
satisfies the requirements of section
403(b), or a section 457 eligible govern-
mental plan.
(3) Elective deferral. The term elective
deferral means an elective deferral within
the meaning of section 402(g)(3) or any
contribution to a section 457 eligible gov-
ernmental plan.
(4) Catch-up eligible participant—(i)
General rule. The term catch-up eligible
participant means an employee who—
(A) Is eligible to make elective defer-
rals during the plan year under an applica-
ble employer plan (without regard to sec-
tion 414(v) or this section); and
(B) Is age 50 or older.
(ii) Projection of age 50.For purposes
of paragraph (a)(4)(i)(B) of this section, a
participant who is projected to attain age
50 before the end of a calendar year is
deemed to be age 50 as of January 1 of
such year.
(5) Other definitions. (i) The terms
employer, employee, section 401(k) plan,
and highly compensated employee have
the meanings provided in §1.410(b)–9.
(ii) The term section 457 eligible gov-
ernmental plan means an eligible deferred
compensation plan described in section
457(b) that is established and maintained
by an eligible employer described in sec-
tion 457(e)(1)(A).
(b) Elective deferrals that exceed an
applicable limit—(1)Applicable limits.
An applicable limit for purposes of deter-

mining catch-up contributions for a catch-
up eligible participant is any of the fol-
lowing:
(i) Statutory limit.A statutory limit is a
limit on elective deferrals or annual addi-
tions permitted to be made (without re-
gard to section 414(v) and this section)
with respect to an employee for a year
provided in section 401(a)(30), 402(h),
403(b)(1)(E), 404(h), 408(k), 408(p), 415,
or 457, as applicable.
(ii) Employer-provided limit. An em-
ployer-provided limit is any limit on the
elective deferrals an employee is permit-
ted to make (without regard to section
414(v) and this section) that is contained
in the terms of the plan, but which is not
required under the Internal Revenue
Code. Thus, for example, a plan provi-
sion that limits highly compensated em-
ployees to a deferral percentage of 10% of
compensation is an employer-provided
limit that is an applicable limit with re-
spect to the highly compensated employ-
ees.
(iii) Actual deferral percentage (ADP)
limit.In the case of a section 401(k) plan
that would fail the ADP test of section
401(k)(3) if it did not correct under sec-
tion 401(k)(8), the ADP limit is the high-
est amount of elective deferrals that can
be retained in the plan by a highly com-
pensated employee under the rules of sec-
tion 401(k)(8)(C). In the case of a SEP
with a salary reduction arrangement
(within the meaning of section 408(k)(6))
that would fail the requirements of section
408(k)(6)(A)(iii) if it did not correct in ac-
cordance with section 408(k)(6)(C), the
ADP limit is the highest amount of elec-
tive deferrals that can be made by a highly
compensated employee under the rules of
section 408(k)(6).
(2) Contributions in excess of applica-
ble limit—(i) Plan year limits. Except as
provided in paragraph (b)(2)(ii) of this
section, the amount of elective deferrals
in excess of an applicable limit is deter-
mined as of the end of the plan year by
comparing the total elective deferrals for
the plan year with the applicable limit for
the plan year. In the case of a plan that
provides for separate employer-provided
limits on elective deferrals for separate
portions of plan compensation within the
plan year, the applicable limit for the plan
year is the sum of the dollar amounts of
the limits for the separate portions. This
plan provision may occur, for example,
when the plan sets a deferral percentage
limit for each payroll period. If the plan
limits elective deferrals for separate por-
tions of the plan year, then, solely for pur-
poses of determining the amount that is in
excess of an employer-provided limit, the
plan may provide, as an alternative rule,
that the applicable limit for the plan year
is the product of the employee’s plan year
compensation and the time-weighted av-
erage of the deferral percentage limits.
Thus, for example, if a plan that provides
for use of a time-weighted average limits
deferrals to 8 percent of compensation
during the first half of the plan year and
10 percent of compensation for the sec-
ond half of the plan year, the applicable
limit is 9 percent of each employee’s plan
year compensation.
(ii) Other year limit.In the case of an
applicable limit which is applied on the
basis of a year other than the plan year
(e.g., the calendar year limit on elective
deferrals under section 401(a)(30)), the
determination of whether elective defer-
rals are in excess of the applicable limit is
made on the basis of such other year.
(c) Catch-up contribution limit—(1)
General rule. Elective deferrals with re-
spect to a catch-up eligible participant in
excess of an applicable limit under para-
graph (b) of this section are treated as
catch-up contributions under this section
as of a date within a taxable year only to
the extent that such elective deferrals do
not exceed the catch-up contribution limit
described in this paragraph (c), reduced
by elective deferrals previously treated as
catch-up contributions for the taxable
year, determined in accordance with para-
graph (c)(3) of this section. The catch-up
contribution limit for a taxable year is
generally the applicable dollar catch-up
limit for such taxable year, as set forth in
paragraph (c)(2) of this section. How-
ever, an elective deferral is not treated as
a catch-up contribution to the extent that
the elective deferral, when added to all
other elective deferrals for the taxable
year under any applicable employer plan
of the employer, exceeds the participant’s
compensation (determined in accordance
with section 415(c)(3)) for the taxable
year.
(2) Applicable dollar catch-up limit—
(i) In general. The applicable dollar
catch-up limit for an applicable employer
plan, other than an applicable employer
plan described in section 401(k)(11) or a
SIMPLE IRA plan as defined in section
408(p), is determined under the following
table:
For Taxable Years Applicable Dollar
Beginning inCatch-up Limit
2002$1,000
2003$2,000
2004$3,000
2005$4,000
2006$5,000
(ii) SIMPLE plan. The applicable dol-
lar catch-up limit for an applicable em-
ployer plan described in section
401(k)(11) or a SIMPLE IRA plan as de-
fined in section 408(p) is determined
under the following table:
For Taxable Years Applicable Dollar
Beginning inCatch-up Limit
2002$ 500
2003$1,000
2004$1,500
2005$2,000
2006$2,500
(iii) Cost of living adjustments.For
taxable years after 2006, the applicable
dollar catch-up limit is the applicable dol-
lar catch-up limit for 2006 described in
paragraph (c)(2)(i) or (ii) of this section
increased at the same time and in the
same manner as adjustments under sec-
tion 415(d), except that the base period
shall be the calendar quarter beginning
July 1, 2005, and any increase that is not a
multiple of $500 shall be rounded to the
next lower multiple of $500.
(3) Timing rules. For purposes of de-
termining the maximum amount of per-
mitted catch-up contributions for a catch-
up eligible participant during a taxable
year, the determination of whether an
elective deferral is a catch-up contribution
is made as of the last day of the plan year
(or in the case of section 415, as of the
last day of the limitation year), except
that, with respect to elective deferrals in
excess of an applicable limit that is tested
on the basis of the taxable year or calen-
2001–45 I.R.B.481November 5, 2001

dar year (e.g., the section 401(a)(30) limit
on elective deferrals), the determination
of whether such elective deferrals are
treated as catch-up contributions is made
at the time they are deferred.
(d) Treatment of catch-up contribu-
tions—(1) Contributions not taken into
account for certain limits. Catch-up
contributions shall not be taken into ac-
count in applying the limits of sec-
tion 401(a)(30), 401(k)(11), 402(h),
402A(c)(2), 403(b), 404(h), 408(k),
408(p), 415, or 457 to other contributions
or benefits under an applicable employer
plan or any other plan of the employer.
(2) Contributions not taken into ac-
count for certain nondiscrimination
tests—(i)Application of ADP test.Elec-
tive deferrals that are treated as catch-up
contributions with respect to a section
401(k) plan because they exceed a statu-
tory or employer-provided limit described
in paragraph (b)(1)(i) or (ii) of this sec-
tion, respectively, are subtracted from the
catch-up eligible participant’s elective de-
ferrals for the plan year for purposes of
determining the actual deferral ratio
(ADR) (as defined in §1.401(k)–1(g)) of a
catch-up eligible participant. Similarly,
elective deferrals that are treated as catch-
up contributions with respect to a SEP be-
cause they exceed a statutory or em-
ployer-provided limit described in
paragraph (b)(1)(i) or (ii) of this section,
respectively, are subtracted from the
catch-up eligible participant’s elective de-
ferrals for the plan year for purposes of
determining the deferral percentage under
section 408(k)(6)(D) of a catch-up eligi-
ble participant.
(ii) Adjustment of elective deferrals for
correction purposes.For purposes of the
correction of excess contributions in ac-
cordance with section 401(k)(8)(C), elec-
tive deferrals under the plan treated as
catch-up contributions for the plan year
are subtracted from the catch-up eligible
participant’s elective deferrals under the
plan for the plan year.
(iii) Excess contributions treated as
catch-up contributions.A section 401(k)
plan that satisfies the ADP test of section
401(k)(3) through correction under sec-
tion 401(k)(8) must retain any elective de-
ferrals that are treated as catch-up contri-
butions pursuant to paragraph (c) of this
section because they exceed the ADP
limit in paragraph (b)(1)(iii) of this sec-
tion. In addition, a section 401(k) plan is
not treated as failing to satisfy section
401(k)(8) merely because elective defer-
rals described in the preceding sentence
are not distributed or recharacterized as
employee contributions. Similarly, a SEP
is not treated as failing to satisfy section
408(k)(6)(A)(iii) merely because catch-up
contributions are not treated as excess
contributions with respect to a catch-up
eligible participant under the rules of sec-
tion 408(k)(6)(C). Notwithstanding the
fact that elective deferrals described in
this paragraph (d)(2)(iii) are not distrib-
uted, such elective deferrals are still con-
sidered to be excess contributions under
section 401(k)(8), and accordingly,
matching contributions with respect to
such elective deferrals may be forfeited
under the rules of section 411(a)(3)(G).
(iv) Application for top-heavy. Catch-
up contributions with respect to the cur-
rent plan year are not taken into account
for purposes of section 416. Thus, if the
only contributions made for a plan year
for key employees are catch-up contribu-
tions, the applicable percentage under
section 416(c)(2) is 0%, and no top-heavy
minimum contribution under section 416
is required for the year. However, catch-
up contributions for prior years are taken
into account for purposes of section 416.
Thus, catch-up contributions for prior
years are included in the account balances
that are used in determining whether the
plan is top-heavy under section 416(g).
(v)Application for section 410(b).
Catch-up contributions with respect to the
current plan year are not taken into ac-
count for purposes of section 410(b).
Thus, catch-up contributions are not taken
into account in determining the average
benefit percentage under §1.410(b)–5 for
the year if benefit percentages are deter-
mined based on current year contribu-
tions. However, catch-up contributions
for prior years are taken into account for
purposes of section 410(b). Thus, catch-
up contributions for prior years would be
included in the account balances that are
used in determining the average benefit
percentage if allocations for prior years
are taken into account.
(3) Availability of catch-up contribu-
tions. An applicable employer plan does
not violate §1.401(a)(4)–4 merely be-
cause the group of employees for whom
catch-up contributions are currently avail-
able (i.e., the catch-up eligible partici-
pants) is not a group of employees that
would satisfy section 410(b) (without re-
gard to §1.410(b)–5). In addition, a
catch-up eligible participant is not treated
as having a right to a different rate of allo-
cation of matching contributions merely
because an otherwise nondiscriminatory
schedule of matching rates is applied to
elective deferrals that include catch-up
contributions. The rules in this paragraph
(d)(3) also apply for purposes of satisfy-
ing the requirements of section
403(b)(12).
(e) Universal availability requir-
ement—(1) General rule. An applicable
employer plan that offers catch-up contri-
butions and that is otherwise subject to
section 401(a)(4) (including a plan that is
subject to section 401(a)(4) pursuant to
section 403(b)(12)) will not satisfy the re-
quirements of section 401(a)(4) unless all
catch-up eligible participants who partici-
pate under any applicable employer plan
maintained by the employer are provided
with the effective opportunity to make the
same dollar amount of catch-up contribu-
tions. A plan does not fail to satisfy this
effective opportunity requirement merely
because the plan allows participants to
defer an amount equal to a specified per-
centage of compensation for each payroll
period and for each payroll period permits
each catch-up eligible participant to defer
a pro-ratashare of the applicable dollar
catch-up limit in addition to that amount.
A plan does not fail the universal avail-
ability requirement of this paragraph (e)
solely because an employer-provided
limit does not apply to all employees or
different limits apply to different groups
of employees under paragraph (b)(2)(i) of
this section. However, a plan may not
provide lower employer-provided limits
for catch-up eligible participants.
(2) Exception for section 457 eligible
governmental plans. An applicable em-
ployer plan does not fail to comply with
the universal availability requirement of
this paragraph (e) merely because another
applicable employer plan that is a section
457 eligible governmental plan does not
provide for catch-up contributions to the
extent set forth in section 414(v)(6)(C).
(3) Exception for newly acquired plans.
An applicable employer plan does not fail
to comply with the universal availability
requirement of this paragraph (e) merely
November 5, 20014822001–45 I.R.B.

because another applicable employer plan
does not provide for catch-up contribu-
tions, if—
(i) The other applicable employer plan
becomes maintained by the employer by
reason of a merger, acquisition or similar
transaction described in §1.410(b)–2(f);
and
(ii) The other applicable employer plan
is amended to provide for catch-up contri-
butions as soon as practicable, but no later
than by the end of the period described in
section 410(b)(6)(C).
(f) Special rules for an employer that
sponsors multiple plans—(1) General
rule.If elective deferrals under more than
one applicable employer plan of an em-
ployer are aggregated for purposes of ap-
plying a statutory limit under paragraph
(b)(1)(i) of this section, then the aggre-
gate elective deferrals treated as catch-up
contributions by reason of exceeding that
statutory limit under all such applicable
employer plans must not exceed the ap-
plicable dollar catch-up limit for the tax-
able year. For example, since compliance
with section 401(a)(30) is determined
based on elective deferrals under section
401(k) plans and section 403(b) contracts
sponsored by the employer, the total
amount of elective deferrals under all sec-
tion 401(k) plans and section 403(b) con-
tracts of the employer treated as catch-up
contributions by reason of exceeding the
section 401(a)(30) limit for a calendar
year under the aggregated plans must not
exceed the applicable dollar catch-up
limit for such taxable year.
(2) Highly compensated employee in
more that one section 401(k) plan. If a
highly compensated employee is a partici-
pant in more than one section 401(k) plan
of an employer, in determining whether
the employee’s elective deferrals exceed
an employer-provided limit under para-
graph (b)(1)(ii) of this section, the em-
ployer-provided limit for the plan year is
the sum of the dollar amounts of the limits
under the separate plans for that employee
and the employee’s elective deferrals
under all section 401(k) plans of the em-
ployer are combined to determine if the
employer-provided limit is exceeded.
(3) Allocation rules. When the amount
of elective deferrals in excess of an ap-
plicable limit under paragraph (b)(1) of
this section is determined under the ag-
gregation rules of paragraph (f)(1) or
(f)(2) of this section, the aggregate
amount of the elective deferrals in excess
of that applicable limit made under all
section 401(k) plans that are aggregated
for purposes of determining a highly com-
pensated employee’s ADR are treated as
elective deferrals in excess of an applica-
ble limit for purposes of applying the
catch-up contribution limit under para-
graph (c)(1) of this section with respect to
each of these section 401(k) plans. How-
ever, the catch-up contributions are sub-
tracted from elective deferrals for pur-
poses of paragraph (d)(2)(ii) of this
section only under the applicable em-
ployer plan under which the catch-up con-
tributions are made. The applicable em-
ployer plan under which the elective
deferrals in excess of an applicable limit
are made for purposes of this paragraph
(f)(3) may be determined in any manner
that is not inconsistent with the manner in
which such amounts were actually de-
ferred under the plans.
(g) Application of section 402(g)—(1)
Exclusion of catch-up contributions. In
determining the amount of elective defer-
rals that are includible in gross income
under section 402(g), except as provided
in paragraph (g)(2) of this section, catch-
up contributions are not treated as exceed-
ing the applicable dollar amount of sec-
tion 402(g)(1). For purposes of this
paragraph (g), a catch-up eligible partici-
pant who makes elective deferrals under
applicable employer plans of two or more
employers that exceed the applicable dol-
lar amount under section 402(g)(1) may
treat the elective deferrals in excess of
that applicable dollar amount as a catch-
up contribution to the extent permitted in
paragraph (g)(2) of this section, even
though the elective deferrals do not ex-
ceed an applicable limit under either plan.
Therefore, for a catch-up eligible partici-
pant who makes elective deferrals under
applicable employer plans of two or more
employers that exceed the applicable dol-
lar amount under section 402(g)(1), the
elective deferrals in excess of that applic-
able dollar amount are excludable from
gross income as catch-up contributions to
the extent permitted in paragraph (g)(2) of
this section. Whether an elective deferral
is treated as a catch-up contribution by an
applicable employer plan is determined
under paragraph (c) of this section and
without regard to whether the employee
treats an elective deferral as a catch-up
contribution under this paragraph (g).
(2) Maximum excludable amount. If a
catch-up eligible participant participates
in two or more applicable employer plans
during a taxable year, the total amount of
elective deferrals under all plans that are
not includible in gross income under this
paragraph (g) because they are catch-up
contributions shall not exceed the applica-
ble dollar catch-up limit under paragraph
(c)(2)(i) of this section for the taxable
year.
(h) Coordination with other catch-up
provisions—(1) Coordination with sec-
tion 457(b)(3).In the case of an applica-
ble employer plan that is a section 457 el-
igible governmental plan, the catch-up
contributions permitted under this section
shall not apply to a catch-up eligible par-
ticipant for any taxable year for which the
additional contributions permitted under
section 457(b)(3) applies to such partici-
pant. For additional guidance, see regula-
tions under section 457.
(2) Coordination with section 402
(g)(7). [Reserved].
(i) Examples. The following examples
illustrate the application of this section.
For purposes of these examples, the limit
under section 401(a)(30) is $15,000 and
the applicable dollar catch-up limit is
$5,000 and, except as specifically pro-
vided, the plan year is the calendar year.
In addition, it is assumed that the partici-
pant’s elective deferrals under all plans of
the employer do not exceed the partici-
pant’s section 415(c)(3) compensation
and that any correction pursuant to sec-
tion 401(k)(8) is made through distribu-
tion of excess contributions. The exam-
ples are as follows:
Example 1. (i) Participant A is eligible to make
elective deferrals under a section 401(k) plan, Plan
P. Plan P does not limit elective deferrals except as
necessary to comply with sections 401(a)(30) and
415. In 2006, Participant A is 55 years old. Plan P
also provides that a catch-up eligible participant is
permitted to defer amounts in excess of the section
401(a)(30) limit up to the applicable dollar catch-up
limit for the year. Participant A defers $18,000 dur-
ing 2006.
(ii) Participant A’s elective deferrals in excess of
the section 401(a)(30) limit ($3,000) do not exceed
the applicable dollar catch-up limit for 2006
($5,000). Under paragraph (a)(1) of this section, the
$3,000 is a catch-up contribution and, pursuant to
paragraph (d)(2)(i) of this section, it is not taken into
account in determining Participant A’s ADR for pur-
poses of section 401(k)(3).
Example 2. (i) Participants B and C, who are
highly compensated employees earning $120,000,
2001–45 I.R.B.483November 5, 2001

are eligible to make elective deferrals under a sec-
tion 401(k) plan, Plan Q. Plan Q limits elective de-
ferrals as necessary to comply with section
401(a)(30) and 415, and also provides that no highly
compensated employee may make an elective defer-
ral at a rate that exceeds 10% of compensation.
However, Plan Q also provides that a catch-up eligi-
ble participant is permitted to defer amounts in ex-
cess of 10% during the plan year up to the applicable
dollar catch-up limit for the year. In 2006, Partici-
pants B and C are both 55 years old and, pursuant to
the catch-up provision in Plan Q, both elect to defer
10% of compensation plus a pro-rataportion of the
$5,000 applicable dollar catch-up limit for 2006.
Participant B continues this election in effect for the
entire year, for a total elective contribution for the
year of $17,000. However, in July 2006, after defer-
ring $8,500, Participant C discontinues making elec-
tive deferrals.
(ii) Once Participant B’s elective deferrals for the
year exceed the section 401(a)(30) limit ($15,000),
subsequent elective deferrals are treated as catch-up
contributions as they are deferred, provided that
such elective deferrals do not exceed the catch-up
contribution limit for the taxable year. Since the
$2,000 in elective deferrals made after Participant B
reaches the section 402(g) limit for the calendar year
does not exceed the applicable dollar catch-up limit
for 2006, the entire $2,000 is treated as a catch-up
contribution.
(iii) As of the last day of the plan year, Participant
B has exceeded the employer-provided limit of 10%
(10% of $120,000 or $12,000 for Participant B) by
an additional $3,000. Since the additional $3,000 in
elective deferrals does not exceed the $5,000 applic-
able dollar catch-up limit for 2006, reduced by the
$2,000 in elective deferrals previously treated as
catch-up contributions, the entire $3,000 of elective
deferrals is treated as a catch-up contribution.
(iv) In determining Participant B’s ADR, the
$5,000 of catch-up contributions are subtracted from
Participant B’s elective deferrals for the plan year
under paragraph (d)(2)(i) of this section. Accord-
ingly, Participant B’s ADR is 10% ($12,000 /
$120,000). In addition, for purposes of applying the
rules of section 401(k)(8), Participant B is treated as
having elective deferrals of $12,000.
(v) Participant C’s elective deferrals for the year
do not exceed an applicable limit for the plan year.
Accordingly, Participant C’s $8,500 of elective de-
ferrals must be taken into account in determining
Participant C’s ADR for purposes of section
401(k)(3).
Example 3. (i) The facts are the same as in Exam-
ple 2,except that Plan Q is amended to change the
maximum permitted deferral percentage for highly
compensated employees to 7%, effective for defer-
rals after April 1, 2006. Participant B, who has
earned $40,000 in the first 3 months of the year and
has been deferring at a rate of 10% of compensation
plus a pro-rataportion of the $5,000 applicable dol-
lar catch-up limit for 2006, reduces the 10% of pay
deferral rate to 7% for the remaining 9 months of the
year (while continuing to defer a pro-rataportion of
the $5,000 applicable dollar catch-up limit for 2006).
During those 9 months, Participant B earns $80,000.
Thus, Participant B’s total elective deferrals for the
year are $14,600 ($4,000 for the first 3 months of the
year plus $5,600 for the last 9 months of the year
plus an additional $5,000 throughout the year).
(ii) The employer-provided limit for Participant
B for the plan year is $9,600 ($4,000 for the first 3
months of the year, plus $5,600 for the last 9 months
of the year). Accordingly, Participant B’s elective
deferrals for the year that are in excess of the em-
ployer-provided limit are $5,000 (the excess of
$14,600 over $9,600), which does not exceed the ap-
plicable dollar catch-up limit of $5,000.
(iii) Alternatively, Plan Q may provide that the
employer-provided limit is determined as the time-
weighted average of the different deferral percent-
age limits over the course of the year. In this case,
the time-weighted average limit is 7.75% for all par-
ticipants, and the applicable limit for Participant B is
7.75% of $120,000, or $9,300. Accordingly, Partici-
pant B’s elective deferrals for the year that are in ex-
cess of the employer-provided limit are $5,300 (the
excess of $14,600 over $9,300). Since the amount
of Participant B’s elective deferrals in excess of the
employer-provided limit ($5,300) exceeds the ap-
plicable dollar catch-up limit for the taxable year,
only $5,000 of Participant B’s elective deferrals may
be treated as catch-up contributions. In determining
Participant B’s actual deferral ratio, the $5,000 of
catch-up contributions are subtracted from Partici-
pant B’s elective deferrals for the plan year under
paragraph (d)(2)(i) of this section. Accordingly, Par-
ticipant B’s actual deferral ratio is 8% ($9,600 /
$120,000). In addition, for purposes of applying the
rules of section 401(k)(8), Participant B is treated as
having elective deferrals of $9,600.
Example 4. (i) The facts are the same as in Ex-
ample 1. In addition to Participant A, Participant D
is a highly compensated employee who is eligible to
make elective deferrals under Plan P. During 2006,
Participant D, who is 60 years old, elects to defer
$14,000.
(ii) The ADP test is run for Plan P (after exclud-
ing the $3,000 in catch-up contributions from Partic-
ipant A’s elective deferrals), but Plan P needs to take
corrective action in order to pass the ADP test. After
applying the rules of section 401(k)(8)(C) to allocate
the total excess contributions determined under sec-
tion 401(k)(8)(B), the maximum deferrals which
may be retained by any highly compensated em-
ployee in Plan P is $12,500.
(iii) Pursuant to paragraph (b)(1)(iii) of this sec-
tion, the ADP limit under Plan P of $12,500 is an ap-
plicable limit. Accordingly, $1,500 of Participant
D’s elective deferrals exceed the applicable limit.
Similarly, $2,500 of Participant A’s elective deferrals
(other than the $3,000 of elective deferrals treated as
catch-up contributions because they exceed the sec-
tion 401(a)(30) limit) exceed the applicable limit.
(iv) The $1,500 of Participant D’s elective defer-
rals that exceed the applicable limit are less than the
applicable dollar catch-up limit and are treated as
catch-up contributions. Pursuant to paragraph
(d)(2)(iii) of this section, Plan P must retain Partici-
pant D’s $1,500 in elective deferrals and Plan P is
not treated as failing to satisfy section 401(k)(8)
merely because the elective deferrals are not distrib-
uted to Participant D.
(v) The $2,500 of Participant A’s elective defer-
rals that exceed the applicable limit are greater
than the portion of the applicable dollar catch-up
limit ($2,000) that remains after treating the
$3,000 of elective deferrals in excess of the sec-
tion 401(a)(30) limit as catch-up contributions.
Accordingly, $2000 of Participant A’s elective de-
ferrals are treated as catch-up contributions. Pur-
suant to paragraph (d)(2)(iii) of this section, Plan
P must retain Participant A’s $2,000 in elective de-
ferrals and Plan P is not treated as failing to satisfy
section 401(k)(8) merely because the elective de-
ferrals are not distributed to Participant A. How-
ever, $500 of Participant A’s elective deferrals can
not be treated as catch-up contributions and must
be distributed to Participant A in order to satisfy
section 401(k)(8).
Example 5. (i) Participant E is a catch-up eligible
employee under a section 401(k) plan, Plan R, with
a plan year ending October 31, 2006. Plan R does
not limit elective deferrals except as necessary to
comply with section 401(a)(30) and section 415.
Plan R permits all catch-up eligible participants to
defer an additional amount equal to the applicable
dollar catch-up limit for the year ($5,000) in excess
of the section 401(a)(30) limit. Participant E did not
exceed the section 401(a)(30) limit in 2005. Partici-
pant E made $3,200 of deferrals in the period No-
vember 1, 2005, through December 31, 2005, and an
additional $16,000 of deferrals in the first 10 months
of 2006, for a total of $19,200 in elective deferrals
for the plan year.
(ii) Once Participant E’s elective deferrals for the
calendar year 2006 exceed $15,000, subsequent
elective deferrals are treated as catch-up contribu-
tions at the time they are deferred, provided that
such elective deferrals do not exceed the applicable
dollar catch-up limit for the taxable year. Since the
$1,000 in elective deferrals made after Participant E
reaches the section 402(g) limit for the calendar year
does not exceed the applicable dollar catch-up limit
for 2006, the entire $1,000 is a catch-up contribu-
tion. Pursuant to paragraph (d)(2)(i) of this section,
$1,000 is subtracted from Participant E’s $19,200 in
elective deferrals for the plan year ending October
31, 2006, in determining Participant E’s ADR for
that plan year.
(iii) The ADP test is run for Plan R (after exclud-
ing the $1,000 in elective deferrals in excess of the
section 401(a)(30) limit), but Plan R needs to take
corrective action in order to pass the ADP test. After
applying the rules of section 401(k)(8)(C) to allocate
the total excess contributions determined under sec-
tion 401(k)(8)(C), the maximum deferrals that may
be retained by any highly compensated employee
under Plan R for the plan year ending October 31,
2006, (the ADP limit) is $14,800.
(iv) Under paragraph (d)(2)(ii) of this section,
elective deferrals that exceed the section 401(a)(30)
limit under Plan R are also subtracted from Partici-
pant E’s elective deferrals under Plan R for purposes
of applying the rules of 401(k)(8). Accordingly, for
purposes of correcting the failed ADP test, Partici-
pant E is treated as having contributed $18,200 of
elective deferrals in Plan R. The amount of elective
deferrals that would have to be distributed to Partici-
pant E in order to satisfy section 401(k)(8)(C) is
$3,400 ($18,200 minus $14,800), which is less than
the excess of the applicable dollar catch-up limit
($5,000) over the elective deferrals previously
treated as catch-up contributions under Plan R for
the taxable year ($1,000). Under paragraph
(d)(2)(iii) of this section, Plan R must retain Partici-
pant E’s $3,400 in elective deferrals and is not
treated as failing to satisfy section 401(k)(8) merely
because the elective deferrals are not distributed to
Participant E.
November 5, 20014842001–45 I.R.B.

(v) Even though Participant E’s elective deferrals
for the calendar year 2006 have exceeded the section
401(a)(30) limit, Participant E can continue to make
elective deferrals during the last two months of the
calendar year, since Participant E’s catch-up contri-
butions for the taxable year have not exceeded the
applicable dollar catch-up limit for the taxable year.
However, the maximum amount of elective deferrals
Participant E may make for the balance of the calen-
dar year is $600 (the $5,000 applicable dollar catch-
up limit for 2006, reduced by the $4,400 ($1,000
plus $3,400) of elective deferrals previously treated
as catch-up contributions during the taxable year).
Example 6.(i) The facts are the same as in Ex-
ample 5, except that Participant E exceeded the sec-
tion 401(a)(30) limit for 2005 by $1,300 prior to Oc-
tober 31, 2005, and made $600 of elective deferrals
in the period November 1, 2005, through December
31, 2005 (which were catch-up contributions for
2005). Thus, Participant E made $16,600 of elective
deferrals for the plan year ending October 31, 2006.
(ii) Once Participant E’s elective deferrals for the
calendar year 2006 exceed $15,000, subsequent
elective deferrals are treated as catch-up contribu-
tions as they are deferred, provided that such elec-
tive deferrals do not exceed the applicable dollar
catch-up limit for the taxable year. Since the $1,000
in elective deferrals made after Participant E reaches
the section 402(g) limit for calendar year 2006 does
not exceed the applicable dollar catch-up limit for
2006, the entire $1,000 is a catch-up contribution.
Pursuant to paragraph (d)(2)(i) of this section,
$1,000 is subtracted from Participant E’s elective
deferrals in determining Participant E’s actual defer-
ral ratio for the plan year ending October 31, 2006.
In addition, the $600 of catch-up contributions from
the period November 1, 2005, to December 31,
2005, are subtracted from Participant E’s elective
deferrals in determining Participant E’s ADR. Thus,
the total elective deferrals taken into account in de-
termining Participant E’s ADR for the plan year end-
ing October 31, 2006, is $15,000 ($16,600 in elec-
tive deferrals for the current plan year, less $1,600 in
catch-up contributions).
(iii) The ADP test is run for Plan R (after exclud-
ing the $1,600 in elective deferrals in excess of the
section 401(a)(30) limit), but Plan R needs to take
corrective action in order to pass the ADP test. After
applying the rules of section 401(k)(8)(C) to allocate
the total excess contributions determined under sec-
tion 401(k)(8)(C), the maximum deferrals that may
be retained by any highly compensated employee
under Plan R (the ADP limit) is $14,800.
(iv) Under paragraph (d)(2)(ii) of this section,
elective deferrals that exceed the section 401(a)(30)
limit under Plan R are also subtracted from Partici-
pant E’s elective deferrals under Plan R for purposes
of applying the rules of 401(k)(8). Accordingly, for
purposes of correcting the failed ADP test, Partici-
pant E is treated as having contributed $15,000 of
elective deferrals in Plan R. The amount of elective
deferrals that would have to be distributed to Partici-
pant E in order to satisfy section 401(k)(8)(C) is
$200 ($15,000 minus $14,800), which is less than
the excess of the applicable dollar catch-up limit
($5,000) over the elective deferrals previously
treated as catch-up contributions under Plan R for
the taxable year ($1,000). Under paragraph
(d)(2)(iii) of this section, Plan R must retain Partici-
pant E’s $200 in elective deferrals and is not treated
as failing to satisfy section 401(k)(8) merely be-
cause the elective deferrals are not distributed to
Participant E.
(v) Even though Participant E’s elective deferrals
for calendar year 2006 have exceeded the section
401(a)(30) limit, Participant E can continue to make
elective deferrals during the last two months of the
calendar year, since Participant E’s catch-up contri-
butions for the taxable year 2006 have not exceeded
the applicable dollar catch-up limit for the taxable
year. However, the maximum amount of elective
deferrals Participant E may make for the balance of
the calendar year is $3,800 (the $5,000 applicable
dollar catch-up limit for 2006, reduced by $1,200
($1,000 plus $200) in elective deferrals previously
treated as catch-up contributions during taxable year
2006).
Example 7.(i) Participant F, who is 58 years old,
is a highly compensated employee who earns
$100,000. Participant F participates in a section
401(k) plan, Plan S, for the first six months of the
year and then transfers to another section 401(k)
plan, Plan T, sponsored by the same employer, for the
second six months of the year. Plan S limits highly
compensated employees’ elective deferrals to 6% of
compensation for the period of participation, but per-
mits catch-up eligible participants to defer amounts
in excess of 6% during the plan year, up to the ap-
plicable dollar catch-up limit for the year. Plan T
limits highly compensated employee’s elective defer-
rals to 8% of compensation for the period of partici-
pation, but permits catch-up eligible participants to
defer amounts in excess of 8% during the plan year,
up to the applicable dollar catch-up limit for the year.
Participant F, who earned $50,000 in the first six
months of the year, defers $5,000 under Plan S. Par-
ticipant F also deferred $5,000 under Plan T.
(ii) Under paragraph (f)(2) of this section, the
employer-provided limit for Participant F is $7,000,
the sum of the employer-provided limit for Plan S
($3,000) and the employer-provided limit for Plan T
($4,000). Participant F’s elective deferrals for the
year are $10,000. Therefore, the amount of Partici-
pant F’s elective deferrals in excess of the employer-
provided limit is $3,000. Under paragraph (f)(3) of
this section, the $3,000 in excess of the employer-
provided limit is treated as an elective deferral in ex-
cess of that limit under both Plans S and T for pur-
poses of applying the catch-up contribution limit
under paragraph (c)(1) of this section.
(iii) Since the amount of Participant F’s elective
deferrals in excess of the employer-provided limit
($3,000) does not exceed the applicable dollar catch-
up limit for the taxable year, the entire $3,000 of
Participant F’s elective deferrals are treated as catch-
up contributions. In determining Participant F’s ac-
tual deferral ratio, the entire $3,000 of catch-up con-
tributions is subtracted from Participant F’s elective
deferrals for the plan year under paragraph (d)(2)(i)
of this section. Accordingly, Participant F’s actual
deferral ratio is 7% ($7,000 / $100,000) for both
Plans S and T.
(iv) In accordance with paragraph (f)(3) of this
section, it is determined that $2,000 of the excess
over the employer-provided limit was made under
Plan S and $1,000 of the excess over the employer-
provided limit was made under Plan T. This deter-
mination is not inconsistent with the manner in
which the elective deferrals were actually made.
Therefore, under paragraph (d)(2)(ii) of this section,
for purposes of applying the rules of section
401(k)(8), Participant F is treated as having elective
deferrals of $3,000 ($5,000–$2,000) in Plan S and
$4,000 ($5,000–$1,000) in Plan T.
(v) If, after applying the ADP test of section
401(k)(3), Plan S or Plan T were to require correc-
tion under section 401(k)(8), the maximum amount
of elective deferrals in excess of the ADP limit that
could be treated as catch-up contributions for Partic-
ipant F under the Plan could not exceed $2,000, the
applicable dollar catch-up limit of $5,000, reduced
by the $3,000 in excess of the employer-provided
limit previously treated as catch-up contributions for
the taxable year.
(j) Effective date and transition rule—
(1) Effective date.Section 414(v) and this
section apply to contributions in taxable
years beginning on or after January 1,
2002.
(2) Transition rule for collectively bar-
gained employees. An applicable em-
ployer plan will not fail to satisfy the re-
quirements of paragraph (e) of this
section merely because employees eligi-
ble to make elective deferrals who are in-
cluded in a unit of employees covered by
a collective bargaining agreement in ef-
fect on January 1, 2002, are not permitted
to make catch-up contributions until the
first plan year beginning after the termi-
nation of such agreement.
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
(Filed by the Office of the Federal Register on Octo-
ber 22, 2001, 8:45 a.m., and published in the issue of
the Federal Register for October 23, 2001, 66 F.R.
53555)
Availability of Revised
Determination Letter Forms
Announcement 2001–109
In Announcement 2001–77 (2001–30
I.R.B. 83), July 23, 2001, the Service de-
scribed changes that were being made to
simplify its application procedures for
determination letters on the qualification
of pension, profit-sharing, stock bonus
and annuity plans under §§ 401(a) and
403(a) of the Internal Revenue Code.
Part of the simplification of the applica-
tion procedures described in Announce-
ment 2001–77 involves the revision of
the determination letter application
forms.
The first four of those application
forms used to request determination let-
2001–45 I.R.B.485November 5, 2001

ters for ongoing qualified employee bene-
fit plans and a related schedule as well as
the instructions to these forms and sched-
ule are now available. These revised ap-
plication forms and instructions will be
available in late November 2001, from
IRS distribution centers at 1-800-TAX
FORM. In addition, these forms are cur-
rentlyavailable on the IRS Web Site at
http://www.irs.gov/forms_pubs/forms.html.
These 2001 application forms may be
submitted as downloaded from the Ser-
vice’s Web Site, i.e., the requirement to
provide a duplicate front page (or pink
copy) has been eliminated for these revi-
sions. The currently revised application
forms are:
Form 5300, Application for Determina-
tion for Employee Benefit Plan (including
collectively bargained plans formerly
filed on Form 5303) (Rev. September
2001)
Schedule Q (Form 5300), Elective De-
termination Requests(Rev. August 2001)
Form 5307, Application for Determina-
tion for Adopters of Master or Prototype
or Volume Submitter Plans (Rev. Septem-
ber 2001)
Form 5309, Application for Determina-
tion of Employee Stock Ownership Plan
(Rev. August 2001)
Form 6406, Short Form Application for
Determination for Minor Amendment of
Employee Benefit Plan (Rev. September
2001)
In addition to changing the titles of cer-
tain forms to reflect simplified methods
and the elimination of one form, i.e.,
Form 5303, Application for Determina-
tion for Collectively Bargained Plan,
these revisions contain many of the
changes described in Announcement
2001–77. For example, the Schedule Q is
now optional and two questions previ-
ously on the Schedule Q have been
moved to the Form 5300 and the Form
5307 and made optional. Moreover,
while applicants are strongly encour-
aged to use the 2001 revisions to these
forms, applicants may continue to submit
determination letter applications on the
prior versions of the revised forms (or on
Form 5303) through December 31, 2001,
consistent with the procedures in section
I.G of Announcement 2001–77.
The other forms referred to in An-
nouncement 2001–77 (Forms 5310,
5310–A, 6088, and 8717) are currently
undergoing revision. These forms are ex-
pected to be available on the IRS Web
Site later this year. The Service will issue
an announcement when these forms are
available.
Drafting Information
The principal author of this announce-
ment is Michael Rubin of the Employee
Plans, Tax Exempt and Government Enti-
ties Division. For further information re-
garding this announcement, please con-
tact the Employee Plans’ taxpayer
assistance telephone service at 1-877-
829-5500 (a toll-free number), between
the hours of 8:00 a.m. and 9:30 p.m. East-
ern Time, Monday through Friday. Mr.
Rubin may be reached at (202) 283-9888
(not a toll-free number).
Deletions From Cumulative List
of Organizations Contributions
to Which are Deductible Under
Section 170 of the Code
Announcement 2001–110
The name of an organization that no
longer qualifies as an organization de-
scribed in section 170(c)(2) of the Internal
Revenue Code of 1986 is listed below.
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 orga-
nization ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion 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 omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) begins on November 5, 2001, and
ends 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 husband and
wife treated as one contributor. This ben-
efit is not extended to any individual, in
whole or in part, for the acts or omissions
of the organization that were the basis for
revocation.
Northwest Childrens Institute
Seattle, WA
Gasoline Tax Claims Under
Section 6416(a)(4)
Announcement 2001–111
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Advance notice of proposed
rulemaking.
SUMMARY: This document invites com-
ments from the public on issues that the
IRS may address in proposed regulations
relating to claims for credits or refunds of
the gasoline tax. All materials submitted
will be available for public inspection and
copying.
DATES: Written and electronic com-
ments must be received by January 22,
2002.
ADDRESSES: Send submissions to:
CC:ITA:RU (REG–143219–01), room
5226, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand de-
livered Monday through Friday bet-
ween the hours of 8 a.m. and 5 p.m.
to: CC:ITA:RU (REG–143219–01),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue NW,
Washington, DC. Alternatively, taxpayers
may send submissions electronically via
the Internet by selecting the “Tax Regs”
option on the IRS Home Page, or di-
rectly to the IRS Internet site at
http://www.irs.gov/tax_regs/regslist.html.
FOR FURTHER INFORMATION CON-
TACT: Concerning submissions, the Reg-
ulations Unit (202) 622-7180; concerning
the proposals, Frank Boland (202) 622-
3130 (not toll-free numbers).
November 5, 20014862001–45 I.R.B.

SUPPLEMENTARY INFORMATION:
Under section 6416(b)(2), the person
that paid the gasoline tax imposed by sec-
tion 4081 to the government may receive
a credit or refund of the amount of the tax
if the gasoline is, by any person, exported,
used or sold for use as supplies for vessels
or aircraft, sold to a state or local govern-
ment for its exclusive use, sold to a non-
profit educational organization for its ex-
clusive use, or used or sold for use in the
production of special fuels (exempt pur-
poses).
Section 6102 of the Technical and Mis-
cellaneous Revenue Act of 1988 (the 1988
Act) (Public Law 100–647, 102 Stat. 3342)
added section 6416(a)(4) to the Internal
Revenue Code. Under section
6416(a)(4)(A), a wholesale distributor (de-
scribed in section 6416(a)(4)(B)) that buys
gasoline on which the tax imposed by sec-
tion 4081 has been paid and sells the gaso-
line to its ultimate purchaser for an exempt
purpose is treated as the person (and the
only person) that paid the tax to the gov-
ernment and thus is the person eligible to
claim a credit or refund of that tax.
Section 6416(a)(4)(B), as added by the
1988 Act, provides that the term whole-
sale distributor includes any person that
sells gasoline to producers, retailers, or to
users that purchase in bulk quantities and
accept delivery into bulk storage tanks.
For this purpose, the term producer in-
cludes a refiner, blender, or wholesale dis-
tributor of gasoline, or a dealer selling
gasoline exclusively to producers of gaso-
line. The term wholesale distributor does
not include any person that is an importer,
refiner, or blender of gasoline, or is a
dealer selling gasoline exclusively to pro-
ducers. Section 905 of the Taxpayer Re-
lief Act of 1997 (Public Law 105–34, 111
Stat. 788) amended section 6416(a)(4)(B)
of the Code by providing that the term
wholesale distributor also includes any
person that makes retail sales of gasoline
at 10 or more retail motor fuel outlets.
Notice 89–29 (1989–1 C.B. 669) pro-
vides rules for implementing section
6416(a)(4), as added by the 1988 Act.
These include rules that allow claims by
the person that actually paid the tax to the
government instead of claims by the
wholesale distributor if (1) tax is not in-
cluded in the price of the gasoline bought
by the wholesale distributor or (2) the sale
by the wholesale distributor is charged on
an oil company credit card issued to an
exempt person.
In response to questions that have
arisen concerning the application of the
rules in Notice 89–29, the IRS is consid-
ering proposing regulations under section
6416(a)(4) that, when finalized, would re-
place the guidance provided by Notice
89–29. The IRS invites comments from
the public on issues that should be ad-
dressed in the regulations, including is-
sues relating to refund claims by persons
other than the wholesale distributor.
Paul Kugler,
Associate Chief Counsel
(Passthroughs and Special Industries).
(Filed by the Office of the Federal Register on Octo-
ber 22, 2001, 8:45 a.m., and published in the issue of
the Federal Register for October 23, 2001, 66 F.R.
53564)
Notice of Disposition of
Declaratory Judgment
Proceedings Under Section
7428
This announcement serves notice to
donors that on June 15, 2001, the United
States Court of Appeals for the Eleventh
Circuit entered judgment finding that
there was no actual case or controversy
and affirming the United States Tax
Court’s determination that the organiza-
tion listed below lacked capacity to bring
suit from the retroactive revocation of its
tax exempt status as a section 501(c)(3)
organization. Therefore the organization
listed below is not recognized as an orga-
nization described in section 501(c)(3)
and is not exempt from tax under section
501(a) effective January 1, 1990.
Abraham Lincoln Opportunity
Foundation, Denver, CO
Section 7428(c) Validation of
Certain Contributions Made
During Pendency of Declaratory
Judgment Proceedings
This announcement serves notice to po-
tential donors that the organization listed
below has recently filed a timely declara-
tory judgment suit under section 7428 of
the Code, challenging revocation of its
status as an eligible donee under section
170(c)(2).
Protection under section 7428(c) of the
Code begins on November 5, 2001, and
ends on the date on which a court first de-
termines that an organization is not de-
scribed in section 170(c)(2), as more par-
ticularly set forth in section 7428(c)(1).
In the case of individual contributors, the
maximum amount of contributions pro-
tected during this period is limited to
$1,000.00, with a husband and wife being
treated as one contributor. This protection
is not extended to any individual who was
responsible, in whole or in part, for the
acts or omissions of the organization that
were the basis for the revocation. This
protection also applies (but without limi-
tation as to amount) to organizations de-
scribed in section 170(c)(2) which are ex-
empt from tax under section 501(a). If
the organization ultimately prevails in its
declaratory judgment suit, deductibility of
contributions would be subject to the nor-
mal limitations set forth under section
170.
Endowment for Paso Del Norte Schools,
Inc., El Paso, TX
2001–45 I.R.B.487November 5, 2001

November 5, 2001i2001–45 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”)
that have an effect on previous rulings
use the following defined terms to de-
scribe the effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is 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 ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes 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
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished 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 published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is 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 ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is 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 following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
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—Employer.
ERISA—Employee Retirement Income Security
Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

2001–45 I.R.B.iiNovember 5, 2001
Numerical Finding List
1
Bulletins 2001–27 through 2001–44
Announcements:
2001–69, 2001–27 I.R.B. 23
2001–70, 2001–27 I.R.B. 23
2001–71, 2001–27 I.R.B. 26
2001–72, 2001–28 I.R.B. 39
2001–73, 2001–28 I.R.B. 40
2001–74, 2001–28 I.R.B. 40
2001–75, 2001–28 I.R.B. 42
2001–76, 2001–29 I.R.B. 67
2001–77, 2001–30 I.R.B. 83
2001–78, 2001–30 I.R.B. 87
2001–79, 2001–31 I.R.B. 97
2001–80, 2001–31 I.R.B. 98
2001–81, 2001–33 I.R.B. 175
2001–82, 2001–32 I.R.B. 123
2001–83, 2001–35 I.R.B. 205
2001–84, 2001–35 I.R.B. 206
2001–85, 2001–36 I.R.B. 219
2001–86, 2001–35 I.R.B. 207
2001–87, 2001–35 I.R.B. 208
2001–88, 2001–36 I.R.B. 220
2001–89, 2001–38 I.R.B. 291
2001–90, 2001–35 I.R.B. 208
2001–91, 2001–36 I.R.B. 221
2001–92, 2001–39 I.R.B. 301
2001–93, 2001–44 I.R.B. 416
2001–94, 2001–39 I.R.B. 303
2001–95, 2001–39 I.R.B. 303
2001–96, 2001–41 I.R.B. 317
2001–97, 2001–40 I.R.B. 310
2001–98, 2001–41 I.R.B. 317
2001–99, 2001–42 I.R.B. 340
2001–100, 2001–41 I.R.B. 317
2001–101, 2001–43 I.R.B. 374
2001–102, 2001–42 I.R.B. 340
2001–103, 2001–43 I.R.B. 375
2001–104, 2001–43 I.R.B. 376
2001–105, 2001–43 I.R.B. 376
2001–106, 2001–44 I.R.B. 416
2001–107, 2001–44 I.R.B. 419
2001–108, 2001–44 I.R.B. 419
Court Decisions:
2070, 2001–31 I.R.B. 90
2071, 2001–44 I.R.B. 385
2072, 2001–44 I.R.B. 379
Notices:
2001–39, 2001–27 I.R.B. 3
2001–41, 2001–27 I.R.B. 2
2001–42, 2001–30 I.R.B. 70
2001–43, 2001–30 I.R.B. 72
2001–44, 2001–30 I.R.B. 77
2001–45, 2001–33 I.R.B. 129
2001–46, 2001–32 I.R.B. 122
2001–47, 2001–36 I.R.B. 212
2001–48, 2001–33 I.R.B. 130
Notices—Continued:
2001–49, 2001–34 I.R.B. 188
2001–50, 2001–34 I.R.B. 189
2001–51, 2001–34 I.R.B. 190
2001–52, 2001–35 I.R.B. 203
2001–53, 2001–37 I.R.B. 225
2001–54, 2001–37 I.R.B. 225
2001–55, 2001–39 I.R.B. 299
2001–56, 2001–38 I.R.B. 277
2001–57, 2001–38 I.R.B. 279
2001–58, 2001–39 I.R.B. 299
2001–59, 2001–41 I.R.B. 315
2001–60, 2001–40 I.R.B. 304
2001–61, 2001–40 I.R.B. 305
2001–62, 2001–40 I.R.B. 307
2001–63, 2001–40 I.R.B. 308
2001–64, 2001–41 I.R.B. 316
2001–65, 2001–43 I.R.B. 369
2001–66, 2001–44 I.R.B. 396
Proposed Regulations:
REG–110311–98, 2001–35 I.R.B. 204
REG–106917–99, 2001–27 I.R.B. 4
REG–103735–00, 2001–35 I.R.B. 204
REG–103736–00, 2001–35 I.R.B. 204
REG–107151–00, 2001–43 I.R.B. 370
REG–100548–01, 2001–29 I.R.B. 67
REG–106431–01, 2001–37 I.R.B. 272
Railroad Retirement Quarterly Rates:
2001–27, I.R.B. 1
2001–41, I.R.B. 314
Revenue Procedures:
2001–39, 2001–28 I.R.B. 38
2001–40, 2001–33 I.R.B. 130
2001–41, 2001–33 I.R.B. 173
2001–42, 2001–36 I.R.B. 212
2001–43, 2001–34 I.R.B. 191
2001–44, 2001–35 I.R.B. 203
2001–45, 2001–37 I.R.B. 227
2001–46, 2001–37 I.R.B. 263
2001–47, 2001–42 I.R.B. 332
2001–48, 2001–40 I.R.B. 308
2001–49, 2001–39 I.R.B. 300
2001–51, 2001–43 I.R.B. 369
Revenue Rulings:
2001–30, 2001–29 I.R.B. 46
2001–33, 2001–32 I.R.B. 118
2001–34, 2001–28 I.R.B. 31
2001–35, 2001–29 I.R.B. 59
2001–36, 2001–32 I.R.B. 119
2001–37, 2001–32 I.R.B. 100
2001–38, 2001–33 I.R.B. 124
2001–39, 2001–33 I.R.B. 125
2001–40, 2001–38 I.R.B. 276
2001–41, 2001–35 I.R.B. 193
2001–42, 2001–37 I.R.B. 223
2001–43, 2001–36 I.R.B. 209
2001–44, 2001–37 I.R.B. 223
Revenue Rulings—Continued:
2001–45, 2001–42 I.R.B. 323
2001–46, 2001–42 I.R.B. 321
2001–47, 2001–39 I.R.B. 293
2001–48, 2001–42 I.R.B. 324
2001–49, 2001–41 I.R.B. 312
2001–50, 2001–43 I.R.B. 343
Treasury Decisions:
8947, 2001–28 I.R.B. 36
8948, 2001–28 I.R.B. 27
8949, 2001–28 I.R.B. 33
8950, 2001–28 I.R.B. 34
8951, 2001–29 I.R.B. 63
8952, 2001–29 I.R.B. 60
8953, 2001–29 I.R.B. 44
8954, 2001–29 I.R.B. 47
8955, 2001–32 I.R.B. 101
8956, 2001–32 I.R.B. 112
8957, 2001–33 I.R.B. 125
8958, 2001–34 I.R.B. 183
8959, 2001–34 I.R.B. 185
8960, 2001–34 I.R.B. 176
8961, 2001–35 I.R.B. 194
8962, 2001–35 I.R.B. 201
8963, 2001–35 I.R.B. 197
8964, 2001–42 I.R.B. 320
8965, 2001–43 I.R.B. 344
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2001–1 through 2001–26
is in Internal Revenue Bulletin 2001–27, dated July
2, 2001.

November 5, 2001iii2001–45 I.R.B.
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2001–27 through 2001–44
Announcements:
2000–48
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
Notices:
98–52
Modified by
Notice 2001–56, 2001–38 I.R.B. 277
99–41
Modified and superseded by
Notice 2001–62, 2001–40 I.R.B. 307
2001–4
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
2001–9
Modified by
Notice 2001–46, 2001–32 I.R.B. 122
2001–15
Supplemented by
Notice 2001–51, 2001–34 I.R.B. 190
2001–42
Modified by
Notice 2001–57, 2001–38 I.R.B. 279
Proposed Regulations:
LR–97–79
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
LR–107–84
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
REG–110311–98
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–106917–99
Corrected by
Ann. 2001–86, 2001–35 I.R.B. 207
REG–103735–00
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–103736–00
Supplemented by
T.D. 8961, 2001–35 I.R.B. 194
REG–107186–00
Corrected by
Ann. 2001–71, 2001–27 I.R.B. 26
REG–130477–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B. 123
REG–130481–00
Supplemented by
Ann. 2001–82, 2001–32 I.R.B. 123
Revenue Procedures:
83–74
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B. 300
Revenue Procedures—Continued:
84–84
Revoked by
Rev. Proc. 2001–49, 2001–39 I.R.B. 300
93–27
Clarified by
Rev. Proc. 2001–43, 2001–34 I.R.B. 191
97–13
Modified by
Rev. Proc. 2001–39, 2001–28 I.R.B. 38
97–19
Modified by
Notice 2001–62, 2001–40 I.R.B. 307
98–44
Superseded by
Rev. Proc. 2001–40, 2001–33 I.R.B. 130
99–27
Superseded by
Rev. Proc. 2001–42, 2001–36 I.R.B. 212
99–49
Modified and amplified by
Rev. Proc. 2001–46, 2001–37 I.R.B. 263
2000–20
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
2000–39
Corrected by
Ann. 2001–73, 2001–28 I.R.B. 40
Superseded by
Rev. Proc. 2001–47, 2001–42 I.R.B. 332
2001–2
Modified by
Rev. Proc. 2001–41, 2001–33 I.R.B. 173
2001–3
Modified by
Rev. Proc. 2001–51, 2001–43 I.R.B. 369
2001–6
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
Revenue Rulings:
57–589
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
65–316
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
67–274
Amplified by
Rev. Rul. 2001–46, 2001–42 I.R.B. 321
68–125
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
69–563
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
70–379
Obsoleted by
Rev. Rul. 2001–39, 2001–33 I.R.B. 125
74–326
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
Revenue Rulings—Continued:
78–127
Modified by
Rev. Rul. 2001–40, 2001–38 I.R.B. 276
78–179
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
89–42
Modified and superseded by
Rev. Rul. 2001–48, 2001–42 I.R.B. 324
90–95
Distinguished by
Rev. Rul. 2001–42, 2001–42 I.R.B. 321
92–19
Supplemented by
Rev. Rul. 2001–38, 2001–33 I.R.B. 124
97–31
Modified and superseded by
Rev. Rul. 2001–48, 2001–42 I.R.B. 324
Treasury Decisions:
8948
Corrected by
Ann. 2001–90, 2001–35 I.R.B. 208
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2001–1 through 2001–26 is in Internal Revenue
Bulletin 2001–27, dated July 2, 2001.

2001–45 I.R.B.ivNovember 5, 2001
INDEX
Internal Revenue Bulletins
2001–27 through 2001–44
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the parenthesis refer
to the Internal Revenue Bulletin in which
the item may be found and the page
number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction
Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural
Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Defined benefit pension plan, transfer of
excess assets (TD 8948) 28, 27; correc-
tion (Ann 90) 35, 208
Determination letters:
Future of the determination letter pro-
gram (Ann 83) 35, 205
Qualified plans, simplifying applica-
tion procedures (Ann 77) 30, 83
Forms:
5306-A, Application for Approval of
Prototype Simplified Employee Pen-
sion (SEP) or Savings Incentive
Match Plan for Employees of Small
Employers (SIMPLE IRA Plan),
new (Ann 96) 41, 317
5500 (Schedules B & R), filing relief
(Ann 103) 43,375
Full funding limitations:
Weighted average interest rate for:
June 2001 (Notice 39) 27, 3
July 2001 (Notice 48) 33, 130
August 2001 (Notice 52) 35, 203
September 2001 (Notice 58) 39,
299
October 2001 (Notice 65) 43, 369
Nondiscrimination requirements and
rules:
A defined benefit replacement alloca-
tion, cross-testing (RR 30) 29, 46
Certain defined contribution retirement
plans (TD 8954) 29, 47
Governmental and church plans, relief
from (Notice 46) 32, 122
Qualified retirement plans:
Compensation limit, top-heavy deter-
mination, 401(k) hardship distribu-
tion (Notice 56) 38, 277
Master & prototype (M&P) and vol-
ume submitter specimen plans, opin-
ion letters (Ann 104) 43, 376
Or individual retirement arrangements
(IRAs), saver’s tax credit (Ann 106)
44, 416
Remedial amendment period under
EGTRRA (Notice 42) 30, 70
Required minimum distribution, alter-
native model amendment (Ann 82)
32,123
Sample amendments for changes to
plan qualifiation requirements (No-
tice 57) 38, 279
Regulations:
26 CFR 1.401(a)(4)–0, –8, revised;
1.401(a)(4)–9, –12, amended; non-
discrimination requirements for cer-
tain defined contribution retirement
plans (TD 8954) 29, 47
26 CFR 1.420–1, added; minimum cost
requirement permitting the transfer
of excess assets of a defined benefit
pension plan to a retiree health ac-
count (TD 8948) 28, 27; correction
(Ann 90) 35, 208
26 CFR 301.7701–7, amended; classi-
fication of certain pension and em-
ployee benefit trusts, and investment
trusts as domestic trusts for federal
tax purposes (TD 8962) 35, 201
Simplified Employee Pension (SEP) or
Savings Incentive Match Plan for Em-
ployees of Small Employers (SIMPLE
IRA), new Form 5306-A (Ann 96) 41,
317
Trusts, classification of certain pension
and employee benefit trusts, and in-
vestment trusts as domestic trusts for
federal tax purposes (TD 8962) 35, 201
EMPLOYMENT TAX
Back wages subject to FICA and FUTA
taxes, year paid (CD 2070) 31, 90
Compensation clause, Social Security and
Medicare taxes for federal judges (CD
2071) 44, 385
Electronic furnishing of payee state-
ments, voluntary, hearing (Ann 71)
27, 26
Employee elective deferral catch-up con-
tributions, reporting on Forms W-2 and
5498 (Ann 93) 44, 416
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD
8952) 29, 60
Forms W-2, separate reporting of non-
statutory stock option income (Ann
92) 39, 301
Interest-free adjustments, underpay-
ments of employment taxes (TD
8959) 34, 185
Penalties for underpayments of deposits
and overstated deposit claims (TD
8947) 28, 36
Railroad retirement, rate determination,
quarterly:
July 1, 2001, 27, 1
October 1, 2001, 41, 314
Refund or credit of overassessments, date
of allowance (RR 40) 38, 276
Regulations:
26 CFR 31.6205–1(a)(6), revised; in-
terest-free adjustments with respect
to underpayments of employment
taxes (TD 8959) 34, 185
26 CFR 31.6302–1, revised; 31.6302
(c)–4, revised; 301.6656–1, –2, re-
moved; 301.6656–3, redesignated as
301.6656–1; 602.101, amended;
penalties for underpayments of de-
posits and overstated deposit claims
(TD 8947) 28, 36
26 CFR 31.6302–1, amended; 31.6302
(c)–3, amended; 301.6302–1T, re-
moved; removal of Federal Reserve
banks as federal depositaries (TD
8952) 29, 60
26 CFR 301.6323(j)–1, added; with-
drawal of notice of federal tax lien in
certain circumstances (TD 8951) 29, 63
Tax liens, federal, circumstances for
withdrawal of notice (TD 8951) 29,
63
ESTATE TAX
Automatic extension of time to file Form
706 (TD 8957) 33, 125
EMPLOYEE PLANS—
Cont.
EMPLOYMENT TAX—
Cont.

November 5, 2001v2001–45 I.R.B.
Filing locations for estate, gift, and genera-
tion-skipping transfer tax returns, revised
(Ann 74) 28, 40
Generation-skipping transfer tax, automatic
allocation, election (Notice 50) 34, 189
Regulations:
26 CFR 20.6075–1, revised; 20.6081
–1, revised; 602.101, amended; estate
tax return, Form 706, extension to file
(TD 8957) 33, 125
EXCISE TAX
Excise tax return filing, payment, and de-
posit requirements (TD 8963) 35, 197
Forms:
720, changes to requirements for excise
tax returns, payments, and deposits
(Ann 98) 41, 317
2290SP, Declaración del Impuesto sobre
el Use de Vehículos Pesados en las
Carreteras, new (Ann 69) 27,23
Regulations:
26 CFR 40.0–1, amended; 40.6011
(a)–1, –2, amended; 40.6071(a)–1,
amended; 40.6071(a)–2, removed;
40.6091–1, amended; 40.6101–1, re-
vised; 40.6109(a)–1, revised;
40.6151(a)–1, revised; 40.6302(c)
–1, –2, revised; 40.6302(c)–3,
amended; 40.6302(c)–4, removed;
40.9999–1, removed; deposits of ex-
cise taxes (TD 8963) 35, 197
EXEMPT
ORGANIZATIONS
Filing locations for estate, gift, and gener-
ation-skipping transfer tax returns, re-
vised (Ann 74) 28, 40
Generation-skipping transfer tax, automatic
allocation, election (Notice 50) 34, 189
List of organizations classified as pri-
vate foundations (Ann 70) 27, 23;
(Ann 72) 28, 39; (Ann 76) 29, 67;
(Ann 78) 30, 87; (Ann 79) 31, 97;
(Ann 84) 35, 206; (Ann 85) 36, 219;
(Ann 89) 38, 291; (Ann 94) 39, 301;
(Ann 97) 40, 310; (Ann 100) 41, 317;
(Ann 102) 42, 340; (Ann 105) 43, 376;
(Ann 108) 44, 419
Qualified state tuition programs, rollovers
and change of investments (Notice 55)
39, 299
Revocations (Ann 81) 33, 175; (Ann 95)
39, 303
INCOME TAX
Accounting periods, rules and procedures
for (REG–106917–99) 27, 4; correc-
tion (Ann 86) 35, 207
Archer MSAs (Ann 99) 42, 340
Backup withholding rate for amounts paid
after August 6, 2001 (Ann 80) 31, 98
Bonds, tax and revenue anticipation, safe
harbor (Notice 49) 34, 188
Business and traveling expenses, per
diemallowances (Ann 73) 28, 40; 2002
(RP 47) 42, 332
Collapsible corporations, withdrawal of
proposed regulations LR–107–84
(REG–100548–01) 29, 67
Corporations, consolidated groups:
Special aggregate stock ownership
rules (TD 8949) 28, 33
Tentative carryback adjustments (TD
8950) 28, 34
Corporations:
Consolidated income tax return filers,
withdrawal of proposed regulations
LR–97–79 (REG–100548–01) 29, 67
Corporate reorganizations, mergers and
acquisitions, step transactions (RR
46) 42, 321
Mexican subsidiary formed to comply
with foreign law (RR 39) 33, 125
Credits:
Enhanced oil recovery credit, 2001 in-
flation adjustment (Notice 54) 37,
225
Low-income housing credit:
Carryovers to qualified states, 2001
National Pool (RP 44) 35, 203
Satisfactory bond, “bond factor”
amounts for the period, July
through September 2001 (RR 37)
32, 100
Disaster relief for September 11, 2001,
terrorist attack for:
Affected taxpayers (Notice 61) 40, 305
Filing deadlines (Notice 63) 40, 308
Issuers of tax-exempt bonds (Ann
101) 43, 374
Disclosure of return information, Census
of Agriculture (TD 8958) 34, 183
Earned income credit, eligibility after de-
nial (TD 8953) 29, 44
Electronic and magnetic media:
Filing, specifications for Form 1042–S,
Foreign Person’s U.S. Source In-
come Subject to Withholding (RP
40) 33, 130
Information reporting seminars, Form
1042–S (Ann 87) 35, 208
Electronic filing for partnerships, exemp-
tion from (Ann 75) 28, 42
Electronic furnishing of payee statements,
voluntary, hearing (Ann 71) 27, 26
Employee elective deferral catch-up con-
tributions, reporting on Forms W-2 and
5498 (Ann 93) 44, 416
Exempt organization revocations (Ann 81)
33, 175; (Ann 95) 39, 303
Federal tax deposits, removal of Federal
Reserve banks as depositaries (TD 8952)
29, 60
Forms:
W–9, electronic submission by certain
intermediaries (Ann 91) 36, 221
720, Quarterly Federal Excise Tax Re-
turn, changes (Ann 98) 41, 317
1042–S, specifications for filing magnet-
ically or electronically (RP 40) 33,
130
2290SP, Declaración del Impuesto sobre
el Uso de Vehículos Pesados en las
Carreteras, new (Ann 69) 27, 23
5306-A, Application for Approval of
SEP or SIMPLE IRA Plans (Ann 96)
41, 312
Information reporting call site at Martins-
burg Computing Center (Ann 107) 44,
419
Insurance companies:
Differential earnings rate and recom-
puted differential earnings rate for
mutual life insurance companies (RR
33) 32, 118
Foreign companies, minimum effec-
tively connected net investment in-
come (RP 48) 40, 308
Modified endowment contracts, uniform
closing agreement (RP 42) 36, 212
Prevailing mortality and morbidity tables
(RR 38) 33, 124
Interest:
Allocation, integrated treatment of cer-
tain financial transactions, request
for comments (Notice 59) 41, 315
Investment:
Federal short-term, mid-term, and
long-term rates for:
July 2001 (RR 34) 28, 31
August 2001 (RR 36) 32,119
September 2001 (RR 43) 36,209
October 2001 (RR 49) 41, 312
Rates:
Underpayments and overpayments,
quarter beginning:
October 1, 2001 (RR 47) 39, 293
INCOME TAX—Cont.ESTATE TAX—Cont.

2001–45 I.R.B.viNovember 5, 2001
International operation of ships and aircraft,
income exempt from tax (RR 48) 42, 324
Inventory:
LIFO:
Price indexes used by department
stores for:
May 2001 (RR 35) 29, 59
June 2001 (RR 41) 35, 193
July 2001 (RR 44) 37, 223
August 2001 (RR 45) 42, 323
Liabilities assumed in certain corporate
transactions (TD 8964) 42, 320
Limitations on passive activity losses and
credits (Notice 47) 36, 212
Marginal properties, oil and gas produc-
tion, depletion, applicable percentages
(Notice 53) 37, 225
Net operating loss, product liability losses
(CD 2072) 44, 379
Notional principal contract (NPC), con-
tingent nonperiodic payments (Notice
44) 30, 77
Partnerships:
Disguised sales of interests, request for
comments (Notice 64) 41, 316
Substitute forms requirements for part-
ner copy of Sch. K-1 of Forms 1065
and 1065-B (Ann 88) 36, 220
Unvested partnership profits interests
(RP 43) 34, 191
Penalties for underpayments of deposits
and overstated deposit claims (TD
8947) 28, 36
Private delivery services, timely filing or
payment (Notice 62) 40, 307
Private foundations, organizations now
classified as (Ann 70) 27, 23; (Ann
72) 28, 39; (Ann 76) 29, 67; (Ann 78)
30, 87; (Ann 79) 31, 97; (Ann 84) 35,
206; (Ann 85) 36, 219; (Ann 89) 38,
291; (Ann 94) 39, 301; (Ann 97) 40,
310; ( Ann 100) 41, 317; (Ann 102) 42,
340; (Ann 105) 43, 376; (Ann 108) 44,
419
Proposed Regulations:
26 CFR 1.341–1(b), –2, –5, –4(a),
–4(c), withdrawn; withdrawal of
proposed regulations relating to col-
lapsible corporations (REG–
100548–01) 29, 67
26 CFR 1.441–0 through –4, added;
1.441–1T through 4T, removed;
1.442–1, revised; 1.442–2T, –3T, re-
moved; 1.706–1, amended; 1.706
–1T, removed; 1.898–4, amended;
1.1378–1, added; 5c.442–1, re-
moved; 5f.442–1, removed;
18.1378–1, removed; changes in ac-
counting periods (REG–106917–99)
27, 4; correction (Ann 86) 35, 207
26 CFR 1.1041–1T, amended;
1.1041–2, added; constructive trans-
fers and transfers of property to a
third party on behalf of a spouse
(REG–107151–00) 43, 370
26 CFR 1.1361–1, amended; qualified
subchapter S trust election for testa-
mentary trusts (REG–106431–01) 37,
272
26 CFR 1.1502–2, –3, –7, –8, –11, –21,
–22, –75, –78, –79, withdrawn; with-
drawal of proposed regulations relat-
ing to corporations filing consolidated
returns (REG–100548–01) 29, 67
26 CFR 1.6011–4, amended; 301.
6111–2, amended; modification of
tax shelter rules II (REG–
103735–00, REG–110311–98,
REG–103736–00) 35, 204
Publication 1167, substitute forms, gen-
eral requirements (RP 45) 37, 227
Qualified intermediaries, audit guidelines,
withholding tax on nonresident aliens,
foreign financial institutions (Notice
66) 44, 396
Railroad track maintenance costs, ac-
counting methods (RP 46) 37, 263
Recognition of gain on:
Certain distributions of stock or securi-
ties in connection with an acquisition
(TD 8960) 34, 176
Certain transfers to foreign trusts and
estates (TD 8956) 32, 112
Refund or credit of overassessments, date
of allowance (RR 40) 38, 276
Regulations:
26 CFR 1.32–3, added; 1.32–3T, re-
moved; 602.101(b), amended; eligibil-
ity requirements after denial of the
earned income credit (TD 8953) 29, 44
26 CFR 1.301–1, amended; 1.301-1T,
removed; liabilities assumed in cer-
tain corporate transactions (TD
8964) 42, 320
26 CFR 1.355–0, amended; 1.355–7T,
added; guidance under section
355(e); recognition of gain on cer-
tain distributions of stock or securi-
ties in connection with an acquisition
(TD 8960) 34, 176
26 CFR 1.679–0 through –7, added;
1.958–1, revised; 1.958–2, amended;
foreign trusts that have U.S. beneficia-
ries (TD 8955) 32, 101
26 CFR 1.684–1, through –5, added;
recognition of gain on certain trans-
fers to certain foreign trusts and es-
tates (TD 8956) 32, 112
26 CFR 1.732–3, added; 1.1502–34,
amended; special aggregate stock
ownership rules (TD 8949) 28, 33
26 CFR 1.1502–78, amended;
1.1502–78T, removed; guidance on
filing an application for a tentative
carryback adjustment in a consoli-
dated return context (TD 8950) 28, 34
26 CFR 1.6011–4T, amended;
301.6111–2T, amended; 301.6112
–1T, amended; modification of tax
shelter rules II (TD 8961) 35, 194
26 CFR 1.6302–1, –2, revised;
301.6656–1, –2, removed; 301.6656
–3, redesignated as 301.6656–1;
602.101, amended; penalties for un-
derpayments of deposits and over-
stated deposit claims (TD 8947) 28,
36
26 CFR 1.6302–1, –2, amended;
1.1461–1, amended; 1.1502–5(a)(1),
amended; 1.6151–1(d)(1), amended;
removal of Federal Reserve banks as
federal depositaries (TD 8952) 29,
60
26 CFR 301.6103(j)(5)–1, added;
301.6103(j)(5)–1T, removed; dis-
closure of return information to of-
ficers and employees of the Depart-
ment of Agriculture for certain
statistical purposes and related ac-
tivities, Census of Agriculture (TD
8958) 34, 183
26 CFR 301.6221 through 301.6233,
modified; 602.101, amended; unified
partnership audit procedures
(TEFRA) (TD 8965) 43, 344
26 CFR 301.6323(j)–1, added; with-
drawal of notice of federal tax lien in
certain circumstances (TD 8951) 29,
63
26 CFR 301.7701–7, amended; classi-
fication of certain pension and em-
ployee benefit trusts, and investment
trusts as domestic trusts for federal
tax purposes (TD 8962) 35, 201
Section 1374 built-in gains:
Tax applied to certain timber, coal, and
domestic iron ore transactions (RR
50) 43, 343
INCOME TAX—Cont.INCOME TAX—Cont.INCOME TAX—Cont.

November 5, 2001vii2001–45 I.R.B.
Timber, coal, and domestic iron ore
transactions (RP 51) 43, 369
Standard Industry Fare Level (SIFL) for-
mula (RR 42) 37, 223
Substitute forms, general requirements
(RP 45) 37, 227
Tax consequences of stock redemptions
by a spouse or former spouse during
marriage or incident to divorce
(REG–107151–00) 43, 370
Tax conventions:
French social security, tax treatment of
(Notice 41) 27, 2
Tax-exempt bonds:
Disaster relief to issuers (Ann 101) 43,
374
Private activity bonds (RP 39) 28, 38
Tax liens, federal, circumstances for with-
drawal of notice (TD 8951) 29, 63
Tax shelters:
Basis shifting tax avoidance transac-
tions (Notice 45) 33, 129
Listed transactions (Notice 51) 34, 190
Modification of tax shelter rules II (TD
8961) 35, 194; (REG–103735–00,
REG–110311–98, REG–103736–00)
35, 204
Procedures to investigate abusive pro-
motions (RP 49) 39, 300
Technical advice, from Associates Chief
Counsel and Division Counsel/Associ-
ate Chief Counsel (TE/GE), frivolous
issues (RP 41) 33, 173
Trusts:
Classification of certain pension and
employee benefit trusts, and invest-
ment trusts as domestic trusts for
federal tax purposes (TD 8962) 35,
201
Foreign trusts that have U.S. beneficia-
ries (TD 8955) 32, 101
Qualified subchapter S trust election
for testamentary trusts (REG–
106431–01) 37, 272
Unified partnership audit procedures
(TEFRA) (TD 8965) 43, 344
Voluntary closing agreement program for
tax-exempt bonds (TEB VCAP) (No-
tice 60) 40, 304
Withholdings, payments to nonqualified
intermediaries and foreign trusts, U. S.
withholding agents (Notice 43) 30, 72
INCOME TAX—Cont.INCOME TAX—Cont.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the
Superintendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold
on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Tax Info for Business at the bottom of the page.
Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD–ROM
Internal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD–ROM). The CD–ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders(discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250–7954. Please allow two
to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, W:CAR:MP:FP, Washington, DC 20224.
Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300