Internal Revenue Bulletin 2009-39 (PDF rendition): IRS Revenue Rulings

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.

Bulletin No. 200
9-39
September 28, 20
09
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2009–27, page 404.
Interest rates; underpayments and overpayments.The
rates for interest determined under section 6621 of the Code
for the calendar quarter beginning October 1, 2009, will be 4
percent for overpayments (3 percent in the case of a corpo-
ration), 4 percent for underpayments, and 6 percent for large
corporate underpayments. The rate of interest paid on the por-
tion of a corporate overpayment exceeding $10,000 will be 1.5
percent.
Rev. Rul. 2009–28, page 391.
Fringe benefits aircraft valuation formula.The Standard
Industry Fare Level (SIFL) cents-per-mile rates and terminal
charge in effect for the second half of 2009 are set forth for
purposes of determining the value of noncommercial flights
on employer-provided aircraft under section 1.61–21(g) of the
regulations.
Rev. Proc. 2009–41, page 439.
This procedure provides guidance under section 7701 of the
Code for an eligible entity that requests relief for a late clas-
sification election filed with the applicable IRS service center
within 3 years and 75 days of the requested effective date of
the eligible entity’s classification. The procedure also provides
guidance for those eligible entities that do not qualify for relief
under this revenue procedure and that are required to request
a letter ruling in order to request relief for a late entity classifi-
cation election. Rev. Proc. 2002–59 superseded.
EMPLOYEE PLANS
Rev. Rul. 2009–30, page 391.
Automatic contribution increases under automatic con-
tribution arrangements.This ruling provides guidance on
how automatic enrollment in a section 401(k) plan can work
when there is an escalator feature included. An escalator fea-
ture means that the amount of an employee’s compensation
that is contributed to the plan, without the employee’s affirma-
tive election, is increased periodically according to the terms
of the plan. Two situations are described. One involves a basic
automatic contribution arrangement and the other involves an
eligible automatic contribution arrangement described in sec-
tion 414(w) of the Code. Rev. Rul. 2009–30 is part of the
“Savings Initiative” guidance issued by the Service.
Rev. Rul. 2009–31, page 395.
Annual paid time off contributions.This ruling provides
guidance on the tax consequences of an amendment to a tax-
qualified retirement plan to permit annual contributions of an
employee’s unused paid time off under the employer’s paid time
off plan. A paid time off plan generally refers to a sick and
vacation arrangement that provides for paid leave whether the
leave is due to illness or incapacity. The amendment relates to
a contribution (including a section 401(k) contribution) or cash
out of the unused paid time off, determined as of the end of the
plan year (December 31). Rev. Rul. 2009–31 is companion
guidance to Rev. Rul. 2009–32 and is part of the “Savings
Initiative’ guidance issued by the Service.
(Continued on the next page)
Finding Lists begin on page ii.
Index for begins on page iv.

Rev. Rul. 2009–32, page 398.
Paid time off contributions at termination of employ-
ment.This ruling provides guidance on the tax consequences
of an amendment to a tax-qualified retirement plan to permit
contributions for an employee’s accumulated and unused paid
time off under the employer’s paid time off plan at a partici-
pant’s termination of employment. A paid time off plan gener-
ally refers to a sick and vacation arrangement that provides for
paid leave whether the leave is due to illness or incapacity. The
amendment relates to a post-severance contribution (including
a section 401(k) contribution) or cash out of the accumulated
and unused paid time off. Rev. Rul. 2009–32 is companion
guidance to Rev. Rul. 2009–31 and is part of the “Savings
Initiative” guidance issued by the Service.
Notice 2009–65, page 413.
Adding automatic enrollment to section 401(k) plans
–sampleamendments.This notice provides two sample
amendments that sponsors of section 401(k) plans can use
to add automatic enrollment features to their plans. The first
sample amendment can be used to add a basic automatic
contribution arrangement with, if elected by an adopting
employer, an escalation feature. The second sample amend-
ment can be used to add an “eligible automatic contribution
arrangement (“EACA”) as described in section 414(w) of the
Code with, if elected by an adopting employer, as escalation
feature. Final regulations (T.D. 9447, 2009–12 I.R.B. 694)
under section 414(w) and this notice, by providing sample
amendments, facilitate the use of EACAs in section 401(k)
plans. This notice is part of the “Savings Initiative” guidance
issued by the Service.
Notice 2009–66, page 418.
Automatic enrollment in SIMPLE IRAs.Thisnoticepro-
vides guidance to facilitate automatic enrollment in SIMPLE
IRA plans, including questions and answers relating to the in-
clusioninaSIMPLEIRAplanofanautomaticcontributionar-
rangement. This notice also requests comments on whether
the Department of the Treasury and the Service should issue
guidance regarding SIMPLE IRA plans that include eligible auto-
matic contribution arrangements under section 414(w) of the
Code. This notice provides guidance, in the form of questions
and answers, on automatic contribution arrangements under
SIMPLE IRA plans. Notice 2009–66 is companion guidance to
Notice 2009–67 and is part of the “Savings Initiative” guidance
issued by the Service.
Notice 2009–67, page 420.
Adding automatic enrollment to SIMPLE IRA plans – sam-
ple amendment.This notice provides a sample amendment
that can be used by a sponsor of a SIMPLE IRA plan described
in section 408(p) of the Code to add an automatic contribution
arrangement to the plan. Only SIMPLE IRA plans that use a
designated financial institution described in section 408(p)(7)
can use the sample amendment. Notice 2009–67 is compan-
ion guidance to Notice 2009–66 and is part of the “Savings
Initiative” guidance issued by the Service.
Notice 2009–68, page 423.
Safe harbor explanations — eligible rollover distribu-
tions.This notice contains two safe harbor explanations that
may be provided to recipients of eligible rollover distributions
from an employer plan in order to satisfy section 402(f) of the
Code. The first safe harbor explanation applies to a distribution
not from a designated Roth account, as described in section
402A. The second safe harbor explanation applies to a distri-
bution from a designated Roth account. These safe harbor ex-
planations update the safe harbor explanations that were pub-
lished in Notice 2002–3, 2002–1 C.B. 289, to reflect changes
in the law. This notice is part of the “Savings Initiative” guid-
ance issued by the Service. Notice 2002–3 modified and su-
perseded.
Notice 2009–75, page 436.
Rollovers from employer plans to Roth IRAs.This notice
describes the federal income tax consequences of rolling over
an eligible rollover distribution from a qualified plan under sec-
tion 401(a) of the Code, an annuity plan described in section
403(a), a plan described in section 403(b), or an eligible gov-
ernmental plan under section 457(b) to a Roth IRA described
in section 408A. This notice supplements the regulations un-
der section 408A and Notice 2008–30, 2008–12 I.R.B. 638
to provide additional guidance. Notice 2008–30 amplified and
clarified.
ADMINISTRATIVE
Rev. Proc. 2009–40, page 438.
This procedure publishes the amount of unused housing
credit carryovers allocated to qualified states under section
42(h)(3)(D) of the Code for calendar year 2009.
September 28, 20092009–39 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2009–39 I.R.B.September 28, 2009

September 28, 20092009–39 I.R.B.
Place missing child here.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 61.—Gross Income
Defined
26 CFR 1.61–21: Taxation of fringe benefits.
Fringe benefits aircraft valuation for-
mula.The Standard Industry Fare Level
(SIFL) cents-per-mile rates and terminal
charge in effect for the second half of 2009
are set forth for purposes of determining
the value of noncommercial flights on
employer-provided aircraft under section
1.61–21(g) of the regulations.
Rev. Rul. 2009–28
For purposes of the taxation of fringe
benefits under section 61 of the Inter-
nal Revenue Code, section 1.61–21(g) of
the Income Tax Regulations provides a
rule for valuing noncommercial flights
on employer-provided aircraft. Section
1.61–21(g)(5) provides an aircraft valua-
tion formula to determine the value of such
flights. The value of a flight is determined
under the base aircraft valuation formula
(also known as the Standard Industry Fare
Level formula or SIFL) by multiplying
the SIFL cents-per-mile rates applicable
for the period during which the flight was
taken by the appropriate aircraft multiple
provided in section 1.61–21(g)(7) and then
adding the applicable terminal charge. The
SIFL cents-per-mile rates in the formula
and the terminal charge are calculated by
the Department of Transportation and are
reviewed semi-annually.
The following chart sets forth the termi-
nal charge and SIFL mileage rates:
Period During Which
the Flight Is Taken
Terminal
Charge
SIFL Mileage
Rates
7/1/09 - 12/31/09
$45.71
Up to 500 miles
= $.2501 per mile
501–1500 miles
= $.1907 per mile
Over 1500 miles
= $.1833 per mile
DRAFTING INFORMATION
The principal author of this revenue
ruling is Kathleen Edmondson of the
Office of Division Counsel/Associate
Chief Counsel (Tax Exempt/Government
Entities).For further information
regarding this revenue ruling, contact
Ms. Edmondson at (202) 622–0047 (not a
toll-free call).
Se
ction 401.—Qualified
Pension, Profit-Sharing,
and Stock Bonus Plans
Automatic contribution increases
under automatic contribution arrange-
ments.This ruling provides guidance on
how automatic enrollment in a section
401(k) plan can work when there is an
escalator feature included. An escalator
feature means that the amount of an em-
ployee’s compensation that is contributed
to the plan, without the employee’s affir-
mative election, is increased periodically
according to the terms of the plan. Two
situations are described. One involves a
basic automatic contribution arrangement
and the other involves an eligible auto-
matic contribution arrangement described
in section 414(w) of the Code. Rev. Rul.
2009–30 is part of the “Savings Initiative”
guidance issued by the Service.
Rev. Rul. 2009–30
ISSUES
1. Will default contributions to a
profit-sharing plan fail to be considered
elective contributions merely because
they are made pursuant to an automatic
contribution arrangement under which an
eligible employee’s default contribution
percentage automatically increases in plan
years after the first plan year of the eligible
employee’s participation in the automatic
contribution arrangement based in part on
increases in the eligible employee’s plan
compensation?
2. Will default contributions under
an automatic contribution arrangement
fail to satisfy the qualified percentage
requirement (including uniformity and
minimum percentage requirements) relat-
ing to a “qualified automatic contribution
arrangement” under section 401(k)(13) of
the Internal Revenue Code (providing an
automatic enrollment nondiscrimination
safe harbor) or the uniformity requirement
relating to an “eligible automatic contri-
bution arrangement” under section 414(w)
(permitting 90-day withdrawals) merely
because default contributions are made
pursuant to an arrangement under which
the default contribution percentage for
all eligible employees increases on a date
other than the first day of a plan year?
FACTS
Situation 1
Employer X maintains Plan A, a profit-
sharing plan intended to satisfy the re-
quirements of sections 401(a), 401(k), and
401(m), and maintained on a calendar-year
basis. Plan A is not intended to satisfy the
requirements to be a qualified automatic
contribution arrangement or eligible auto-
matic contribution arrangement.
Under Plan A, any eligible employee
of Employer X may affirmatively elect
to receive his or her compensation en-
tirely in cash or to have Employer X make
specified contributions on the eligible
employee’s behalf to Plan A in lieu of
receiving those amounts as cash compen-
sation. Subject to certain limitations set
2009–39 I.R.B.391September 28, 2009

forth in Plan A, the eligible employee
may designate the amount of these elec-
tive contributions as a percentage of the
eligible employee’s “plan compensation,”
defined under Plan A as base pay (exclud-
ing overtime, bonuses, and other special
compensation).
Under Plan A, if any eligible employee
of Employer X does not affirmatively
elect to receive cash or to have a specified
amount contributed to Plan A, default con-
tributions are automatically contributed to
Plan A (with a corresponding reduction in
the eligible employee’s cash compensa-
tion) beginning with the first pay period
of the first plan year of the eligible em-
ployee’s participation in the automatic
contribution arrangement. For that first
plan year, the default contribution per-
centage is 4 percent of plan compensation.
Any eligible employee may elect at any
time not to make elective contributions
(including not to make default contribu-
tions) or to have Employer X contribute
to Plan A a different percentage of plan
compensation.
Employer X usually provides annual in-
creases in base pay for its employees ef-
fective for pay periods beginning on or af-
ter the employment anniversary date for
each employee. Under Plan A, for plan
years after the first plan year of the eli-
gible employee’s participation in the au-
tomatic contribution arrangement, the de-
fault contribution percentage is automat-
ically increased beginning with the first
payperiodthatbeginsonoraftertheeli-
gible employee’s employment anniversary
date. The increase in the default contri-
bution percentage is equal to the greater
of (1) 1 percentage point, or (2) a number
of percentage points calculated as 30 per-
cent of the percentage increase in the el-
igible employee’s base pay for such first
pay period over the eligible employee’s
base pay for the immediately preceding
pay period (rounded to the nearest whole
percentage). However, under Plan A, the
default contribution percentage may never
exceed 11 percent. For example, the de-
fault contribution percentage for an em-
ployee with default contributions begin-
ning in 2009 would increase by 1 percent-
age point each plan year for pay periods
beginning on or after the employee’s em-
ployment anniversary date (to 5 percent in
2010, 6 percent in 2011, etc., up to 11 per-
cent in 2016 and later plan years), even if
his or her base pay were not to increase. If
the employee’s base pay were to increase
by at least 5 percent during one or more
plan years before 2016, the default con-
tribution percentage would increase to 11
percent even earlier.
Eligible employees are provided no-
tices satisfying the timing and content re-
quirements of section 1.401(k)–1(e)(2)(ii)
of the Income Tax Regulations that explain
the default contribution percentage, auto-
matic increases in the default contribution
percentage in plan years after the first plan
year, and the eligible employees’ right
to elect to have no elective contributions
(including no default contributions) made
to Plan A or to alter the amount of those
contributions.
Plan A provides that elective contribu-
tions are immediately nonforfeitable and,
iftheeligibleemployeehasnotattained
age 59–1/2, cannot be distributed prior to
the eligible employee’s death or severance
from employment, except in the case of
hardship. Plan A also provides that, for
each eligible employee, Employer X will
make matching contributions to Plan A on
account of the eligible employee’s elective
contributions up to a specified percentage
of the eligible employee’s plan compensa-
tion.
Plan A provides that default contribu-
tions and related matching contributions
will, absent a contrary election, be in-
vested in a qualified default investment
alternative (QDIA), as described in sec-
tion 2550.404c–5 of Department of Labor
regulations.
Situation 2
Employer Y maintains Plan B, a profit-
sharingplanintendedtosatisfythere-
quirements of sections 401(a), 401(k), and
401(m), and maintained on a calendar-year
basis.PlanBisalsointendedtosatisfythe
requirements to be a qualified automatic
contribution arrangement and an eligible
automatic contribution arrangement.
Under Plan B, any eligible employee
of Employer Y may affirmatively elect
to receive his or her compensation en-
tirely in cash or to have Employer Y make
specified contributions on the eligible
employee’s behalf to Plan B in lieu of
receiving those amounts as cash com-
pensation. Subject to certain limitations
set forth in Plan B, the eligible employee
may designate the amount of these elec-
tive contributions as a percentage of the
eligible employee’s “plan compensation,”
defined under Plan B.
Under Plan B, if any eligible employee
of Employer Y does not affirmatively
elect to receive cash or to have a specified
amount contributed to Plan B, default con-
tributions are automatically contributed to
Plan B (with a corresponding reduction in
the eligible employee’s cash compensa-
tion) beginning with the first pay period
of the first plan year of the eligible em-
ployee’s participation in the automatic
contribution arrangement. For that first
plan year, the default contribution per-
centage is 3 percent of plan compensation.
Any eligible employee may elect at any
time not to make elective contributions
(including not to make default contribu-
tions) or to have Employer Y contribute
to Plan B a different percentage of plan
compensation.
Employer Y usually provides annual in-
creases in compensation for its employees
effective for pay periods beginning on or
after April 1 each year. Under Plan B, for
plan years after the first plan year of the
eligible employee’s participation in the au-
tomatic contribution arrangement, the de-
fault contribution percentage is automat-
ically increased beginning with the first
pay period that begins on or after April
1. The increase in the default contribution
percentage is equal to 1 percentage point.
However, under Plan B, the default con-
tribution percentage may never exceed 10
percent.
Eligible employees are provided no-
tices satisfying the timing and content
requirements of sections 401(k)(13)(E)
and 414(w)(4) that explain the default con-
tribution percentage, automatic increases
to the default contribution percentage in
plan years after the first plan year, and the
eligible employees’ right to elect to have
no elective contributions (including no
default contributions) made to Plan B or
to alter the amount of those contributions.
Plan B provides that elective contri-
butions are immediately nonforfeitable
and, if the eligible employee has not at-
tained age 59–1/2, cannot be distributed
prior to the eligible employee’s death or
severance from employment, except in
the case of hardship or in the case of a
distribution that satisfies the requirements
of section 414(w)(2). Plan B also pro-
September 28, 20093922009–39 I.R.B.

vides that, for each eligible employee,
Employer Y will make specified matching
contributions to Plan B on account of the
eligible employee’s elective contributions
up to a specified percentage of the eligible
employee’s plan compensation under a
matching formula that satisfies the rules
of sections 401(k)(13)(D)(i)(I), (ii), (iii),
and (iv) and 401(m)(12).
Plan B provides that default contribu-
tions and related matching contributions
will, absent a contrary election, be invested
in a QDIA.
LAW
Automatic Contribution Arrangements
under a Qualified Cash or Deferred
Arrangement
Section 401(k) provides that a profit-
sharing or stock bonusplan, a pre-ERISA
money purchase plan, or a rural cooper-
ative plan can meet the requirements of
section 401(a) even if it includes a quali-
fied cash or deferred arrangement. Section
401(k) also sets forth the requirements that
a cash or deferred arrangement must sat-
isfy in order to be a qualified cash or de-
ferred arrangement.
Section 1.401(k)–1(a)(2)(i) defines a
cash or deferred arrangement as an ar-
rangement under which an employee may
make a cash or deferred election with re-
spect to contributions to, or accruals or
other benefits under, a plan that is intended
to satisfy the requirements of section
401(a).
Section 1.401(k)–1(a)(3)(i) defines a
cash or deferred election as any election
(or modification of an earlier election) by
an employee to have the employer either
provide an amount to the employee in
the form of cash (or some other taxable
benefit) that is not currently available or
contribute an amount to a trust (or provide
an accrual or other benefit) under a plan
deferring the receipt of compensation.
Section 1.401(k)–1(a)(3)(ii) provides
that, for purposes of determining whether
an election is a cash or deferred election,
it is irrelevant whether the default that
applies in the absence of an affirmative
election is (1) for the employee to receive
an amount in cash or some other taxable
benefit or (2) for the employer to con-
tribute an amount to a trust or provide
an accrual or other benefit under a plan
deferring the receipt of compensation.
Section 1.401(k)–1(e)(2)(ii) provides
that a qualified cash or deferred arrange-
ment must provide an employee with an
effective opportunity to make (or change)
a cash or deferred election at least once
during each plan year, and that whether
an employee has an effective opportunity
is determined based on all the relevant
facts and circumstances, including the ad-
equacy of notice of the availability of the
election, the period of time during which
an election may be made, and any other
conditions on elections.
Qualified Automatic Contribution
Arrangements (Automatic Enrollment
Nondiscrimination Safe Harbor)
In general, section 401(k)(3) imposes
nondiscrimination standards on qualified
cash or deferred arrangements, including
an actual deferral percentage (ADP) test.
Similarly, in general, section 401(m) im-
poses nondiscrimination standards on em-
ployer matching contributions made to a
definedcontributionplanonbehalfofthe
employee, including anactual contribution
percentage (ACP) test.
Sections 401(k)(13) and 401(m)(12)
provide alternative design-based safe har-
bors for a cash or deferred arrangement
that provides for automatic contributions
at a specified level and meets certain em-
ployer matching contribution (or employer
nonelective contribution), uniformity, no-
tice, and other requirements. A cash or
deferred arrangement that satisfies these
requirements is a qualified automatic con-
tribution arrangement that is treated as
satisfying the ADP test and the ACP test.
Sections 1.401(k)–3 and 1.401(m)–3
prescribe rules for qualified automatic
contribution arrangements. These rules in-
clude, under section 1.401(k)–3(j)(1)(i), a
requirement that the default election under
a qualified automatic contribution arrange-
ment be a contribution equal to a qualified
percentage multiplied by the employee’s
eligible compensation from which elective
contributions are permitted to be made
under the cash or deferred arrangement.
Under section 1.401(k)–3(j)(2), in gen-
eral a default contribution percentage is
a qualified percentage only if it is uni-
form for all eligible employees, does not
exceed 10 percent, and satisfies certain
minimum percentage requirements. Un-
der section 1.401(k)–3(j)(2)(iii), several
exceptions to the uniformity requirement
apply, including that a plan does not fail to
satisfy the uniformity requirement merely
because the default contribution percent-
age varies based on the number of years
(or portions of years) since the begin-
ning of the initial period for an employee.
For this purpose, the initial period begins
when the employee first has contributions
made pursuant to a default election under
an arrangement that is intended to be a
qualified automatic contribution arrange-
ment for a plan year and ends on the last
day of the following plan year. Section
1.401(k)–3(j)(2)(ii) sets out the minimum
percentage requirements. In general, the
minimum percentage is 3 percent for the
initial period. The minimum percentage
is 4 percent for the next succeeding plan
year, 5 percent for the next succeeding
plan year, and 6 percent for all succeeding
plan years.
Eligible Automatic Contribution
Arrangements (Permitting 90-day
Withdrawals)
Section 414(w) provides limited re-
lief from generally-applicable distribution
restrictions under sections 401(k)(2)(B),
403(b)(7), 403(b)(11), and 457(d)(1)(A)
in the case of an eligible automatic contri-
bution arrangement. In particular, sections
414(w)(1) and 414(w)(2) provide that
an applicable employer plan that con-
tains an eligible automatic contribution
arrangement is permitted to allow em-
ployees, within 90 days after the date of
the first default contribution with respect
to the employee under the arrangement,
to elect to receive a distribution equal
to the amount of default contributions
(and attributable earnings) made with re-
spect to the employee beginning with the
first payroll period to which the eligible
automatic contribution arrangement ap-
plies to the employee and ending with the
effective date of the election. Sections
414(w)(1)(A) and 414(w)(1)(B) provide
that the amount of the distribution is in-
cludible in gross income for the taxable
year in which the distribution is made, but
is not subject to the additional income tax
under section 72(t). Under section 414(w),
an automatic contribution arrangement
must satisfy uniformity, notice, and other
2009–39 I.R.B.393September 28, 2009

requirements in order to be an eligible
automatic contribution arrangement.
Section 1.414(w)–1 prescribes rules
under section 414(w), including, under
section 1.414(w)–1(b)(2)(i), that the de-
fault contribution election under an eli-
gible automatic contribution arrangement
be a uniform percentage of compensa-
tion. Under section 1.414(w)–1(b)(2)(ii),
several exceptions to the uniformity re-
quirement apply by cross-reference to
section 1.401(k)–3(j)(2)(iii), including a
modified version of the exception under
which a plan does not fail to satisfy the
uniformity requirement merely because
the default contribution percentage varies
based on the number of years (or portions
of years) since the beginning of the initial
period for an employee.
ANALYSIS
Situation 1
The default contributions made for an
eligible employee in Situation 1 are elec-
tive contributions made pursuant to a cash
or deferred election and satisfy the require-
ment in section 1.401(k)–1(a)(3)(i) that
the amount that each eligible employee
may defer as an elective contribution be
available to the eligible employee in cash
(or some other taxable benefit). Pursuant
to section 1.401(k)–1(a)(3)(ii), the elec-
tion is a cash or deferred election and the
contributions are elective contributions
even though the contributions are made
pursuant to a default election in the ab-
sence of an affirmative election.
Because a default contribution per-
centage can be increased or otherwise
changed over time pursuant to a plan-spec-
ified schedule, the default contributions
in Situation 1 do not cease to be elective
contributions merely because default con-
tribution percentages increase over time
and such increases are, in part, determined
by reference to the amount of, and are
scheduled to take effect at or by reference
to the time of, future increases in base pay.
The structure of increases in the default
contribution percentage for years after the
first plan year of an eligible employee’s
participation in the automatic contribution
arrangement results in default contribution
percentages for eligible employees that are
not uniform percentages of plan compen-
sation for all eligible employees, and the
percentages do not vary based solely on
the number of years (or portions of years)
since the beginning of the initial period de-
scribedinsection1.401(k)–3(j)(2)(iii)(A).
However, because the automatic con-
tribution arrangement in Situation 1 is
not intended to be an eligible automatic
contribution arrangement or a qualified
automatic contribution arrangement, this
nonuniformity is permissible.
Situation 2
The default contributions described
in Situation 2 are elective contributions
made pursuant to cash or deferred elec-
tions and satisfy the requirement in sec-
tion 1.401(k)–1(a)(3)(i) that the amount
that each eligible employee may defer as
an elective contribution be available to
the eligible employee in cash (or some
other taxable benefit). Pursuant to section
1.401(k)–1(a)(3)(ii), the election is a cash
or deferred election and the contributions
are elective contributions even though
the contributions are made pursuant to a
default election in the absence of an affir-
mative election.
The default contributions described in
Situation 2 do not cause the arrangement
to fail to satisfy the requirements for a
qualified automatic contribution arrange-
ment and an eligible automatic contribu-
tion arrangement. In particular, the pro-
visions in Plan B under which, for plan
years after the first plan year of an eligible
employee’s participation in the automatic
contribution arrangement, the default con-
tribution percentage is automatically in-
creased beginning with the first pay pe-
riod that begins on or after April 1, do not
cause Plan B to fail theuniformity require-
ment of sections 1.401(k)–3(j)(2)(i) and
1.414(w)–1(b)(2)(i). The increases are eli-
gible for an exception to the uniformity re-
quirement because they apply in the same
manner to all eligible employees for whom
the same number of years or portions of
years have elapsed since default contribu-
tions were first made for them under the
automatic contribution arrangement.
Also, the default contribution percent-
ages for each plan year after the first plan
year satisfy the minimum default contri-
bution percentage requirements of section
1.401(k)–3(j)(2)(ii) for periods beginning
both before and on or after April 1 of
such a plan year. This is because, under
section 1.401(k)–3(j)(2)(ii)(B), the min-
imum default contribution percentage of
4 percent is not required to apply until
after the end of the plan year following the
first plan year of an eligible employee’s
participation in the automatic contribution
arrangement, whereas, under Plan B, the
increased default contribution percentage
of 4 percent applies earlier, beginning
with the first pay period that begins on or
after April 1 of the plan year following
the first plan year. Similarly, the mini-
mum default contribution percentages of
5 percent and 6 percent set out in section
1.401(k)–3(j)(2)(ii)(C) and (D) are satis-
fied under Plan B earlier than required.
Alternatively, if under Plan B increased
default contribution percentages had not
begun to apply until April 1 of the second
plan year following the first plan year, the
minimum default contribution percentage
requirements could have been satisfied
by using an initial default contribution
percentage of 4 percent (rather than 3 per-
cent).
HOLDINGS
1.Default contributions to a
profit-sharing plan will not fail to be
considered elective contributions merely
because they are made pursuant to an
automatic contribution arrangement un-
der which an eligible employee’s default
contribution percentage automatically in-
creases in plan years after the first plan
year of the eligible employee’s participa-
tion in the automatic contribution arrange-
ment based in part on increases in the
eligible employee’s plan compensation.
2. Default contributions under an au-
tomatic contribution arrangement will not
fail to satisfy the qualified percentage re-
quirement (including uniformity and min-
imum percentage requirements) relating to
a qualified automatic contribution arrange-
ment or the uniformity requirement relat-
ing to an eligible automatic contribution
arrangement merely because default con-
tributions are made pursuant to an arrange-
ment under which the default contribution
percentage for all eligible employees in-
creases on a date other than the first day
of a plan year.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Roger Kuehnle of the Employee
September 28, 20093942009–39 I.R.B.

Plans, Tax Exempt and Government En-
tities Division. Questions regarding this
revenue ruling may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
Annual paid time off contributions.
This ruling provides guidance on the
tax consequences of an amendment to a
tax-qualified retirement plan to permit
annual contributions of an employee’s un-
used paid time off under the employer’s
paid time off plan. A paid time off plan
generally refers to a sick and vacation
arrangement that provides for paid leave
whether the leave is due to illness or in-
capacity. The amendment relates to a
contribution (including a section 401(k)
contribution) or cash out of the unused
paid time off, determined as of the end of
the plan year (December 31). Rev. Rul.
2009–31 is companion guidance to Rev.
Rul. 2009–32 and is part of the “Savings
Initiative’ guidance issued by the Service.
Rev. Rul. 2009–31
ISSUES
1. Do the amendments described below
to an existing qualified profit-sharing
plan requiring or permitting certain
annual contributions of the dollar
equivalent of unused paid time off
cause the plan to fail to meet the re-
quirements of § 401(a) and, if applica-
ble, § 401(k) of the Internal Revenue
Code (Code)?
2. When is a participant required to
recognize gross income with respect
to the contributions to the qualified
profit-sharing plan and payments to
the participant as described below?
FACTS
For purposes of each situation below, it
is assumed that the employer is a corpora-
tion to which subchapter C of Chapter 1,
Subtitle A, of the Code applies; that each
participant is an individual who accounts
for gross income under the cash receipts
and disbursements method of accounting
and has a calendar year taxable year; that
all employees of the employer are eligible
to participate in the paid time off plan (the
PTO Plan) on substantially the same terms
and conditions; that prior to its amend-
ment, the PTO Plan qualifies as a bona fide
sick and vacation leave plan for purposes
of § 409A and § 1.409A–1(a)(5) of the In-
come Tax Regulations; that all payments
for paid time off (whether paid for used or
unused time off) are made from the gen-
eral assets of the employer; and that the
employer has two-week pay periods. For
this purpose, a paid time off plan refers to a
sick and vacation leave plan under which a
participant may take paid leave without re-
gard to whether the leave is due to illness
or incapacity.
Situation 1
Company Z maintains the Company Z
PTO Plan (Z PTO Plan), under which all
participants are granted up to 240 hours of
paid time off each January 1 (prorated for
new hires commencing employment dur-
ing the calendar year), with the number
of hours depending solely on the partici-
pant’s number of years of service. For this
purpose, salaried employees are treated as
working 8 hours per work day. Under the
ZPTOPlan,nounusedpaidtimeoffhours
remaining as of the close of business on
December 31 may be carried over to the
following year.
Company Z also maintains the Com-
pany Z Profit Sharing Plan (Z Profit Shar-
ing Plan), which is a profit-sharing plan
that, without regard to the amendment de-
scribed in this Situation 1, meets the re-
quirements of § 401(a). The Z Profit Shar-
ing Plan includes a qualified cash or de-
ferred arrangement under § 401(k) that
provides for elective contributions and that
does not provide forcatch-up contribu-
tions under § 414(v). The Z Profit Sharing
Plan has a calendar year plan year and lim-
itation year.
In December 2008, Company Z
amended the Z Profit Sharing Plan and the
Z PTO Plan, effective January 1, 2009, to
provide that (1) the dollar equivalent of
any unused paid time off as of the close
of business on December 31 is forfeited
under the Z PTO Plan and the dollar equiv-
alent of the amount forfeited is contributed
to the Z Profit Sharing Plan and allocated
to the participant’s account as of Decem-
ber 31, to the extent the contribution (in
combination with prior annual additions)
does not exceed the applicable limitations
under § 415(c), and (2) the dollar equiva-
lent of any remaining paid time off is paid
totheemployeebyFebruary28ofthe
following year. Under the Z Profit Sharing
Plan, the amounts attributable to paid time
off are in addition to other contributions
under the plan and are treated as nonelec-
tive contributions. For these purposes, the
dollar equivalent of the unused paid time
off is determined as the number of hours
of unused paid time off multiplied by the
participant’s hourly rate of compensation
as of December 31 of that year (deter-
mined for salaried employees by treating
the employee as working 8 hours per work
day).
A is an employee of Company Z who
participates in the Z PTO Plan and the
Z Profit Sharing Plan. As of the close
of business on December 31, 2009, A
has 20x hours of unused paid time off
and earns $25 per hour, and therefore the
dollar equivalent of A’s unused paid time
off is $500x. Because of the application of
the limitations under § 415(c), Company
Z may contribute only $400x of unused
paid time off to the Z Profit Sharing Plan
for allocation to A’s account in the 2009
limitation year (in combination with prior
annual additions).
Company Z contributes $400x to the
Z Profit Sharing Plan on behalf of A
on February 28, 2010, and allocates this
amount to A’s account under the Z Profit
Sharing Plan as of December 31, 2009.
Company Z pays A the remaining $100x
in cash on February 28, 2010.
Situation 2
Company Y maintains the Company Y
PTO Plan (Y PTO Plan), under which par-
ticipants ratably accrue up to 240 hours
of paid time off each calendar year on a
pay-period basis beginning on January 1
and at the end of the year may carry over
to the following year an amount of un-
used paid time off not to exceed a speci-
fied number of hours (the carryover limit).
For this purpose, salaried employees are
treated as working 8 hours per work day.
The dollar equivalent of any unused paid
time off for a year in excess of the carry-
over limit is paid to the participant by Feb-
ruary 28 of the following year.
Company Y also maintains the Com-
pany Y Section 401(k) Plan (Y 401(k)
Plan), which is a profit-sharing plan that,
without regard to the amendment de-
scribed in this Situation 2, meets the
requirements of § 401(a). The Y 401(k)
2009–39 I.R.B.395September 28, 2009

Plan includes a qualified cash or deferred
arrangement under § 401(k) that provides
for elective contributions and that does not
provide for catch-up contributions under
§ 414(v). The Y 401(k) Plan has a calen-
dar year plan year and limitation year.
In December 2008, Company Y
amended the Y 401(k) Plan and the Y
PTO Plan, effective January 1, 2009, to
provide that a participant may elect to
reduce all or part of the dollar equivalent
ofanyunusedpaidtimeoffthatmaynot
be carried over to the following year and
have that amount contributed by Company
Y to the Y 401(k) Plan and allocated to the
participant’s account as of the beginning
of the third pay period of the following
year, to the extent that the contribution (in
combination with prior annual additions)
does not exceed the applicable limitations
under § 415(c) and to the extent that the
contributions (in combination with prior
elective deferrals) do not exceed the appli-
cable limitation under § 401(a)(30). Under
the terms of the Y 401(k) Plan, contribu-
tions of the dollar equivalent of paid time
off are in addition to other contributions
under the Y 401(k) Plan and are treated
as elective contributions (for example, the
same distribution restrictions apply). The
dollar equivalent of any unused paid time
off that is not contributed to the Y 401(k)
Plan under the terms of the amended Y
PTOPlanispaidtotheparticipantby
February 28 of the following year. For
these purposes, the dollar equivalent of
the unused paid time off is determined as
the number of hours of unused paid time
off multiplied by the participant’s hourly
rate of compensation as of December 31
of the initial year (determined for salaried
employees by treating the employee as
working 8 hours per work day).
B is an employee of Company Y who
participates in the Y PTO Plan and the Y
401(k) Plan. As of the close of business
on December 31, 2009, B has 15x hours
of unused paid time off in excess of the
carryover limit and earns $30 per hour, so
the dollar equivalent of B’s unused paid
time off in excess of the carryover limit is
$450x.
Pursuant to a valid and timely election,
B elects to have 60% of the dollar equiv-
alent of the unused paid time off in ex-
cess of the carryover limit, or $270x, con-
tributed to the Y 401(k) Plan, the contribu-
tion of which would not cause the plan to
exceed the limitationsunder §§ 401(a)(30)
and 415(c) for the applicable year. On
February 1, 2010, Company Y contributes
$270x to the Y 401(k) Plan and allocates
$270x to B’s account under the plan as of
February 1, 2010. Under the terms of the
Y 401(k) Plan, this amount is treated as a
contribution for the 2010 plan year. Com-
pany Y pays B the remaining $180x on
February 1, 2010.
LAW
Section 401(a) provides that a trust cre-
ated or organized in the United States and
forming part of a stock bonus, pension, or
profit-sharing plan of an employer for the
exclusive benefit of its employees or their
beneficiaries constitutes a qualified trust
under that section if a series of conditions
is met. Section 401(a)(4) provides as one
of those conditions that the contributions
or benefits provided under the plan do not
discriminate in favor of highly compen-
sated employees (within the meaning of
§ 414(q)). A plan maintained pursuant to a
collective bargaining agreement is deemed
to satisfy the nondiscrimination require-
ments. In other cases, under the regula-
tions under § 401(a)(4), the amount of non-
elective contributions under a profit-shar-
ing plan must satisfy either a design-based
safe harbor or a test based on the contribu-
tions made for individual participants.
Section 401(a)(30) of the Code pro-
vides that in the case of a trust which is
part of a plan under which elective defer-
rals (within the meaning of § 402(g)(3))
may be made with respect to any individ-
ual during a calendar year, such trust does
not constitute a qualified trust unless the
plan provides that the amount of such de-
ferrals under such plan and all other plans,
contracts, or arrangements of an employer
maintaining such plan may not exceed the
amount of the limitation in effect under
§ 402(g)(1)(A) for taxable years beginning
in such calendar year. Under § 402(g)(3),
elective contributions under a qualified
cash or deferred arrangement are included
in the definition of elective deferrals.
Section 401(k)(2)(A) provides, in perti-
nent part, that a qualified cash or deferred
arrangement is any arrangement which is
part of a profit sharing plan or stock bonus
plan, a pre-ERISA money purchase plan,
or a rural cooperative plan, which meets
the requirements of § 401(a), and under
which a covered employee may elect to
have the employer make payments as con-
tributions to a trust under the plan on be-
half of the employee, or to the employee
directly in cash.
Section 1.401(k)–1(a)(3)(i) provides
that a cash or deferred election is any
election by an employee to have the em-
ployer either: (A) provide an amount to
the employee in the form of cash or some
other taxable benefit that is not currently
available or (B) contribute an amount to a
trust, or provide an accrual or other ben-
efit, under a plan deferring the receipt of
compensation.
Section1.401(k)–6defines nonelective
contributions as employer contributions
(other than matching contributions) with
respect to which the employee may not
elect to have the contributions paid to the
employee in cash or other benefits instead
of being contributed to the plan. Section
1.401(k)–6 defines elective contributions
as contributions made pursuant to a cash or
deferred election under a cash or deferred
arrangement (whether or not qualified).
Under § 401(k)(3)(A)(ii), elective con-
tributions under a qualified cash or de-
ferred arrangement generally must satisfy
the actual deferral percentage test. Section
1.401(k)–2(a)(4)(i) provides generally that
for purposes of the actual deferral percent-
age test, elective contributions are taken
into account for a yearif the elective con-
tribution is allocated to the participant’s
account under the plan as of a date within
that year, and certain other requirements
are satisfied.
Section 402(a) provides that any
amount actually distributed to any dis-
tributee by an employees’ trust described
in § 401(a) which is exempt from tax un-
der § 501(a) is taxable to the distributee in
the taxable year of the distributee in which
distributed, under § 72. Section 72(t) pro-
vides, in pertinent part, that the income
tax applicable to any amount a participant
receives from a qualified plan generally is
increased by an amount equal to 10 percent
of the portion of the amount includible
in gross income unless the amounts are
distributed on or after the date on which
the participant attains age 59
1
/2or after the
participant’s separation from service after
attainment of age 55.
Section 402(e)(3) provides, in pertinent
part, that contributions made by an em-
ployer on behalf of an employee to a trust
September 28, 20093962009–39 I.R.B.

which is part of a qualified cash or deferred
arrangement (as defined in § 401(k)(2)) are
not treated as distributed or made available
to the employee nor as contributions made
tothetrustbytheemployeemerelybe-
cause the arrangement includes provisions
under which the employee has an election
whether the contribution will be made to
the trust or received by the employee in
cash.
Section 415(a)(1)(B) provides that a
trust which is part of a pension, profit-shar-
ing, or stock bonus plan shall not consti-
tute a qualified trust under § 401(a) if in
the case of a defined contribution plan,
contributions and other additions under
the plan with respect to any participant
for any taxable year exceed the limitation
of § 415(c). Section 415(c)(1) provides
that contributions and other additions with
respect to a participant exceed the limi-
tationof§415(c)if,whenexpressedas
an annual addition to the participant’s ac-
count, the annual addition is greater than
the lesser of $40,000 or 100 percent of
the participant’s compensation. Section
415(d)(1)(C) provides that the Secretary
shall adjust annually the $40,000 amount
for increases in the cost-of-living.
Section 1.415(c)–1(b)(1)(i) generally
defines the term “annual addition” as
the sum, credited to a participant’s ac-
count for any limitation year, of (A)
employer contributions; (B) employee
contributions; and (C) forfeitures. Under
§ 1.415(c)–1(b)(6), an annual addition
generally is treated as credited to the
account of a participant for a particular
limitation year if it is allocated to the par-
ticipant’s account under the terms of the
plan as of any date within that limitation
year.
Section 415(c)(3)(A) provides that, in
general, the term “participant’s compensa-
tion” means the compensation of the par-
ticipant from the employer for the year.
Section 1.415(c)–2(b)(1) provides that, for
purposes of § 415, compensation includes
amounts received for personal services ac-
tually rendered in the course of employ-
ment with the employer maintaining the
plan, to the extent that the amounts are
includible in gross income (or to the ex-
tent the amounts would have been received
and includible in gross income but for cer-
tain elections, including an election de-
scribed in § 402(e)(3)). However, un-
der § 1.415(c)–2(b)(2), contributions by an
employer to a plan of deferred compen-
sation (other than certain elective contri-
butions described in § 402(e)(3)) are not
included in compensation for purposes of
§ 415.
Section 1.415(c)–2(e)(1)(i) states in
pertinent part that, in order to be taken
into account for a limitation year, com-
pensationwithinthemeaningofsection
415(c)(3) must be actually paid or made
available to an employee (or, if earlier,
includible in the gross income of the em-
ployee) within the limitation year. Section
1.415(c)–2(e)(1)(ii) states in pertinent
part that, except as otherwise provided
in § 1.415(c)–2(e), in order to be taken
into account for a limitation year, com-
pensationwithinthemeaningofsection
415(c)(3) must be paid or treated as paid
to the employee (inaccordance with the
rules of § 1.415–2(e)(1)(i)) prior to the
employee’s severance from employment
with the employer maintaining the plan.
Section 451(a) and § 1.451–1(a) pro-
vide that an item of gross income is in-
cludible in gross income in the taxable year
in which it is actually or constructively re-
ceived by a taxpayer using the cash re-
ceipts and disbursements method of ac-
counting. Under § 1.451–2(a), income is
constructively received in the taxable year
during which it is credited to a taxpayer’s
account, set apart or otherwise made avail-
able so that the taxpayer may draw on it
at any time. However, income is not con-
structively received if the taxpayer’s con-
trol of its receipt is subject to substantial
limitations or restrictions.
Section 409A(a)(1)(A)(i) provides, in
pertinent part, that if at any time during a
taxable year a nonqualified deferred com-
pensation plan fails to meet certain re-
quirements set forth under § 409A(a), or
is not operated in accordance with such re-
quirements, all compensation deferred un-
der the plan for the taxable year and all
preceding taxable years shall be includible
in gross income for the taxable year to the
extent not subject to a substantial risk of
forfeiture and not previously included in
gross income. Section 409A(a)(1)(B) pro-
vides, in pertinent part, that any compen-
sation required to be included in gross in-
come under § 409A(a)(1)(A) for a taxable
year shall be subject tothe additional taxes
set forth in § 409A(a)(1)(B).
Section 409A(d)(1) provides that the
term “nonqualified deferred compensa-
tion plan” means any plan that provides
for the deferral of compensation, other
than: (A) a qualified employer plan and
(B) anybona fidevacation leave, sick
leave, compensatorytime, disability pay,
or death benefit plan. Section 409A(d)(2)
provides, in pertinent part, that the term
“qualified employer plan” means any
plan, contract, pension, account or trust
described in § 219(g)(5)(A) or (B) (with-
out regard to § 219(g)(5)(A)(iii)). Section
219(g)(5)(A)(i) refers to a plan described
in § 401(a), which includes a trust exempt
from tax under § 501(a).
ANALYSIS
Situation 1
The amendment of the Z Profit Sharing
Plan to require certain contributions of the
dollar equivalent of unused paid time off
to the Z Profit Sharing Plan does not cause
the Z Profit Sharing Plan to fail to meet
the requirements of § 401(a), provided
that the contributions made pursuant to
the arrangement satisfy the nondiscrim-
ination requirements of § 401(a)(4) (in
combination with other contributions and
forfeitures allocated for the year). Be-
cause A is not provided a right to elect
a payment of the dollar equivalent of the
unused paid time off in lieu of a plan
contribution, Company Z’s contribution
of $400x to the Z Profit Sharing Plan is
not an elective contribution that is made
pursuant to a cash or deferred election
within the meaning of § 401(k)(2)(A) and
§ 1.401(k)-(1)(a)(3)(i). Rather, Company
Z’s contribution to the Z Profit Sharing
Plan is a nonelective employer contribu-
tion within the meaning of § 1.401(k)–6.
The amount contributed and allocated
for each participant will vary based on the
amount of the participant’s unused paid
time off. Thus, contributions for unused
paid time off are likely to preclude a plan
from satisfying a design-based safe har-
bor under § 401(a)(4). Therefore, testing
based on the contributions made for in-
dividual participants generally will be re-
quired.
The contributions made pursuant to the
arrangement must also not exceed the lim-
itations under § 415(c) (in combination
with prior annual additions). Because the
contributionof$400xonbehalfofAwas
allocated to A’s account as of December
2009–39 I.R.B.397September 28, 2009

31, 2009, and made February 28, 2010
(before the end of the 30 day period fol-
lowing the deadline for Company Z to file
its income tax return), it is subject to the
limitations under § 415(c) applicable for
the 2009 limitation year and is taken into
account for § 401(a)(4) purposes for the
2009 plan year. Under the facts presented,
the contribution of $400x does not cause
the plan to exceed the limitations under
§ 415(c).
If the requirements of § 401(a)(4) are
met, the amount contributed will be in-
cludible in A’s gross income in accordance
with § 402(a) only when distributed to
A. Like any other distribution from the
Z Profit Sharing Plan, the distribution of
amounts attributable to the dollar equiva-
lent of the unused paid time off is subject to
an additional 10% income tax under § 72(t)
unless the distribution satisfies one of the
exceptions described in § 72(t)(2), such as
being made on or after the date on which
the participant attains age 59
1
/2or after the
participant separates from service after at-
tainment of age 55.
Under the Z PTO Plan as amended, the
dollar equivalent of unused paid time off
is not paid, set apart, or otherwise made
availablesothatAmaydrawoniteither(i)
during the 2009 calendar year or (ii) upon
conversion in 2009 to a contribution to a
qualified plan or cash payment in 2010.
Therefore, under the doctrine of construc-
tive receipt and § 451, such amount is not
includible in A’s gross income in 2009. In
addition, the amendment to the Z PTO Plan
and the operation of the plan in accordance
with the terms of the amendment do not
cause the Z PTO Plan to fail to qualify as a
bona fide sick and vacation leave plan for
purposes of § 409A and § 1.409A–1(a)(5).
The $100x payment is includible in A’s
gross income in 2010, the taxable year in
whichitispaidtoA.
Situation 2
The amendment of the Y 401(k) Plan
to permit certain contributions of the
dollar equivalent of unused paid time
off to the Y 401(k) Plan does not cause
the Y 401(k) Plan to fail to meet the
requirements of §§ 401(a) and 401(k),
provided that the contributions (taking
into account other contributions, prior
deferrals, and prior annual additions, as
applicable) satisfy the nondiscrimination
requirements of § 401(k) and the
applicable limitations of §§ 401(a)(30)
and 415(c).
Because B is provided a right to elect
either a payment of cash or a plan contri-
bution for the dollar equivalent of unused
paid time off that may not be carried over
to the subsequent year, Company Y’s con-
tribution of $270x to the Y 401(k) Plan and
allocation to B’s account under the plan
is an elective contribution. Because the
contribution is made on February 1, 2010
and is not treated as allocated for 2009, it
is taken into consideration for the nondis-
crimination requirements of § 401(k) and
the limitations of §§ 401(a)(30) and 415(c)
for 2010.
Under the facts presented, the allo-
cation of $270x would not cause the
Y 401(k) Plan to exceed the limitations
of § 415(c) for the 2010 limitation year.
Although the dollar equivalent of the
unused paid time off was made available
to D in 2010, pursuant to § 402(e)(3), the
$270x is not treated as made available
to D if the amount was contributed to
the plan as part of a qualified cash or
deferred arrangement. If the requirements
of §§ 401(k) and 401(a)(30) are met, the
contribution will have been made pursuant
to a qualified cash or deferred arrangement
under § 401(k) and will be includible in B’s
gross income in accordance with § 402(a)
only when distributed to B. Like any other
distribution from the Y 401(k) Plan, the
distribution of amounts attributable to the
dollar equivalent of the unused paid time
off is subject to an additional 10% income
tax under § 72(t) unless the distribution
satisfies one of the exceptions described in
§ 72(t)(2), such as being made on or after
the date on which the participant attains
age 59
1
/2or after the participant separates
from service after attainment of age 55.
Under the Y PTO Plan, as amended, the
dollar equivalent of unused paid time off
is not paid, set apart, or otherwise made
availablesothatBmaydrawoniteither(i)
during the 2009 calendar year or (ii) upon
conversion in 2009 to a contribution to a
qualified plan or cash payment in 2010.
Therefore, under the doctrine of construc-
tive receipt and § 451,such amount is not
includible in B’s gross income in 2009.
In addition, the amendment to the Y PTO
Plan and the operation of the plan in ac-
cordance with the terms of the amendment
do not cause the Y PTO Plan to fail to
qualify as abona fidesick and vacation
leave plan for purposes of § 409A and
§ 1.409A–1(a)(5). The $180x payment is
includible in B’s gross income in 2010, the
taxable year in which it is paid to B.
HOLDING
1. Under the facts presented, the amend-
ments requiring or permitting certain
contributions of the dollar equivalent
of unused paid time off to a qualified
profit-sharing plan do not cause the
plan to fail to meet the qualification
requirements of § 401(a), provided
that the contributions satisfy the ap-
plicable requirements of §§ 401(a)(4)
and 415(c) and, where applicable,
§§ 401(k) and 401(a)(30).
2. Under the facts presented, assuming
the applicable qualification require-
ments are satisfied, a participant does
not include in gross income contribu-
tions of the dollar equivalent of un-
used paid time off to the profit-shar-
ing plan in accordance with § 402(a)
until distributions are made to the par-
ticipant from the plan and does not in-
clude in gross income an amount paid
for the dollar equivalent of unused
paid time off that is not contributed
to the profit-sharing plan until the tax-
able year in which the amount is paid
to the participant.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Robert Gertner, Roger Kuehnle,
and Alice Lynch of the Employee Plans,
Tax Exempt and Government Entities
Division. Questions regarding this rev-
enue ruling may be sent via e-mail to
retirementplanquestions@irs.gov.
Paid time off contributions at termi-
nation of employment.This ruling pro-
vides guidance on the tax consequences
of an amendment to a tax-qualified retire-
ment plan to permit contributions for an
employee’s accumulated and unused paid
time off under the employer’s paid time
off plan at a participant’s termination of
employment. A paid time off plan gener-
ally refers to a sick and vacation arrange-
ment that provides for paid leave whether
the leave is due to illness or incapacity.
The amendment relates to a post-severance
September 28, 20093982009–39 I.R.B.

contribution (including a section 401(k)
contribution) or cash out of the accumu-
lated and unused paid time off. Rev. Rul.
2009–32 is companion guidance to Rev.
Rul. 2009–31 and is part of the “Savings
Initiative” guidance issued by the Service.
Rev. Rul. 2009–32
ISSUES
1. Do the amendments described below
to an existing qualified profit-sharing
plan requiring or permitting certain
contributions to the plan of the dollar
equivalent of unused paid time off at
a participant’s termination of employ-
ment cause the plan to fail to meet the
requirements of § 401(a) and, if ap-
plicable, § 401(k) of the Internal Rev-
enue Code (Code)?
2. When is a participant required to
recognize gross income with respect
to the contributions to the qualified
profit-sharing plan and payments to
the participant as described below?
FACTS
For purposes of each situation below, it
is assumed that the employer is a corpora-
tion to which subchapter C of Chapter 1,
Subtitle A of the Code applies; that each
participant is an individual who accounts
for gross income under the cash receipts
and disbursements method of accounting
and has a calendar year taxable year; that
all employees of the employer are eligible
to participate in the paid time off plan (the
PTO plan) on substantially the same terms
and conditions; that prior to its amend-
ment, the PTO plan qualifies as a bona fide
sick and vacation leave plan for purposes
of § 409A and § 1.409A–1(a)(5) of the In-
come Tax Regulations; that payments un-
der the PTO plan for unused paid time
off constitute payment for unused accrued
bona fide sick, vacation, or other leave for
purposes of § 1.415(c)–2(e)(3)(iii)(A); that
all payments for paid time off (whether
paid for used or unused time off) are made
from the general assets of the employer;
and that the employer has two-week pay
periods. For this purpose, a paid time off
plan refers to a sick and vacation pay or
leave plan under which a participant may
take paid leave without regard to whether
the leave is due to illness or incapacity.
Situation 1
Company X maintains the Company X
PTO Plan (X PTO Plan), under which all
participants are granted up to 240 hours of
paid time off each January 1 (prorated for
new hires commencing employment dur-
ing the calendar year), with the number
of hours depending solely on the partici-
pant’s number of years of service. For this
purpose, salaried employees are treated as
working 8 hours per work day. Under the
X PTO Plan, a participant at the end of
the year may carry over to the following
year an amount of unused paid time off
not to exceed a specified number of hours
(the carryover limit), and any hours of un-
used paid time off in excess of the carry-
over limit are forfeited. If a participant
terminates employment, the dollar equiva-
lent of any hours of unused paid time off
remaining at the termination of employ-
ment are paid to the terminated participant
within 60 days after the termination of em-
ployment, with the dollar equivalent deter-
mined as the number of hours of unused
paid time off multiplied by the terminated
participant’s hourly rate of compensation
for the pay period during which the partic-
ipant terminates employment (determined
for salaried employees by treating the em-
ployee as working 8 hours per work day).
Company X also maintains the Com-
pany X Profit Sharing Plan (X Profit Shar-
ing Plan), which is a profit-sharing plan
that, without regard to the amendment de-
scribed in this Situation 1, meets the re-
quirements of § 401(a). The X Profit Shar-
ing Plan includes a qualified cash or de-
ferred arrangement under § 401(k) that
provides for elective contributions and that
does not provide forcatch-up contribu-
tions under § 414(v). The X Profit Sharing
Plan has a calendar year plan year and limi-
tation year. The X Profit Sharing Plan pro-
vides that amounts for unused paid time off
paid by the later of 2
1
/2months after termi-
nation of employment with Company X or
the end of the limitation year that includes
thedateoftheseverancefromemployment
are treated as compensation under the plan
for purposes of § 415, to the extent per-
missible under § 415. The X Profit Shar-
ing Plan provides that § 415 compensation
is determined using only amounts actually
paid during the limitation year.
In December 2008, Company X
amended the X Profit Sharing Plan and the
X PTO Plan, effective January 1, 2009,
to provide that the dollar equivalent of
any unused paid time off at the time of a
participant’s termination of employment is
forfeited under the X PTO Plan and is con-
tributed to the X Profit Sharing Plan and
allocated to the participant’s account as of
the first day of the second pay period be-
ginning immediately after the participant’s
termination of employment, to the extent
the contribution (in combination with prior
annual additions) does not exceed the ap-
plicable limitations under § 415(c). Under
the X Profit Sharing Plan, contributions of
the dollar equivalent of paid time off are in
addition to other contributions under the
plan and are treated as nonelective con-
tributions. Under the terms of the X PTO
Plan, the dollar equivalent of any unused
paid time off that is not contributed to the
X Profit Sharing Plan is paid to the termi-
nated participant within 60 days after the
termination of employment. For these pur-
poses, the dollar equivalent of the unused
paid time off is determined as the number
of hours of unused paid time off multiplied
by the terminated participant’s hourly rate
of compensation for the pay period during
which the participant terminates employ-
ment (determined for salaried employees
by treating the employee as working 8
hours per work day).
C is an employee of Company X who
participates in the X PTO Plan and the
X Profit Sharing Plan. C’s employment
terminates on October 1, 2009. As of the
close of business on October 1, 2009, C
has 12x hours of unused paid time off, and
earns $25 per hour, and so has unused paid
time off with a dollar equivalent of $300x.
12x hours does not exceed the sum of the
hours in the remaining work days for 2009
plus the carryover limit.
A contribution of $300x to the X Profit
SharingPlanonbehalfofC,incombi-
nation with prior annual additions, would
not cause C’s total contributions and an-
nual additions to exceed the limitations
under § 415(c) for the 2009 limitation
year. Company X contributes $300x to
the X Profit Sharing Plan on October 19,
2009, and allocates this amount to C’s
account under the X Profit Sharing Plan,
effective as of October 19, 2009.
2009–39 I.R.B.399September 28, 2009

Situation 2
The facts are the same as inSituation 1,
except that C’s employment terminates on
December 28, 2009, and any payment for
unused paid time off on account of termi-
nation will be paid to C in 2010 and will
be the only payment of compensation that
C will receive from Company X in 2010. C
has 12x hours of unused paid time off and
earns $25 per hour, and therefore, has un-
used paid time off with a dollar equivalent
of $300x. The 12x hours of unused paid
time off does not exceed the sum of the
hours in the remaining work days for 2009
plus the carryover limit. The $300x does
not exceed the § 415(c) applicable dollar
limit for 2010. Company X contributes
$150x to the X Profit Sharing Plan on Jan-
uary 18, 2010, and allocates the amount
to C’s account under the X Profit Sharing
Plan as of January 18, 2010. This contri-
bution is not treated as a contribution to the
X Profit Sharing Plan for 2009. Company
X pays the remaining $150x to C on Jan-
uary 18, 2010.
Situation 3
Company W maintains the Company W
PTO Plan (W PTO Plan), under which par-
ticipants ratably accrue up to 240 hours
of paid time off each calendar year on a
pay-period basis beginning on January 1.
For this purpose, salaried employees are
treated as working 8 hours per work day.
Under the W PTO Plan, a specified number
of unused paid time off hours remaining as
of the close of business on December 31
may be carried over to the following year,
and any hours of unused paid time off in
excess of the carryover limit are forfeited.
If a participant terminates employment, the
dollar equivalent of any hours of unused
paid time off remaining at the termina-
tion of employment are paid to the termi-
nated participant within 60 days after the
termination of employment, with the dol-
lar equivalent determined as the number of
hours of unused paid time off multiplied
by the terminated participant’s hourly rate
of compensation for the pay period during
which the participant terminates employ-
ment (determined for salaried employees
by treating the employee as working 8
hours per work day).
Company W also maintains the Com-
pany W Section 401(k) Plan (W 401(k)
Plan), which is a profit-sharing plan that,
without regard to the amendment de-
scribed in this Situation 3, meets the
requirements of § 401(a). The W 401(k)
Plan includes a qualified cash or deferred
arrangement under § 401(k) that does not
provide for catch-up contributions under
§ 414(v). The W 401(k) Plan has a calen-
dar year plan year and limitation year. The
W 401(k) Plan provides that for purposes
of §§ 401(k) and 415(c), amounts con-
tributed to the plan are taken into account
for the year in which falls the date the
amounts are allocated to the participant’s
account under the plan. The W 401(k)
Plan also provides that amounts for un-
used paid time off paid by the later of 2
1
/2
months after termination of employment
with Company W or the end of the lim-
itation year that includes the date of the
severance from employment, are treated as
compensation under the plan for purposes
of § 415, to the extent permissible under
§ 415(c). The W 401(k) Plan provides
that, for purposes of § 415, compensation
is determined by including only amounts
actually paid during the limitation year.
In December 2008, Company W
amended the W 401(k) Plan and the
W PTO Plan, effective January 1,
2009, to provide that a participant may
elect to reduce all or part of the dollar
equivalent of any unused paid time off
at the time of a participant’s termination
of employment and have that amount
contributed by Company W and allocated
to the participant’s account under the
W 401(k) Plan as of the first day of the
second pay period beginning immediately
after the participant’s termination of
employment, to the extent that the
contribution (in combination with prior
annual additions) does not exceed the
applicable limitations under § 415(c)
and to the extent the contributions (in
combination with prior elective deferrals)
do not exceed the applicable limitation
under § 401(a)(30). Under the terms of
the W 401(k) Plan, contributions of the
dollar equivalent of paid time off are in
addition to other contributions and treated
as elective contributions. Under the terms
of the W PTO Plan, the dollar equivalent
ofanyunusedpaidtimeoffthatisnot
contributed to the W 401(k) Plan is paid
to the employee on the first day of the
second pay period beginning immediately
after the participant’s termination of
employment. For these purposes, the
dollar equivalent of the unused paid
time off is determined as the number of
hours of unused paid time off multiplied
by the terminated participant’s hourly
rate of compensation for the pay period
during which the participant terminates
employment (determined for salaried
employees by treating the employee as
working 8 hours per work day).
D is an employee of Company W who
participates in the W PTO Plan and the
W 401(k) Plan. D terminates employment
on October 1, 2009. As of the close of
business on October 1, 2009, D has 15x
hours of unused paid time off, and earns
$20 per hour, and so has unused paid time
off with a dollar equivalent of $300x. 15x
hours does not exceed the sum of the hours
in the remaining work days for 2009 plus
the carryover limit.
D has a valid and timely election in
effect to have 70% of the dollar equivalent
of the unused paid time off contributed
to the W 401(k) Plan. The contribu-
tion of $210x (70% of $300x) would not
exceed the applicablelimitations under
§§ 401(a)(30) and 415(c). Company W
contributes $210x to the W 401(k) Plan
on October 19, 2009, and allocates that
amount to D’s account under the W 401(k)
Plan as of October 19, 2009. Company W
pays the remaining $90x to D on October
19, 2009.
Situation 4
The facts are the same as in Situation 3,
except that D’s employment terminates on
December 28, 2009, and any payment for
unused paid time off on account of termi-
nation will be paid to D in 2010 and will
be the only payment of compensation that
D will receive from Company W in 2010.
As of the close of business on December
28, 2009, D has 15x hours of unused paid
time off, and earns $20 per hour, and so has
unused paid time off with a dollar equiva-
lent of $300x. 15x hours does not exceed
the sum of the hours in the remaining work
days for 2009 plus the carryover limit.
D has a valid and timely election in
effect to have 70% of the dollar equivalent
of the unused paid time off contributed
to the W 401(k) Plan. The contribu-
tion of $210x (70% of $300x) would not
exceed the applicablelimitations under
§§ 401(a)(30) and 415(c). Company W
September 28, 20094002009–39 I.R.B.

contributes $210x to the W 401(k) Plan
on January 18, 2010 and allocates that
amount to D’s account under the W 401(k)
Plan as of January 18, 2010. Company W
pays the remaining $90x to D on January
18, 2010.
LAW
Section 401(a) provides that a trust cre-
ated or organized in the United States and
forming part of a stock bonus, pension, or
profit-sharing plan of an employer for the
exclusive benefit of its employees or their
beneficiaries constitutes a qualified trust
under that section if a series of conditions
is met. Section 401(a)(4) provides as one
of those conditions that the contributions
or benefits provided under the plan do not
discriminate in favor of highly compen-
sated employees (within the meaning of
§ 414(q)). A plan maintained pursuant to a
collective bargaining agreement is deemed
to satisfy the nondiscrimination require-
ments. In other cases, under the regula-
tions under § 401(a)(4), the amount of non-
elective contributions under a profit-shar-
ing plan must satisfy either a design-based
safe harbor or a test based on the contribu-
tions made for individual participants.
Section 401(a)(30) of the Code pro-
vides that in the case of a trust which is
part of a plan under which elective defer-
rals (within the meaning of § 402(g)(3))
may be made with respect to any individ-
ual during a calendar year, such trust does
not constitute a qualified trust unless the
plan provides that the amount of such de-
ferrals under such plan and all other plans,
contracts, or arrangements of an employer
maintaining such plan may not exceed the
amount of the limitation in effect under
§ 402(g)(1)(A) for taxable years beginning
in such calendar year. Under § 402(g)(3),
elective contributions under a qualified
cash or deferred arrangement are included
in the definition of elective deferrals.
Section 401(k)(2)(A) provides, in perti-
nent part, that a qualified cash or deferred
arrangement is any arrangement which is
part of a profit sharing plan or stock bonus
plan, a pre-ERISA money purchase plan,
or a rural cooperative plan, which meets
the requirements of § 401(a), and under
which a covered employee may elect to
have the employer make payments as con-
tributions to a trust under the plan on be-
half of the employee, or to the employee
directly in cash.
Section 1.401(k)–1(a)(3)(i) provides
that a cash or deferred election is any
election by an employee to have the em-
ployer either: (A) provide an amount to
the employee in the form of cash or some
other taxable benefit that is not currently
available or (B) contribute an amount to a
trust, or provide an accrual or other ben-
efit, under a plan deferring the receipt of
compensation.
Section 1.401(k)–6 defines nonelective
contributions as employer contributions
(other than matching contributions) with
respect to which the employee may not
elect to have the contributions paid to the
employee in cash or other benefits instead
of being contributed to the plan. Section
1.401(k)–6 defines elective contributions
as contributions made pursuant to a cash or
deferred election under a cash or deferred
arrangement (whether or not qualified).
Under § 401(k)(3)(A)(ii), elective con-
tributions under a qualified cash or de-
ferred arrangement generally must satisfy
the actual deferral percentage test. Section
1.401(k)–2(a)(4)(i) provides generally that
for purposes of the actual deferral percent-
age test, elective contributions are taken
into account for a year if the elective con-
tribution is allocated to the participant’s
account under the plan as of a date within
that year, and certain other requirements
are satisfied.
Section 402(a) provides that any
amount actually distributed to any dis-
tributee by an employees’ trust described
in § 401(a) which is exempt from tax un-
der § 501(a) is taxable to the distributee
in the taxable year of the distributee in
which distributed, under § 72. Section
72(t) provides, in pertinent part, that the
income tax applicable to any amount a
participant receives from a qualified plan
generally is increased by an amount equal
to 10 percent of the portion of the amount
includible in gross income unless such
amounts are distributed on or after the date
on which the participant attains age 59
1
/2
or after the participant’s separation from
service after attainment of age 55.
Section 402(e)(3) provides, in pertinent
part, that contributions made by an em-
ployer on behalf of an employee to a trust
which is part of a qualified cash or deferred
arrangement (as defined in § 401(k)(2)) are
not treated as distributed or made available
to the employee nor as contributions made
to the trust by the employee merely be-
cause the arrangement includes provisions
under which the employee has an election
whether the contribution will be made to
the trust or received by the employee in
cash.
Section 415(a)(1)(B) provides that a
trust which is part of a pension, profit-shar-
ing, or stock bonus plan does not constitute
a qualified trust under § 401(a) if in the
case of a defined contribution plan, contri-
butions and other additions under the plan
with respect to any participant for any tax-
able year exceed the limitation of § 415(c).
Section 415(c)(1) provides that contribu-
tions and other additions with respect to a
participant exceed the limitation of § 415
if, when expressed as an annual addition
to the participant’s account, the annual ad-
dition is greater than the lesser of $40,000
or 100 percent of the participant’s com-
pensation. Section 415(d)(1)(C) provides
that the Secretary shall adjust annually
the $40,000 amount for increases in the
cost-of-living in accordance with regula-
tions prescribed by the Secretary.
Section 1.415(c)–1(b)(1)(i) generally
defines the term “annual addition” as
the sum, credited to a participant’s ac-
count for any limitation year, of (A)
employer contributions; (B) employee
contributions; and (C) forfeitures. Under
§ 1.415(c)–1(b)(6), an annual addition
generally is treated as credited to the
account of a participant for a particular
limitation year if it is allocated to the par-
ticipant’s account under the terms of the
plan as of any date within that limitation
year.
Section 415(c)(3)(A) provides that in
general, the term “participant’s compensa-
tion” means the compensation of the par-
ticipant from the employer for the year.
Section 1.415(c)–2(b)(1) provides that, for
purposes of § 415, compensation includes
amounts received for personal services ac-
tually rendered in the course of employ-
ment with the employer maintaining the
plan, to the extent that the amounts are
includible in gross income (or to the ex-
tent the amounts would have been received
and includible in gross income but for cer-
tain elections, including an election de-
scribed in § 402(e)(3)). However, un-
der § 1.415(c)–2(b)(2), contributions by an
employer to a plan of deferred compensa-
tion (other than certain elective contribu-
2009–39 I.R.B.401September 28, 2009

tions, including contributions described in
§ 402(e)(3)) are not included in compensa-
tion for purposes of § 415.
Section 1.415(c)–2(e)(1)(i) states in
pertinent part that, in order to be taken
into account for a limitation year, com-
pensation within the meaning of section
415(c)(3) must be actually paid or made
available to an employee (or, if earlier,
includible in the gross income of the em-
ployee) within the limitation year. Section
1.415(c)–2(e)(1)(ii)states in pertinent
part that, except as otherwise provided
in § 1.415(c)–2(e), in order to be taken
into account for a limitation year, com-
pensation within the meaning of section
415(c)(3) must be paid or treated as paid
to the employee (in accordance with the
rules of § 1.415(c)–2(e)(1)(i)) prior to the
employee’s severance from employment
with the employer maintaining the plan.
Section 1.415(c)–2(e)(3) provides that
a plan may provide that certain amounts
are included in the participant’s compen-
sation (within the meaning of § 415(c)(3))
if those amounts are paid by the later
of 2
1
/2months after severance from em-
ployment with the employer maintaining
the plan or the end of the limitation year
that includes the date of severance from
employment with the employer maintain-
ing the plan, and those amounts would
have been included in the definition of
compensation had they been paid prior
to the employee’s severance from em-
ployment with the employer maintaining
the plan. Section 1.415(c)–2(e)(3)(iii)(A)
provides that an amount is described in
§ 1.415(c)–2(e)(3)(iii) (and therefore may
be included in § 415(c) compensation sub-
ject to certain conditions) if the amount
is payment for unused accrued bona fide
sick, vacation, or other leave, but only if
the employee would have been able to use
the leave if employment had continued.
Section 451(a) and §1.451–1(a) provide
that an item of gross income is includi-
ble in gross income in the taxable year in
which it is actually or constructively re-
ceived by a taxpayer using the cash re-
ceipts and disbursements method of ac-
counting. Under §1.451–2(a), income is
constructively received in the taxable year
during which it is credited to a taxpayer’s
account, set apart or otherwise made avail-
able so that the taxpayer may draw on it
at any time. However, income is not con-
structively received if the taxpayer’s con-
trol of its receipt is subject to substantial
limitations or restrictions.
Section 409A(a)(1)(A)(i) provides, in
pertinent part, that if at any time during a
taxable year a nonqualified deferred com-
pensation plan fails to meet certain re-
quirements set forth under § 409A(a), or
is not operated in accordance with such re-
quirements, all compensation deferred un-
der the plan for the taxable year and all
preceding taxable years shall be includible
in gross income for the taxable year to the
extent not subject to a substantial risk of
forfeiture and not previously included in
gross income. Section 409A(a)(1)(B) pro-
vides, in pertinent part, that any compen-
sation required to be included in gross in-
come under § 409A(a)(1)(A) for a taxable
year shall be subject tothe additional taxes
set forth in § 409A(a)(1)(B).
Section 409A(d)(1) provides that the
term “nonqualified deferred compensa-
tion plan” means any plan that provides
for the deferral of compensation, other
than: (A) a qualified employer plan and
(B) any bona fide vacation leave, sick
leave, compensatory time, disability pay,
or death benefit plan. Section 409A(d)(2)
provides, in pertinent part, that the term
“qualified employer plan” means any
plan, contract, pension, account or trust
described in § 219(g)(5)(A) or (B) (with-
out regard to § 219(g)(5)(A)(iii)). Section
219(g)(5)(A)(i) refers to a plan described
in § 401(a), which includes a trust exempt
from tax under § 501(a).
ANALYSIS
Situation 1
The amendment to the X Profit Sharing
Plan to require certain contributions of the
dollar equivalent of unused paid time off to
the X Profit Sharing Plan does not cause
the X Profit Sharing Plan to fail to meet
the requirements of § 401(a), provided that
the contributions satisfy the requirements
of § 401(a)(4) (in combination with other
contributions and forfeitures allocated for
the year). Because C is not provided a
right to elect a payment of cash for unused
paid time off in lieu of a plan contribution,
Company X’s contribution of $300x to the
X Profit Sharing Plan is not an elective
contribution that is made pursuant to a cash
or deferred election within the meaning of
§ 401(k)(2)(A) and § 1.401(k)-(1)(a)(3)(i).
Rather, Company X’s contribution to the
X Profit Sharing Plan is a nonelective em-
ployer contribution within the meaning of
§ 1.401(k)–6.
The amount contributed and allocated
for each participant will vary based on the
amount of the participant’s unused paid
time off. Thus, the contributions for un-
used paid time off are likely to preclude
a plan from satisfying a design-based safe
harbor under § 401(a)(4). Therefore, test-
ing based on the contributions made for in-
dividual participants generally will be re-
quired.
The contributions made pursuant to the
arrangement must also not exceed the lim-
itations under § 415(c) (in combination
with prior annual additions). Because the
contribution of $300x was allocated to C’s
account as of October 12, 2009, and made
on that date (before the end of the 30 day
period following the deadline for Com-
pany X to file its income tax return), the
contribution is subject to the limitations
under § 415(c) applicable for the 2009 lim-
itation year and is taken into account for
§ 401(a)(4) purposes for the 2009 plan
year. Under the facts presented, the contri-
bution of $300x (in combination with prior
annual additions) does not exceed the lim-
itations of § 415(c) for 2009.
If the requirements of § 401(a)(4) are
met, the amount contributed will be in-
cluded in C’s gross income in accordance
with § 402(a) only when the amount is dis-
tributed to C. Like any other distribution
from the X Profit Sharing Plan, the distri-
bution of amounts attributable to the dollar
equivalent of unused paid time off is sub-
ject to an additional 10% income tax under
§ 72(t) unless the distribution satisfies one
of the exceptions described in § 72(t), such
as being made on or after the date on which
the participant attains age 59
1
/2or after the
participant separates from service after at-
tainment of age 55.
The amendment to the X PTO Plan and
the operation of the plan in accordance
with the terms of the amendment do not
cause the X PTO Plan to fail to qualify as a
bona fide sick and vacation leave plan for
purposes of § 409A and § 1.409A–1(a)(5).
Situation 2
TheamendmenttotheXProfitShar-
ing Plan to require certain contributions
of the dollar equivalent of unused paid
September 28, 20094022009–39 I.R.B.

time off to the X Profit Sharing Plan does
not cause the X Profit Sharing Plan to
fail to meet the requirements of § 401(a)
of the Code, provided that the contribu-
tions made pursuant to the amendment
satisfy the requirements of § 401(a)(4) (in
combination with other contributions and
forfeitures allocated for the year). Because
C is not provided a right to elect a payment
of cash for unused paid time off in lieu of a
contribution to the X Profit Sharing Plan,
Company X’s contribution of $150x to the
X Profit Sharing Plan is not an elective
contribution that is made pursuant to a cash
or deferred election within the meaning of
§ 401(k)(2)(A) and § 1.401(k)-(1)(a)(3)(i).
Rather, Company X’s contribution to the
X Profit Sharing Plan is a nonelective
employer contribution within the meaning
of § 1.401(k)–6.
The contributions made pursuant to the
arrangement must also not exceed the lim-
itations under § 415(c) (in combination
with prior annual additions). Because the
contribution is allocated to C’s account on
January 18, 2010, and made on that date
(before the end of the 30 day period fol-
lowing the deadline for Company X to file
its income tax return), the contribution is
subject to the limitations under § 415 ap-
plicable for the 2010 limitation year and
is taken into account for § 401(a)(4) pur-
poses for the 2010 plan year. Under the
facts, none of the $300x exceeds the appli-
cable § 415(c)(1)(A) dollar limit for 2010,
so the $150x contribution also would not
exceed the applicable § 415(c)(1)(A) dol-
lar limit. However, under § 415(c)(1)(B),
the $150x contribution must also not ex-
ceed 100 percent of compensation for the
2010 limitation year. Because the $150x
contribution is a nonelective contribution,
it is not taken into account as compensa-
tion for purposes of § 415. However, be-
cause the paid time off could have been
carried over and used in 2010 had C re-
mained employed, the payment of the re-
maining $150x to C on January 18 can be
included as § 415 compensation for 2010.
Accordingly, the allocation of $150x to C’s
account will provide an allocation of 100
percent of compensation and will not ex-
ceed the § 415(c) limitations for the 2010
limitation year.
If the requirements of § 401(a)(4) are
met, the amount contributed will be in-
cluded in C’s gross income in accordance
with § 402(a) only when the amount is dis-
tributed to C. Like any other distribution
from the X Profit Sharing Plan, the distri-
bution of amounts attributable to the dollar
equivalent of unused paid time off is sub-
ject to an additional 10% income tax under
§ 72(t) unless the distribution satisfies one
of the exceptions described in § 72(t), such
as being made on or after the date on which
the participant attains age 59
1
/2or after the
participant separates from service after at-
tainment of age 55.
Under the facts of Situation 2, C ter-
minates employment in 2009, but the con-
tribution to the X Profit Sharing Plan and
the cash payment to C occur in 2010. Un-
der the X PTO Plan as amended, the dollar
equivalent of unused paid time off is not
paid, set apart, or otherwise made available
so that C may draw on it either (i) during
the 2009 calendar year or (ii) upon conver-
sion in 2009 to a contribution to a quali-
fied plan or cash payment in 2010. There-
fore, such amount is not includible in C’s
gross income in 2009 under the doctrine
of constructive receipt and § 451. In ad-
dition, the amendment to the X PTO Plan
and the operation of the plan in accordance
with the terms of the amendment do not
cause the X PTO Plan to fail to qualify as a
bona fide sick and vacation leave plan for
purposes of § 409A and § 1.409A–1(a)(5).
The $150x payment is includible in C’s
gross income in 2010, the taxable year in
whichitispaidtoC.
Situation 3
The amendment to the W 401(k) Plan
to permit certain contributions of the dol-
lar equivalent of unused paid time off to
the W 401(k) Plan does not cause the W
401(k) Plan to fail to meet the require-
ments of §§ 401(a) and 401(k), provided
that the contributions (taking into account
other contributions, prior deferrals, and
prior annual additions, as applicable) sat-
isfy the nondiscrimination requirements of
§ 401(k) and the applicable limitations of
§§ 401(a)(30) and 415(c).
Because D is provided a right to elect
either a payment of cash or a plan con-
tribution for the dollar equivalent of un-
used paid time off that may not be car-
ried over to the following year, Company
W’s contribution of $210x to the W 401(k)
Plan is an elective contribution. Because
the contribution is allocated to D’s account
as of October 19, 2009, and is made on
that date (before the end of the 30 day pe-
riod following the deadline for Company
W to file its income tax return), the con-
tribution is subject to the limitations un-
der § 415 applicable for the 2009 limita-
tion year. The contribution is also subject
to the limitations on elective deferrals un-
der § 401(a)(30) applied for 2009 and the
actual deferral percentage nondiscrimina-
tion testing under § 401(k)(3)(A)(ii) and
§1.401(k)–2forthe2009planyear.
Under the facts presented, the alloca-
tion of $210x to D’s account (in combi-
nation with prior annual additions) does
not cause the plan to exceed the limita-
tions of § 415(c). Although the dollar
equivalent of the unused paid time off was
made available to D in 2009, pursuant to
§ 402(e)(3) the $210x is not treated as
made available to D because the amount
was contributed to the plan as part of a
qualified cash or deferred arrangement.
Accordingly, if the nondiscrimination
requirements of § 401(k) and the limita-
tions of § 401(a)(30) are met, the amount
contributed will be included in D’s gross
income in accordance with § 402(a) only
when the amount is distributed to D. Like
any other distributions from the W 401(k)
Plan, the distribution of amounts attrib-
utable to the dollar equivalent of unused
paid time off is subject to the additional
10% income tax under § 72(t) if the distri-
bution does not meet one of the exceptions
of § 72(t), such as being made on or after
the date on which the participant attains
age 59
1
/2or after the participant separates
from service after attainment of age 55.
In addition, the amendment to the
W PTO Plan and the operation of the
plan in accordance with the terms of the
amendment do not cause the W PTO Plan
to fail to qualify as a bona fide sick and
vacation leave plan for purposes of § 409A
and § 1.409A–1(a)(5). The $90x payment
is includible in D’s gross income in 2009,
the taxable year in which it is paid to D.
Situation 4
The amendment to the W 401(k) Plan
to permit certain contributions of the dol-
lar equivalent of unused paid time off to
the W 401(k) Plan does not cause the W
401(k) Plan to fail to meet the require-
ments of §§ 401(a) and 401(k), provided
that the contributions (taking into account
other contributions, prior deferrals, and
2009–39 I.R.B.403September 28, 2009

prior annual additions, as applicable) sat-
isfy the nondiscrimination requirements of
§ 401(k) and the applicable limitations of
§§ 401(a)(30) and 415(c).
Because D is provided a right to elect
either a payment of cash or a plan con-
tribution for the dollar equivalent of un-
used paid time off that may not be car-
ried over to the following year, Company
W’s contribution of $210x to the W 401(k)
Plan is an elective contribution. Because
the contribution is made on January 18,
2010, and is allocated as of that date (be-
fore the end of the 30 day period follow-
ing the deadline for Company W to file its
income tax return), the contribution is sub-
ject to the limitations under § 415 applica-
ble for the 2010 limitation year. The con-
tribution is also subject to the limitations
on elective deferralsunder § 401(a)(30)
applied for 2010 and the actual deferral
percentage nondiscrimination testing un-
der § 401(k)(3)(A)(ii) and § 1.401(k)–2 for
the 2010 plan year.
As an elective contribution, the $210x
may be treated as compensation for pur-
poses of § 415, so that D’s total 2010 com-
pensation for purposes of § 415(c) is $300x
(the $210x elective contribution plus the
$90x payment). Under the facts presented,
the allocation of $210x to D’s account (in
combination with prior annual additions)
will not cause the plan to exceed the lim-
itations of § 415(c). Although the dol-
lar equivalent of the unused paid time off
was made available to D in 2010, pur-
suant to § 402(e)(3) the $210x will not
be treated as made available to D because
the amount was contributed to the plan as
part of a qualified cash or deferred arrange-
ment. Accordingly, if the nondiscrimina-
tion requirements of § 401(k) and the limi-
tations of § 401(a)(30) are met, the amount
contributed will be included in D’s gross
income in accordance with § 402(a) only
when the amount is distributed to D. Like
any other distributions from the W 401(k)
Plan, the distribution of amounts attribut-
able to the dollar equivalent of unused paid
time off is subject to the additional 10%
income tax under § 72(t) if the distribu-
tion does not meet one of the exceptions
of § 72(t), such as being made on or af-
ter the date on which the participant attains
age 59
1
/2or after the participant separates
from service after attainment of age 55.
Under the facts of Situation 4, D ter-
minates employment in 2009, but the con-
tribution to the X Profit Sharing Plan and
the cash payment to D occur in 2010. Un-
der the X PTO Plan as amended, the dollar
equivalent of unused paid time off is not
paid, set apart, or otherwise made available
so that D may draw on it either (i) during
the 2009 calendar year or (ii) upon conver-
sion in 2009 to a contribution to a qualified
plan or cash payment in 2010. Therefore,
such amount is not includible in D’s gross
income in 2009 under the doctrine of con-
structive receipt and § 451. In addition, the
amendment to the W PTO Plan and the op-
eration of the plan in accordance with the
terms of the amendment do not cause the
W PTO Plan to fail to qualify as a bona fide
sick and vacation leave plan for purposes
of § 409A and § 1.409A–1(a)(5). The $90x
payment is includible in D’s gross income
in 2010, the taxable year in which it is paid
to D.
HOLDING
1. Under the facts presented, the amend-
ments requiring or permitting certain
contributions of the dollar equivalent
of unused paid time off to a qualified
profit-sharing plan do not cause the
plan to fail to meet the qualification
requirements of § 401(a), provided
that the contributions satisfy the ap-
plicable requirements of §§ 401(a)(4)
and 415(c) and, where applicable,
§§ 401(k) and 401(a)(30).
2. Under the facts presented, assuming
the applicable qualification require-
ments are satisfied, a participant does
not include in gross income contribu-
tions of the dollar equivalent of un-
used paid time off to the profit-shar-
ing plan in accordance with § 402(a)
until distributions are made to the par-
ticipant from the plan and does not in-
clude in gross income an amount paid
for the dollar equivalent of unused
paid time off that is not contributed
to the profit-sharing plan until the tax-
able year in which the amount is paid
to the participant.
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Robert Gertner, Roger Kuehnle,
and Alice Lynch of the Employee Plans,
Tax Exempt and Government Entities
Division. Questions regarding this rev-
enue ruling may be sent via e-mail to
retirementplanquestions@irs.gov.
Section 6621.—Determina-
tion of Rate of Interest
26 CFR 301.6621–1: Interest rate.
Interest rates; underpayments and
overpayments.The rates for interest de-
termined under section 6621 of the Code
for the calendar quarter beginning Octo-
ber 1, 2009, will be 4 percent for over-
payments (3 percent in the case of a cor-
poration), 4 percent for underpayments,
and 6 percent for large corporate underpay-
ments. The rate of interest paid on the por-
tion of a corporate overpayment exceeding
$10,000 will be 1.5 percent.
Rev. Rul. 2009–27
Section 6621 of the Internal Revenue
Code establishes the rates for interest
on tax overpayments and tax underpay-
ments. Under section 6621(a)(1), the
overpayment rate is the sum of the federal
short-term rate plus 3 percentage points
(2 percentage points in the case of a cor-
poration), except the rate for the portion
of a corporate overpayment of tax exceed-
ing $10,000 for a taxable period is the
sum of the federal short-term rate plus
0.5 of a percentage point. Under section
6621(a)(2), the underpayment rate is the
sum of the federal short-term rate plus 3
percentage points.
Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
“5 percentage points” for “3 percentage
points.” See section 6621(c) and section
301.6621–3 of the Regulations on Proce-
dure and Administration for the definition
of a large corporate underpayment and
for the rules for determining the appli-
cable date. Section 6621(c) and section
301.6621–3 are generally effective for
periods after December 31, 1990.
Section 6621(b)(1) provides that the
Secretary will determine the federal
short-term rate for the first month in each
calendar quarter. Section 6621(b)(2)(A)
provides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calendar
September 28, 20094042009–39 I.R.B.

quarter beginning after that month. Sec-
tion 6621(b)(3) provides that the federal
short-term rate for any month is the fed-
eral short-term rate determined during that
month by the Secretary in accordance with
section 1274(d), rounded to the nearest
full percent (or, if a multiple of 1/2 of 1
percent, the rate is increased to the next
highest full percent).
Notice 88–59, 1988–1 C.B. 546, an-
nounced that, in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to daily
compounding.
The federal short-term rate determined
in accordance with section 1274(d) during
July 2009 is the rate published in Revenue
Rule 2009–22 to take effect beginning Au-
gust 1, 2009. The federal short-term rate,
rounded to the nearest full percent, based
on daily compounding determined during
the month of July 2009 is 1 percent. Ac-
cordingly, an overpayment rate of 4 per-
cent (3 percent in the case of a corporation)
and an underpayment rate of 4 percent are
established for the calendar quarter begin-
ning October 1, 2009. The overpayment
rate for the portion of a corporate over-
payment exceeding $10,000 for the calen-
dar quarter beginning October 1, 2009, is
1.5 percent. The underpayment rate for
large corporate underpayments for the cal-
endar quarter beginning October 1, 2009,
is 6 percent. These rates apply to amounts
bearing interest during that calendar quar-
ter.
Interest factors for daily compound in-
terest for annual rates of 1.5 percent, 3 per-
cent, 4 percent, and 6 percent are published
in Tables 8, 11, 13, and 17 of Rev. Proc.
95–17, 1995–1 C.B. 556, 562, 565, 567,
and 571.
Annual interest rates to be compounded
daily pursuant to section 6622 that apply
for prior periods are set forth in the tables
accompanying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Deborah Colbert-James of the Office
of Associate Chief Counsel (Procedure &
Administration). For further information
regarding this revenue ruling, contact
Ms. Colbert-James at (202) 622–8143
(not a toll-free call).
2009–39 I.R.B.405September 28, 2009

TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975 — PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATE
In 1995–1 C.B.
DAILY RATE TABLE
Before Jul. 1, 1975
6%
Table 2, pg. 557
Jul. 1, 1975—Jan. 31, 1976
9%
Table 4, pg. 559
Feb. 1, 1976—Jan. 31, 19787%
Table 3, pg. 558
Feb. 1, 1978—Jan. 31, 19806%
Table 2, pg. 557
Feb. 1, 1980—Jan. 31, 198212%
Table 5, pg. 560
Feb. 1, 1982—Dec. 31, 198220%
Table 6, pg. 560
Jan. 1, 1983—Jun. 30, 198316%
Table 37, pg. 591
Jul. 1, 1983—Dec. 31, 198311%
Table 27, pg. 581
Jan. 1, 1984—Jun. 30, 198411%
Table 75, pg. 629
Jul. 1, 1984—Dec. 31, 198411%
Table 75, pg. 629
Jan. 1, 1985—Jun. 30, 1985
13%
Table 31, pg. 585
Jul. 1, 1985—Dec. 31, 1985
11%
Table 27, pg. 581
Jan. 1, 1986—Jun. 30, 198610%
Table 25, pg. 579
Jul. 1, 1986—Dec. 31, 19869%
Table 23, pg. 577
TABLE OF INTEREST RATES
FROM JAN. 1, 1987 — DEC. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1987—Mar. 31, 19878%21
575
9%23
577
Apr. 1, 1987
—Jun. 30, 1987
8%21
575
9%23
577
Jul. 1, 1987—Sep. 30, 19878%21
575
9%23
577
Oct. 1, 1987—Dec. 31, 19879%23
577
10%
25579
Jan. 1, 198
8—Mar. 31, 1988
10%7362711%
75
629
Apr. 1, 1988—Jun. 30, 19889%71
625
10%73627
Jul. 1, 1988—Sep. 30, 19889%71
625
10%73627
Oct. 1, 19
88—Dec. 31, 1988
10%7362711%
75
629
Jan. 1, 1989—Mar. 31, 198910%
25579
11%27
581
Apr. 1, 1989—Jun. 30, 198911%27
581
12%29
583
Jul. 1, 1
989—Sep. 30, 1989
11%27
581
12%29
583
Oct. 1, 1989—Dec. 31, 198910%
25579
11%27
581
Jan. 1, 1990—Mar. 31, 199010%
25579
11%27
581
Apr. 1,
1990—Jun. 30, 1990
10%
25579
11%27
581
Jul. 1, 1990—Sep. 30, 199010%
25579
11%27
581
Oct. 1, 1990—Dec. 31, 199010%
25579
11%27
581
Jan. 1,
1991—Mar. 31, 1991
10%
25579
11%27
581
Apr. 1, 1991—Jun. 30, 19919%23
577
10%
25579
Jul. 1, 1991—Sep. 30, 19919%23
577
10%
25579
Oct. 1
, 1991—Dec. 31, 1991
9%23
577
10%
25579
Jan. 1, 1992—Mar. 31, 19928%696239%71
625
Apr. 1, 1992—Jun. 30, 19927%676218%69623
Jul.
1, 1992—Sep. 30, 1992
7%676218%69623
Oct. 1, 1992—Dec. 31, 19926%
65
6197%67621
Jan. 1, 1993—Mar. 31, 19936%17
571
7%19
573
Apr
. 1, 1993—Jun. 30, 1993
6%17
571
7%19
573
Jul. 1, 1993—Sep. 30, 19936%17
571
7%19
573
Oct. 1, 1993—Dec. 31, 19936%17
571
7%19
573
Ja
n. 1, 1994—Mar. 31, 1994
6%17
571
7%19
573
Apr. 1, 1994—Jun. 30, 19946%17
571
7%19
573
Jul. 1, 1994—Sep. 30, 19947%19
57
3
8%21
57
5
September 28, 20094062009–39 I.R.B.

TABLE OF INTEREST RATES
FROM JAN. 1, 1987 — DEC. 31, 1998 – Continued
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Oct. 1, 1994—Dec. 31, 19948%21
575
9%23
577
Jan. 1, 1995—Ma
r. 31, 1995
8%21
575
9%23
577
Apr. 1, 1995—Jun. 30, 1995
9%23
577
10%
25579
Jul. 1, 1995—Sep. 30, 1995
8%21
575
9%23
577
Oct. 1, 1995—D
ec. 31, 1995
8%21
575
9%23
577
Jan. 1, 1996—M
ar. 31, 1996
8%696239%71
625
Apr. 1, 1996—Jun. 30, 19967%676218%69623
Jul. 1, 1996—Sep. 30, 19968%696239%71
625
Oct. 1, 1996—
Dec. 31, 1996
8%696239%71
625
Jan. 1, 1997—Mar. 31, 19978%21
575
9%23
577
Apr. 1, 1997—Jun. 30, 19978%21
575
9%23
577
Jul. 1, 1997
—Sep. 30, 1997
8%21
575
9%23
577
Oct. 1, 1997—Dec. 31, 19978%21
575
9%23
577
Jan. 1, 1998—Mar. 31, 19988%21
575
9%23
577
Apr. 1, 1998
—Jun. 30, 1998
7%19
573
8%21
575
Jul. 1, 1998—Sep. 30, 19987%19
573
8%21
575
Oct. 1, 1998—Dec. 31, 19987%19
573
8%21
575
TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B
.
RATETABLEPG
Jan. 1, 199
9—Mar. 31, 1999
7%19
573
Apr. 1, 1999—Jun. 30, 19998%21
575
Jul. 1, 1999—Sep. 30, 19998%21
575
Oct. 1, 19
99—Dec. 31, 1999
8%21
575
Jan. 1, 2000—Mar. 31, 20008%69623
Apr. 1, 2000—Jun. 30, 20009%71
625
Jul. 1, 2
000—Sep. 30, 2000
9%71
625
Oct. 1, 2000—Dec. 31, 20009%71
625
Jan. 1, 2001—Mar. 31, 20019%23
577
Apr. 1, 2
001—Jun. 30, 2001
8%21
575
Jul. 1, 2001—Sep. 30, 20017%19
573
Oct. 1, 2001—Dec. 31, 20017%19
573
Jan. 1,
2002—Mar. 31, 2002
6%17
571
Apr. 1, 2002—Jun. 30, 20026%17
571
Jul. 1, 2002—Sep. 30, 20026%17
571
Oct. 1
, 2002—Dec. 31, 2002
6%17
571
Jan. 1, 2003—Mar. 31, 2003
5%15569
Apr. 1, 2003—Jun. 30, 2003
5%15569
Jul.
1, 2003—Sep. 30, 2003
5%15569
Oct. 1, 2003—Dec. 31, 20034%13
567
Jan. 1, 2004—Mar. 31, 20044%61
615
Apr
. 1, 2004—Jun. 30, 2004
5%
63617
Jul. 1, 2004—Sep. 30, 20044%61
615
Oct. 1, 2004—Dec. 31, 2004
5%
63617
Jan. 1, 2005—Mar. 31, 20055%15569
Apr. 1, 2005—Jun. 30, 2005
6%17
571
Ju
l. 1, 2005—Sep. 30, 2005
6%17
57
1
Oct. 1, 2005—Dec. 31, 2005
7%19
573
Jan. 1, 2006—Mar. 31, 20067%19
573
2009–39 I.R.B.407September 28, 2009

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT – Continued
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B.
RATETABLEPG
Apr. 1, 2006—Jun. 30, 20067%19
573
Jul. 1, 2006—Sep. 30, 20068%21
575
Oct. 1, 2006—Dec. 31, 20068%21
575
Jan. 1, 2007—Mar. 31, 20078%21
575
Apr. 1, 2007—Jun. 30, 20078%21
575
Jul. 1, 2007—Sep. 30, 20078%21
575
Oct. 1, 2007—Dec. 31, 20078%21
575
Jan. 1, 2008—Mar. 31, 20087%67621
Apr. 1, 2008—Jun. 30, 20086%
65
619
Jul. 1, 2008—Sep. 30, 2008
5%
63617
Oct. 1, 2008—Dec. 31, 20086%
65
619
Jan. 1, 2009—Mar. 31, 2009
5%15569
Apr. 1, 2009—Jun. 30, 20094%13
567
Jul. 1, 2009—Sep. 30, 20094%13
567
Oct. 1, 2009—Dec. 31, 20094%13
567
TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1999—Mar. 31, 19996%17
571
7%19
573
Apr. 1, 1999—Jun. 30, 19997%19
573
8%21
575
Jul. 1, 199
9—Sep. 30, 1999
7%19
573
8%21
575
Oct. 1, 1999—Dec. 31, 19997%19
573
8%21
575
Jan. 1, 2000—Mar. 31, 20007%676218%69623
Apr. 1, 20
00—Jun. 30, 2000
8%696239%71
625
Jul. 1, 2000—Sep. 30, 20008%696239%71
625
Oct. 1, 2000—Dec. 31, 20008%696239%71
625
Jan. 1, 2
001—Mar. 31, 2001
8%21
575
9%23
577
Apr. 1, 2001—Jun. 30, 20017%19
573
8%21
575
Jul. 1, 2001—Sep. 30, 20016%17
571
7%19
573
Oct. 1, 2
001—Dec. 31, 2001
6%17
571
7%19
573
Jan. 1, 2002—Mar. 31, 2002
5%15569
6%17
571
Apr. 1, 2002—Jun. 30, 2002
5%15569
6%17
571
Jul. 1,
2002—Sep. 30, 2002
5%15569
6%17
571
Oct. 1, 2002—Dec. 31, 2002
5%15569
6%17
571
Jan. 1, 2003—Mar. 31, 20034%13
5675%15569
Apr. 1
, 2003—Jun. 30, 2003
4%13
5675%15569
Jul. 1, 2003—Sep. 30, 20034%13
5675%15569
Oct. 1, 2003—Dec. 31, 20033%11
565
4%13
567
Jan.
1, 2004—Mar. 31, 2004
3%
59
6134%61
615
Apr. 1, 2004—Jun. 30, 20044%61
6155%
63617
Jul. 1, 2004—Sep. 30, 20043%
59
6134%61
615
Oct
. 1, 2004—Dec. 31, 2004
4%61
6155%
63617
Jan. 1, 2005—Mar. 31, 2005
4%13
5675%15569
Apr
. 1, 2005—Jun. 30, 2005
5%15569
6%17
571
Jul. 1, 2005—Sep. 30, 20055%15569
6%17
571
Oct. 1, 2005—Dec. 31, 2005
6%17
571
7%19
573
Jan. 1, 2006—Mar. 31, 20066%17
57
1
7%19
57
3
September 28, 20094082009–39 I.R.B.

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT – Continued
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Apr. 1, 2006—Jun. 30, 20066%17
571
7%19
573
Jul. 1, 2006—Sep. 30, 20067%19
573
8%21
575
Oct. 1, 2006—De
c. 31, 2006
7%19
573
8%21
575
Jan. 1, 2007—Mar. 31, 20077%19
573
8%21
575
Apr. 1, 2007—Jun. 30, 20077%19
573
8%21
575
Jul. 1, 2007—S
ep. 30, 2007
7%19
573
8%21
575
Oct. 1, 2007—Dec. 31, 20077%19
573
8%21
575
Jan. 1, 2008—Mar. 31, 20086%
65
6197%67621
Apr. 1, 2008—
Jun. 30, 2008
5%
636176%
65
619
Jul. 1, 2008—Sep. 30, 20084%61
6155%
63617
Oct. 1, 2008—Dec. 31, 2008
5%
636176%
65
619
Jan. 1, 2009—
Mar. 31, 2009
4%13
5675%15569
Apr. 1, 2009—Jun. 30, 20093%11
565
4%13
567
Jul. 1, 2009—Sep. 30, 20093%11
565
4%13
567
Oct. 1, 2009
—Dec. 31, 2009
3%11
565
4%13
567
TABLE OF INT
EREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1991—Mar. 31, 199113%31
585
Apr. 1, 199
1—Jun. 30, 1991
12%29
583
Jul. 1, 1991—Sep. 30, 199112%29
583
Oct. 1, 1991—Dec. 31, 199112%29
583
Jan. 1, 19
92—Mar. 31, 1992
11%
75
629
Apr. 1, 1992—Jun. 30, 199210%73627
Jul. 1, 1992—Sep. 30, 199210%73627
Oct. 1, 1
992—Dec. 31, 1992
9%71
625
Jan. 1, 1993—Mar. 31, 19939%23
577
Apr. 1, 1993—Jun. 30, 19939%23
577
Jul. 1, 1
993—Sep. 30, 1993
9%23
577
Oct. 1, 1993—Dec. 31, 19939%23
577
Jan. 1, 1994—Mar. 31, 19949%23
577
Apr. 1,
1994—Jun. 30, 1994
9%23
577
Jul. 1, 1994—Sep. 30, 199410%
25579
Oct. 1, 1994—Dec. 31, 199411%27
581
Jan. 1, 1995—Mar. 31, 1995
11%27
581
Apr. 1, 1995—Jun. 30, 1995
12%29
583
Jul.
1, 1995—Sep. 30, 1995
11%27
581
Oct. 1, 1995—Dec. 31, 1995
11%27
581
Jan. 1, 1996—Mar. 31, 199611%
75
629
Apr. 1, 1996—Jun. 30, 199610%73627
Jul
. 1, 1996—Sep. 30, 1996
11%
75
629
Oct. 1, 1996—Dec. 31, 199611%
75
629
Jan. 1, 1997—Mar. 31, 199711%27
581
Apr
. 1, 1997—Jun. 30, 1997
11%27
581
Jul. 1, 1997—Sep. 30, 199711%27
581
Oct. 1, 1997—Dec. 31, 199711%27
58
1
Ja
n. 1, 1998—Mar. 31, 1998
11%27
581
Apr. 1, 1998—Jun. 30, 199810%
25579
2009–39 I.R.B.409September 28, 2009

TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT – Continued
1995–1 C.B.
RATETABLEPG
Jul. 1, 1998—Sep. 30, 199810%
25579
Oct. 1, 1998—Dec. 31, 199810%
25579
Jan. 1, 1999—Mar. 31, 19999%23
577
Apr. 1, 1999—Jun. 30, 199910%
25579
Jul. 1, 1999—Sep. 30, 199910%
25579
Oct. 1, 1999—Dec. 31, 199910%
25579
Jan. 1, 2000—Mar. 31, 200010%73627
Apr. 1, 2000—Jun. 30, 200011%
75
629
Jul. 1, 2000—Sep. 30, 200011%
75
629
Oct. 1, 2000—Dec. 31, 200011%
75
629
Jan. 1, 2001—Mar. 31, 200111%27
581
Apr. 1, 2001—Jun. 30, 200110%
25579
Jul. 1, 2001—Sep. 30, 20019%23
577
Oct. 1, 2001—Dec. 31, 20019%23
577
Jan. 1, 2002—Mar. 31, 20028%21
575
Apr. 1, 2002—Jun. 30, 20028%21
575
Jul. 1, 2002—Sep. 30, 20028%21
575
Oct. 1, 2002—Dec. 30, 20028%21
575
Jan. 1, 2003—Mar. 31, 20037%19
573
Apr. 1, 2003—Jun. 30, 20037%19
573
Jul. 1, 2003—Sep. 30, 20037%19
573
Oct. 1, 2003—Dec. 31, 20036%17
571
Jan. 1, 2004—Mar. 31, 20046%
65
619
Apr. 1, 2004—Jun. 30, 20047%67621
Jul. 1, 2004—Sep. 30, 20046%
65
619
Oct. 1, 2004—Dec. 31, 20047%67621
Jan. 1, 2005—Mar. 31, 2005
7%19
573
Apr. 1, 2005—Jun. 30, 2005
8%21
575
Jul. 1, 2005—Sep. 30, 2005
8%21
575
Oct. 1, 2005—Dec. 31, 2005
9%23
577
Jan. 1, 2006—Mar. 31, 20069%23
577
Apr. 1, 2006—Jun. 30, 20069%23
577
Jul. 1, 2006—Sep. 30, 200610%
25579
Oct. 1, 2006—Dec. 31, 200610%
25579
Jan. 1, 2007—Mar. 31, 200710%
25579
Apr. 1, 2007—Jun. 30, 200710%
25579
Jul. 1, 2007—Sep. 30, 200710%
25579
Oct. 1, 2007—Dec. 31, 200710%
25579
Jan. 1, 2008—Mar. 31, 20089%71
625
Apr. 1, 2008—Jun. 30, 20088%69623
Jul. 1, 2008—Sep. 30, 20087%67621
Oct. 1, 2008—Dec. 31, 20088%69623
Jan. 1, 2009—Mar. 31, 20097%19
573
Apr. 1, 2009—Jun. 30, 20096%17
571
Jul. 1, 2009—Sep. 30, 20096%17
571
Oct. 1, 2009—Dec. 31, 20096%17
571
September 28, 20094102009–39 I.R.B.

TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1995—Mar. 31, 19956.5%
18
572
Apr. 1, 1995—Jun. 30, 19957.5%
20
574
Jul. 1, 1995—Sep. 30, 19956.5%
18
572
Oct. 1, 1995—Dec. 31, 19956.5%
18
572
Jan. 1, 1996—Mar. 31, 1996
6.5%
66620
Apr. 1, 1996—Jun. 30, 1996
5.5%
64618
Jul. 1, 1996—Sep. 30, 1996
6.5%
66620
Oct. 1, 1996—Dec. 31, 1996
6.5%
66620
Jan. 1, 1997—Mar. 31, 1997
6.5%
18
572
Apr. 1, 1997—Jun. 30, 1997
6.5%
18
572
Jul. 1, 1997—Sep. 30, 1997
6.5%
18
572
Oct. 1, 1997—Dec. 31, 1997
6.5%
18
572
Jan. 1, 1998—Mar. 31, 1998
6.5%
18
572
Apr. 1, 1998—Jun. 30, 1998
5.5%
16
570
Jul. 1, 1998—Sep. 30, 1998
5.5%
16
570
Oct. 1, 1998—Dec. 31, 1998
5.5%
16
570
Jan. 1, 1999—Mar. 31, 1999
4.5%
14
568
Apr. 1, 1999—Jun. 30, 1999
5.5%
16
570
Jul. 1, 1999—Sep. 30, 1999
5.5%
16
570
Oct. 1, 1999—Dec. 31, 1999
5.5%
16
570
Jan. 1, 2000—Mar. 31, 2000
5.5%
64618
Apr. 1, 2000—Jun. 30, 2000
6.5%
66620
Jul. 1, 2000—Sep. 30, 2000
6.5%
66620
Oct. 1, 2000—Dec. 31, 2000
6.5%
66620
Jan. 1, 2001—Mar. 31, 2001
6.5%
18
572
Apr. 1, 2001—Jun. 30, 2001
5.5%
16
570
Jul. 1, 2001—Sep. 30, 2001
4.5%
14
568
Oct. 1, 2001—Dec. 31, 2001
4.5%
14
568
Jan. 1, 2002—Mar. 31, 2002
3.5%
12
566
Apr. 1, 2002—Jun. 30, 2002
3.5%
12
566
Jul. 1, 2002—Sep. 30, 2002
3.5%
12
566
Oct. 1, 2002—Dec. 31, 2002
3.5%
12
566
Jan. 1, 2003—Mar. 31, 2003
2.5%
10
564
Apr. 1, 2003—Jun. 30, 2003
2.5%
10
564
Jul. 1, 2003—Sep. 30, 2003
2.5%
10
564
Oct. 1, 2003—Dec. 31, 2003
1.5%
8
562
Jan. 1, 2004—Mar. 31, 2004
1.5%56
610
Apr. 1, 2004—Jun. 30, 2004
2.5%58
612
Jul. 1, 2004—Sep. 30, 2004
1.5%56
610
Oct. 1, 2004—Dec. 31, 2004
2.5%58
612
Jan. 1, 2005—Mar. 31, 20052.5%
10
564
Apr. 1, 2005—Jun. 30, 20053.5%
12
566
Jul. 1, 2005—Sep. 30, 20053.5%
12
566
Oct. 1, 2005—Dec. 31, 20054.5%
14
568
Jan. 1, 2006—Mar. 31, 2006
4.5%
14
568
Apr. 1, 2006—Jun. 30, 2006
4.5%
14
568
Jul. 1, 2006—Sep. 30, 2006
5.5%
16
570
Oct. 1, 2006—Dec. 31, 2006
5.5%
16
570
Jan. 1, 2007—Mar. 31, 2007
5.5%
16
570
Apr. 1, 2007—Jun. 30, 2007
5.5%
16
570
Jul. 1, 2007—Sep. 30, 2007
5.5%
16
570
Oct. 1, 2007—Dec. 31, 2007
5.5%
16
570
Jan. 1, 2008—Mar. 31, 2008
4.5%
62616
Apr. 1, 2008—Jun. 30, 2008
3.5%
60614
Jul. 1, 2008—Sep. 30, 2008
2.5%58
612
2009–39 I.R.B.411September 28, 2009

TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS E
XCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT – Continued
1995–1 C.B.
RATETABLEPG
Oct. 1, 2008—Dec. 31, 2008
3.5%
60614
Jan. 1, 2009—Mar. 31, 2009
2.5%
10
564
Apr. 1, 2009—Jun. 30, 2009
1.5%
8
562
Jul. 1, 2009—Sep. 30, 2009
1.5%
8
562
Oct. 1, 2009—Dec. 31, 2009
1.5%
8
562
September 28, 20094122009–39 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Adding Automatic Enrollment
to Section 401(k) Plans —
Sample Amendments
Notice 2009–65
I. PURPOSE
This notice facilitates automatic en-
rollment by providing two sample plan
amendments for sponsors, practitioners,
and employers who want to add certain
automatic contribution features to their
§ 401(k) plans. Sample Amendment 1 can
be used to add an automatic contribution
arrangement to a § 401(k) plan. Sam-
ple Amendment 2 can be used to add an
eligible automatic contribution arrange-
ment described in § 414(w) of the Internal
Revenue Code (permitting 90-day with-
drawals) to a § 401(k) plan.
II. BACKGROUND
Rev. Rul. 2000–8, 2000–1 C.B. 617,
provides guidance on automatic contribu-
tion arrangements in § 401(k) plans, and
under § 1.401(k)–1(a)(3)(ii) of the Income
Tax Regulations, the default that applies
under a § 401(k) plan in the absence of
an employee’s affirmative election can be
for the employer to make elective contri-
butions to the plan on the employee’s be-
half.
Under § 1.401(k)–1(e)(2)(ii), a § 401(k)
plan must provide an eligible employee an
effective opportunity to make (or change) a
cash or deferred election at least once dur-
ing each plan year, and whether an eligible
employee has an effective opportunity is
determined based on all the relevant facts
and circumstances, including the adequacy
of notice of the availability of the election,
the period of time during which an election
may be made, and any other conditions on
elections.
Section 902 of the Pension Protection
Act of 2006, Public Law 109–280 (PPA
’06), added §§ 401(k)(13), 401(m)(12),
and 414(w) to the Code and amended
§§ 411(a)(3)(G) and 4979 to facilitate
automatic contribution arrangements in
qualified cash or deferred arrangements
under § 401(k). Final regulations under
these Code sections were published in the
Federal Registeron February 24, 2009
(T.D. 9447, 2009–12 I.R.B. 694 [74 F.R.
8200]). Section 1107 of PPA ’06 provided
generally that any plan amendment made
pursuant to PPA ’06 can be made as late as
the last day of the first plan year beginning
on or after January 1, 2009 (2011 in the
case of a governmental plan).
III. SAMPLE PLAN AMENDMENTS
In General. Two sample plan amend-
ments are provided in the Appendix that
sponsors, practitioners, and employers
(“plan sponsors”) can adopt or use in
drafting individualized plan amendments.
Because each amendment is a sample
amendment, plan sponsors are not required
to adopt either amendment verbatim. In
fact, it may be necessary for plan spon-
sors to modify the chosen amendment to
conform to their plan’s terms and admin-
istrative procedures.
Time and Manner of Adoption.Plan
sponsors who want to add one of the sam-
ple amendments to their § 401(k) plans
must adopt the chosen amendment by the
later of (1) the end of the plan year in which
the amendment is effective, pursuant to the
deadline to adopt a discretionary amend-
ment as provided in § 5.05(2) of Rev.
Proc. 2007–44, 2007–2 C.B 54; or (2) if
applicable, the deadlineunder§1107of
PPA ’06 for adopting an amendment made
pursuant to PPA ’06. Pursuant to § 5.06(1)
of Rev. Proc 2007–44, a later deadline
may apply to a governmental plan. The
timely adoption of the chosen amendment
must be evidenced by a written document
that is signed and dated by the employer
(including an adopting employer of a
pre-approved plan). However, regardless
of when the amendment is adopted, the
proper notice describing the features of the
plan as amended must be provided to em-
ployees affected by the amendment within
a reasonable period before the amendment
is effective.
Effect on Reliance. The adoption of ei-
ther sample plan amendment (as modified,
if necessary to conform to the plan’s terms
and administrative procedures) will not re-
sult in the loss of reliance on a favorable
opinion, advisory, or determination letter.
Also, the Service will not treat the adoption
of one of the amendments as affecting the
pre-approved status of a master and proto-
type (“M&P”) or volume submitter plan.
Thatis,suchanamendmenttoanM&P
plan that is adopted by an employer will
notcausetheplantofailtobeanM&P
plan. Similarly, such an amendment to a
volume submitter plan that is adopted by
an employer will not cause the plan to fail
to be a volume submitter plan.
Format of the Sample Amendments.
The format of the sample plan amend-
ments generally follows the design of
pre-approved plans, including all M&P
plans, that employ a “basic plan docu-
ment” and an “adoption agreement.” Thus,
the sample plan amendments include lan-
guage designed for inclusion in a basic
plan document and language designed for
inclusion in an adoption agreement to al-
low the employer to select among options
related to the application of the basic plan
document provision. Sponsors of plans
that do not use an adoption agreement
should modify the format of the chosen
amendment to incorporate the appropriate
adoption agreement options in the terms
of the amendment. In such case, the notes
in the adoption agreement portion of the
sample amendment should not be included
in the amendment that will be signed and
dated by the employer.
DRAFTING INFORMATION
The principal author of this notice
is Roger Kuehnle of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regarding
this notice may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
2009–39 I.R.B.413September 28, 2009

Appendix
Sample Amendment 1
Article [ ] Automatic Contribution Arrangement
Section 1. Rules of Application
1.1 If the Employer has elected the automatic contribution arrangement option in the adoption agreement, the provisions of this
Article shall apply and, to the extent that any other provision ofthe Plan is inconsistent with the provisions of this Article, the
provisions of this Article shall govern.
1.2 Default Elective Deferralswill be made on behalf of Covered Employees who do not have an affirmative election in effect
regarding Elective Deferrals. The amountof Default Elective Deferrals made for a Covered Employee each pay period is equal to
the Default Percentage specified in the adoption agreement multiplied by the Covered Employee’s compensation for that pay
period. If the Employer has so elected in the adoption agreement, a Covered Employee’s Default Percentage will increase by a
designated percentage point or points each Plan Year up to the maximum, beginning with the second Plan Year that begins after
the Default Percentage first applies to the Covered Employee. The increase will be effective beginning with the first pay period
that begins in such Plan Year or, if elected by the Employer in the adoption agreement, the firstpay period in such Plan Year that
begins on or after the date specified in the adoption agreement.
1.3 A Covered Employee will have a reasonable opportunity after receipt of the notice described in Section 3 of this Article
to make an affirmative election regardingElective Deferrals (either to have no Elective Deferrals made or to have a different
amount of Elective Deferrals made) before Default Elective Deferrals are made on the Covered Employee’s behalf. Default
Elective Deferrals being made on behalf of a Covered Employee will cease as soon as administratively feasible after the Covered
Employee makes an affirmative election.
Section 2. Definitions
2.1 An “automatic contribution arrangement” is an arrangement under which, in the absence of an affirmative election by a
Covered Employee, a certain percentageof compensation will be withheld from the Covered Employee’s pay and contributed
to the Plan as an Elective Deferral.
2.2 A “Covered Employee” is a Plan participant identified in the adoption agreement as being covered under the automatic
contribution arrangement.
2.3 “Default Elective Deferrals” are Elective Deferrals contributed to the Plan under the automatic contribution arrangement on
behalf of Covered Employees who do not have an affirmative election in effect regarding Elective Deferrals.
2.4 The “Default Percentage” is the percentage of a Covered Employee’s compensation contributed to the Plan as a Default
Elective Deferral for a Plan Year. The Default Percentage is specified inthe adoption agreement.
Section 3. Notice Requirement
3.1 At least 30 days, but not more than 90 days, before the beginning of the Plan Year, the Employer will provide each Covered
Employee a comprehensive notice of the Covered Employee’s rights and obligations under the automatic contribution
arrangement, written in a manner calculated to be understood by the average Covered Employee. If an employee becomes a
Covered Employee after the 90th day before the beginning of the Plan Year and does not receive the notice for that reason, the
notice will be provided no more than 90 days before the employee becomes a Covered Employee but not later than the date
the employee becomes a Covered Employee.
3.2 The notice will accurately describe:
(a) The amount of Default Elective Deferrals that will bemade on the Covered Employee’s behalf in the absence of
an affirmative election;
(b) The Covered Employee’s right to elect to have no Elective Deferrals made on his or her behalf or to have
a different amount of Elective Deferrals made; and
(c) How Default Elective Deferrals will be investedin the absence of the Covered Employee’s investment
instructions.
Sample Adoption Agreement Language:
Article [ ] Automatic Contribution Arrangement
[ ] If checked, the Automatic Contribution Arrangement provisions of Article [ ] apply.
September 28, 20094142009–39 I.R.B.

Section 1. Covered Employee
Employees covered under the automatic contribution arrangement are:(check one of the options below)
[ ] All Plan participants.
[ ] All Plan participants who do not have an affirmative election in effect regarding Elective Deferrals.
[ ] All Plan participants who become Plan participants on or after the effective date of the automatic contribution
arrangement and who do not have an affirmative election in effect regarding Elective Deferrals.
Section 2. Default Percentage (Check one of the options below and insert a percentage or percentages and, if applicable, a date.)
[ ] The Default Percentage is [ ]%.
[ ] The initial Default Percentage is [ ]% and will increase by [ ] (insert a number) percentage point(s) as described in
Section 1.2 of Article [ ] of the Plan until the Default Percentage is [ ]%. (Insert the highest Default Percentage
that will apply.) Each increase will be effective at the beginning of the Plan Year unless a different date is inserted
here:
.(Insert the date of each increase.)
Section 3. Effective Date
The Automatic Contribution Arrangement under Article [ ] is effective
.(Insert the date the amendment
is effective.
Name of Employer
By: SignatureDate
Name and title
2009–39 I.R.B.415September 28, 2009

Sample Amendment 2
Article [ ] Eligible Automatic Contribution Arrangement (EACA)
Section 1. Rules of Application
1.1 If the Employer has elected the EACA option in the adoption agreement, the provisions of this Article shall apply for the
Plan Year and, to the extent that any other provision of the Plan is inconsistent with the provisions of this Article, the provisions
of this Article shall govern.
1.2 Default Elective Deferralswill be made on behalf of Covered Employees who do not have an affirmative election in effect
regarding Elective Deferrals. The amount of Default Elective Deferrals made for a Covered Employee each pay period is
equal to the Default Percentage specified in the adoption agreement multiplied by the Covered Employee’s compensation for
that pay period. If the Employer has so elected in the adoption agreement, a Covered Employee’s Default Percentage will
increase by a designated percentage point or points each Plan Year, beginning with the second Plan Year that begins after the
Default Percentage first applies to the Covered Employee. The increase will be effective beginningwith the first pay period that
begins in such Plan Year or, if elected by the Employer in theadoption agreement, the first pay period in such Plan Year that
begins on or after the date specified in the adoption agreement.
1.3 A Covered Employee will have a reasonable opportunity after receipt of the notice described in Section 4 of this Article
to make an affirmative election regardingElective Deferrals (either to have no Elective Deferrals made or to have a different
amount of Elective Deferrals made) before Default Elective Deferrals are made on the Covered Employee’s behalf. Default
Elective Deferrals being made on behalf of a Covered Employee will cease as soon as administratively feasible after the Covered
Employee makes an affirmative election.
Section 2. Definitions
2.1 An “EACA” is an automatic contribution arrangement that satisfies the uniformity requirement in Section 3 of this Article and
the notice requirement in Section 4 of this Article.
2.2 An “automatic contribution arrangement” is an arrangement under which, in the absence of an affirmative election by a
Covered Employee, a certain percentageof compensation will be withheld from the Covered Employee’s pay and contributed
to the Plan as an Elective Deferral.
2.3 A “Covered Employee” is a Plan participant identified in the adoption agreement as being covered under the EACA.
2.4 “Default Elective Deferrals” are the Elective Deferrals contributed to thePlan under the EACA on behalf of Covered
Employees who do not have an affirmative election in effect regarding Elective Deferrals.
2.5 The “Default Percentage” is the percentage of a Covered Employee’s compensation contributed to the Plan as a Default
Elective Deferral for the Plan Year. The Default Percentage is specified in the adoption agreement.
Section 3. Uniformity Requirement
3.1 Except as provided in Section 3.2 below or if the Employerhas elected an increasing Default Percentage in the adoption
agreement, the same percentage of compensation will be withheld as Default Elective Deferrals from all Covered Employees
subject to the Default Percentage.
3.2 Default Elective Deferrals will be reduced or stopped to meet the limitations under Code §§ 401(a)(17), 402(g), and 415 and to
satisfy any suspension period required after a hardship distribution.
Section 4. Notice Requirement
4.1 At least 30 days, but not more than 90 days, before the beginning of the Plan Year, the Employer will provide each Covered
Employee a comprehensive notice of the Covered Employee’s rights and obligations under the EACA, written in a manner
calculated to be understood by the average Covered Employee. If an employee becomes a Covered Employee after the 90th day
before the beginning of the Plan Year and does not receive the notice for that reason, the notice will be provided no more than 90
days before the employee becomes a Covered Employee but not later than the date the employee becomes a Covered Employee.
4.2 The notice must accurately describe:
(a) The amount of Default Elective Deferrals that will bemade on the Covered Employee’s behalf in the absence of
an affirmative election;
(b) The Covered Employee’s right to elect to have no Elective Deferrals made on his or her behalf or to have a
different amount of Elective Deferrals made;
September 28, 20094162009–39 I.R.B.

(c) How Default Elective Deferrals will be investedin the absence of the Covered Employee’s investment
instructions; and
(d) The Covered Employee’s right to make a withdrawal ofDefault Elective Deferrals and the procedures for
making such a withdrawal.
Section 5. Withdrawal of Default Elective Deferrals
5.1 No later than 90 days after Default Elective Deferrals are first withheld from a Covered Employee’s pay, the Covered
Employee may request a distribution of his or her Default Elective Deferrals. No spousal consent is required for a withdrawal
under this Section 5.
5.2 The amount to be distributed from the Plan upon the Covered Employee’s request is equal to the amount of Default Elective
Deferrals made through the earlier of (a) the pay date for the second payroll period that begins after the Covered Employee’s
withdrawal request and (b) the first pay date that occurs after 30 days after the Covered Employee’s request, plus attributable
earnings through the date of distribution. Any fee charged to the Covered Employee for the withdrawal may not be greater than
any other fee charged for a cash distribution.
5.3 Unless the Covered Employee affirmatively elects otherwise, any withdrawal request will be treated as an affirmative election
to stop having Elective Deferrals made on the Covered Employee’s behalf as of the date specified in Section 5.2 above.
5.4 Default Elective Deferrals distributed pursuant to this Section 5 are not counted towards the dollar limitation on Elective
Deferrals contained in Code § 402(g) nor for the ADP test. Matching Contributions that might otherwise be allocated to a
Covered Employee’s account on behalf of Default Elective Deferrals will not be allocated to the extent the Covered Employee
withdraws such Elective Deferrals pursuant to this Section 5 and any Matching Contributions already made on account of Default
Elective Deferrals that are later withdrawn pursuant to this Section 5 will be forfeited.
Section 6. Special Rule for Distribution of Excess Contributions and Excess Aggregate Contributions
If the Employer has elected in the adoption agreement that all Plan participants are Covered Employees, then the Plan has until
6 months (rather than 2
1
/2months) after the end of the Plan Year to distribute Excess Contributions and Excess Aggregate
Contributions and avoid the Code § 4979 10% excise tax.
Sample Adoption Agreement Language:
Article [ ] Eligible Automatic Contribution Arrangement (EACA)
[ ] If checked, the Eligible Automatic Contribution Arrangement (EACA) provisions of Article [ ] apply.
Section 1. Covered Employee
Employees covered under the EACA are:(check one of the options below)
[ ] All Plan participants.
[ ] All Plan participants who do not have an affirmative election in effect regarding Elective Deferrals.
[ ] All Plan participants who become Plan participants onor after the effective date of the EACA and who do not
have an affirmative election in effect regarding Elective Deferrals.
Section 2. Default Percentage(Check one of the options below and insert a percentage or percentages and, if applicable, a date.)
[ ] The Default Percentage is [ ]%.
[ ] The initial Default Percentage is [ ]% and will increase by [ ] (insert a number) percentage point(s) as described in
Section 1.2 of Article [ ] of the Plan until the Default Percentage is [ ]%. (Insert the highest Default Percentage that
will apply.) Each increase will be effective at the beginning of the Plan Year unless a different date is inserted here:
.(Insert the date of each increase.)
2009–39 I.R.B.417September 28, 2009

Section 3. Effective Date
The Eligible Automatic Contribution Arrangement (EACA) under Article [ ] is effective
.(Insert the first
day of the Plan Year for which the EACA applies or the date the Plan is effective, if later.)
Name of Employer
By: SignatureDate
Name and title
Automatic Enrollment in
SIMPLE IRAs
Notice 2009–66
I. PURPOSE
This notice provides guidance to facili-
tate automatic enrollment in SIMPLE IRA
plans, including questions and answers re-
lating to the inclusion in a SIMPLE IRA
plan of an automatic contribution arrange-
ment. See also Notice 2009–67, I.R.B.
2009–39, 420, which provides a sample
amendment that may be used to add an
automatic contribution arrangement to a
SIMPLE IRA plan.
II. BACKGROUND
Section 408(p) provides rules for a
SIMPLE IRA plan, which is a simplified
tax-favored retirement plan for small em-
ployers. Notice 98–4, 1998–1 C.B. 25,
provides guidance with respect to SIM-
PLE IRA plans.
Under a SIMPLE IRA plan, contribu-
tions are made to SIMPLE individual re-
tirement accounts or annuities (referred to
as “SIMPLE IRAs”) established pursuant
to the plan adopted by the employer. A
SIMPLE IRA plan must be maintained on
a calendar-year basis. A new SIMPLE
IRA plan is generally permitted to be es-
tablished as of any date between January
1 and October 1, or, in the case of an em-
ployer that comes into existence after Oc-
tober 1, a SIMPLE IRA plan is permit-
ted to be established as soon as adminis-
tratively feasible after the employer comes
into existence. In addition, the SIMPLE
IRA plan must be the only plan maintained
by the employer, except for a plan in which
only employees covered by a collective
bargaining agreement are eligible to par-
ticipate.
Contributions under a SIMPLE IRA
plan consist of salary reduction contribu-
tions,i.e.,contributions made at the elec-
tion of an employee eligible to participate
in the plan (an “eligible employee”), as
well as employer matching contributions
required to be made with respect to each
eligible employee’s salary reduction con-
tributions. Subject to a notice requirement,
an employer may elect to make nonelec-
tive contributions rather than matching
contributions. These salary reduction
contributions and employer matching or
nonelective contributions must be the only
contributions under the plan.
All contributions to an eligible em-
ployee’s SIMPLE IRA must be nonfor-
feitable. Employer contributions are not
permitted to be conditioned on the reten-
tion of the contributions in an employee’s
SIMPLE IRA, and the employer is not
permitted to impose any restrictions on
withdrawals from the SIMPLE IRA.
Salary reduction contributions to a
SIMPLE IRA are subject to a dollar limit
(the “SIMPLE IRA dollar limit,” $11,500
for 2009) and are also taken into account
in applying the dollar limit under § 402(g)
on all elective contributions made by an
individual to employer-sponsored retire-
ment plans (the “aggregate dollar limit,”
$16,500 for 2009). In the case of an
individual who is at least 50 years old,
these dollar limits are increased by the
amount of permissible catch-up contribu-
tions ($2,500 for 2009 in the case of the
SIMPLE IRA dollar limit and $5,500 for
2009 in the case of the aggregate dollar
limit).
Each eligible employee under a SIM-
PLE IRA plan must be permitted to elect,
during the 60-day period immediately pre-
ceding the beginning of the calendar year,
i.e., November 2 to December 31 (the
“annual 60-day election period”), to make
salary reduction contributions for the year
or to change the amount of such contri-
butions under a prior election, including
changing the amount to $0. For the first
year an employee is eligible to make salary
reduction contributions, including the first
year a SIMPLE IRA plan is established,
the employee must be given a 60-day elec-
tion period (the “initial 60-day election
period”) that includes either the date the
employee becomes eligible or the day be-
fore that date. For example, if a newly
hired employee becomes eligible to make
salary reduction contributions on July 19,
2010, then the 60-day period can begin as
early as May 20, 2010 (thus including July
18, 2010, the day before the employee’s
eligibility date) or as late as July 19, 2010.
ASIMPLEIRAplanmayalsopermitan
eligible employee to make or change a
salary reduction contribution election dur-
ing additional or longer election periods.
An employee must be permitted to
terminate a salary reduction contribution
election at any time during the year. If the
employee does so outside of the election
period or periods provided under the SIM-
PLE IRA plan for making or changing
salary reduction contribution elections,
then the SIMPLE IRA plan may provide
that the employee is not permitted to re-
sume salary reduction contributions until
the next year.
Immediately before an eligible em-
ployee’s annual or initial 60-day election
period, the employer must notify the
employee of the opportunity to elect to
make salary reduction contributions (or
to change a prior election) and must in-
clude a copy of a summary description
of the SIMPLE IRA plan. The summary
description used for this purpose must be
provided to the employer by the SIMPLE
IRA trustee and must describe the benefits
provided under the SIMPLE IRA plan,
September 28, 20094182009–39 I.R.B.

the time and method of making elections
under the plan, and the procedures for, and
effects of, making withdrawals, including
rollovers, from the SIMPLE IRA.
In general, a SIMPLE IRA plan must
permit each eligible employee to select
the financial institution to which SIMPLE
IRA contributions are made on behalf of
the employee. Alternatively, an employer
is permitted to establish a SIMPLE IRA
plan with a designated financial institu-
tion, so that all contributions under the
plan are made to SIMPLE IRAs at the des-
ignated institution. In that case, an em-
ployee must be given a reasonable period
of time each year in which to transfer his or
her SIMPLE IRA balance without cost or
penalty from the designated financial insti-
tution to a SIMPLE IRA at another finan-
cial institution selected by the employee.
This requirement is deemed to be met if
an employee has until the end of the em-
ployee’s annual or initial 60-day election
period to request to transfer, without cost
or penalty, the balance attributable to con-
tributions made for the next year (or for
the remainder of the year in the case of
an initial election period) and subsequent
years to a SIMPLE IRA at another finan-
cial institution selected by the employee.
The right to make such a transfer must be
included in the notice provided to the em-
ployee immediately before the election pe-
riod.
Distributions from a SIMPLE IRA are
includible in gross income for the taxable
year in which made unless rolled over to
another SIMPLE IRA or tax-favored re-
tirement plan. Distributions made during
the 2-year period beginning when an em-
ployee first participates in any SIMPLE
IRA plan of the employer (the employee’s
“initial two-year participation period”) are
permitted to be rolled over only to another
SIMPLE IRA. Distributions made before
age 59–
1
/2are subject to the additional
10-percent tax on early withdrawals un-
der § 72(t) unless the distribution is rolled
over or an exception applies. However,
in the case of a distribution from a SIM-
PLE IRA made during the employee’s ini-
tial two-year participation period, the rate
of the additional tax is 25 percent rather
than 10 percent.
An automatic contribution arrangement
is an arrangement under which, in the ab-
senceofanaffirmativeelectionbyanem-
ployee, a default election applies whereby
the employee is treated as having elected to
have a portion of the employee’s compen-
sation contributed to a tax-favored retire-
ment plan as default elective contributions
rather than paid to the employee in cash.
III. QUESTIONS AND ANSWERS
ON AUTOMATIC ENROLLMENT IN
SIMPLE IRA PLANS
Q–1: May a SIMPLE IRA plan include
an automatic contribution arrangement?
A–1: Yes. Section 408(p) requires that
an employee eligible to participate in a
SIMPLE IRA plan have an election be-
tween the employer paying cash to the em-
ployee or making a contribution to a SIM-
PLE IRA on behalf of the employee. It
does not, however, require that the em-
ployee receive an amount in cash in any
case in which the employee does not make
an affirmative election to have that amount
contributed to the SIMPLE IRA. Thus, for
purposes of determining whether a contri-
bution is a salary reduction contribution to
a SIMPLE IRA, it is irrelevant whether the
default that applies in the absence of an af-
firmative election is (1) for the employee
to receive an amount in cash or (2) for the
employer to contribute an amount to the
SIMPLE IRA.
Q–2: May a SIMPLE IRA plan that in-
cludes an automatic contribution arrange-
ment provide that default salary reduction
contributions are made only for employ-
ees who are first eligible under the SIM-
PLE IRA plan on or after the effective date
of the automatic contribution arrangement
and who do not make an affirmative elec-
tion (including an affirmative election of
zero)?
A–2: Yes.
Q–3: May a SIMPLE IRA plan that in-
cludes an automatic contribution arrange-
ment provide that the percentage of com-
pensation at which default salary reduction
contributions are made for an employee in-
creases based on the number of years or
portions of years for which default salary
reduction contributions have been made
for the employee?
A–3: Yes.
Q–4: What notice requirements apply
to a SIMPLE IRA plan that includes an
automatic contribution arrangement?
A–4: In addition to the information
otherwiserequiredtobeincludedina
SIMPLE IRA notice, the notice must ex-
plain (1) the percentage of compensation
at which default salary reduction contri-
butions will be made on the employee’s
behalf if the employee does not make an
affirmative election, (2) the employee’s
right to elect not to have default salary
reduction contributions made to the SIM-
PLE IRA or to have salary reduction
contributions made at a different percent-
age of compensation or, if permitted under
the SIMPLE IRA plan, in a different dol-
lar amount, and (3) how default salary
reduction contributions will be invested in
the absence of any investment election by
the employee. In the case of a SIMPLE
IRA plan under which all contributions are
made to a designated financial institution,
the notice must also explain the additional
period (as discussed in Q&A–5 of this
notice) during which an employee may
elect to transfer his or her balance without
cost or penalty to another SIMPLE IRA.
Q–5: In the case of a SIMPLE IRA plan
under which all contributions are made to a
designated financial institution, how does
an employee’s right to transfer his or her
balance without cost or penalty to another
SIMPLE IRA apply if default salary re-
duction contributions are made for an em-
ployee under an automatic contribution ar-
rangement?
A–5: As discussed in Section II of this
notice, an employee must be permitted
during his or her annual or initial 60-day
election period to request to transfer, with-
out cost or penalty, the balance attributable
to contributions made for the next year (or
for the remainder of the year in the case of
an initial election period) and subsequent
years to a SIMPLE IRA at another finan-
cial institution selected by the employee.
If default salary reduction contributions
for an employee are made to a designated
financial institution, the employee must
also be permitted, during the first 60 calen-
dar days of the first year for which default
salary reduction contributions are made
(ortheremainderofthefirstyearinthe
case of an initial election period), to elect
to transfer, without cost or penalty, his or
her balance attributable to contributions
made for that year and subsequent years
to a SIMPLE IRA at another financial
institution selected by the employee.
Q–6: In the case of a SIMPLE IRA plan
that is covered by the fiduciary duty re-
quirements of § 404 of Title I of the Em-
ployee Retirement Income Security Act of
2009–39 I.R.B.419September 28, 2009

1974 (“ERISA”), does fiduciary relief un-
der§404(c)(5)ofERISAapplywithre-
spect to the investment of SIMPLE IRA
contributions, including default salary re-
duction contributions, in default invest-
ments (i.e., investments made in the ab-
sence of any investment direction by the
employee)?
A–6: The Department of Labor has ad-
vised the Internal Revenue Service that the
regulations under § 404(c)(5) of ERISA re-
lating to qualified default investment al-
ternatives (29 CFR 2550.404c–5) apply to
the investment of contributions, including
default salary reduction contributions, un-
der a SIMPLE IRA plan. Therefore, if
the requirements of these regulations are
met, fiduciary relief under § 404(c)(5) of
ERISA applies with respect to the invest-
ment of such contributions in default in-
vestments.
IV. ELIGIBLE AUTOMATIC
CONTRIBUTION ARRANGEMENTS
UNDER § 414(w) AND REQUEST
FOR COMMENTS
Section 902 of the Pension Protection
Act of 2006, Public Law 109–280 (en-
acted August 17, 2006), added § 414(w)
to the Code to facilitate automatic con-
tribution arrangements in § 401(k) plans,
§ 403(b) plans, and governmental § 457(b)
plans. Under § 414(w), an applicable em-
ployer plan that contains an eligible auto-
matic contribution arrangement is permit-
ted to allow employees, within 90 days
after the date of the first default elective
contribution with respect to the employee
under the arrangement, to elect to receive
a distribution based on the default elec-
tive contributions and avoid the additional
income tax on early withdrawals under
§ 72(t). Section 109(b)(5) of the Worker,
Retiree, and Employer Recovery Act of
2008, Public Law 110–458 (enacted De-
cember 23, 2008), added SIMPLE IRA
plans described in § 408(p) of the Code
(and salary reduction simplified employee
pensions described in § 408(k)(6)) to the
list of employer plans that may include
an eligible automatic contribution arrange-
ment under § 414(w) of the Code. Final
regulations under § 414(w) were published
on February 24, 2009 in theFederal Reg-
ister(74 F.R. 8200). The preamble to the
regulations provides that they do not re-
flect guidance on SIMPLE IRA plans that
include an eligible automatic contribution
arrangement.
Comments are requested on whether the
Department of the Treasury and the Ser-
vice should issue guidance regarding SIM-
PLE IRA plans that include eligible au-
tomatic contribution arrangements under
§ 414(w) and, if so, what issues should be
addressed in the guidance. For example,
such issues might include:
•Application to SIMPLE IRA plans of
the last sentence of § 414(w)(1) re-
garding the forfeiture, or other possible
treatment, of employer matching con-
tributions that relate to salary reduction
contributions withdrawn in a permissi-
ble withdrawal under § 414(w);
•Application to SIMPLE IRA plans of
the requirement in § 414(w)(3)(B) that
default salary reduction contributions
be a uniform percentage of compensa-
tion; and
•Administrative issues with respect
to permissible withdrawals under
§ 414(w) and associated matching
contributions, such as determining
the proper amount of a permissible
withdrawal, information sharing with
respect to a permissible withdrawal,
and reporting of a permissible with-
drawal.
Comments are also requested on
whether the Department of the Treasury
and the Service should issue additional
guidance regarding SIMPLE IRA plans
that include automatic contribution ar-
rangements that are not eligible automatic
contribution arrangements under § 414(w)
and, if so, what issues should be addressed
in the additional guidance.
Written comments can be sent to
CC:PA:LPD:DRU (Notice 2009–66),
Room 5203, Internal Revenue Service,
POB 7604 Ben Franklin Station, Wash-
ington, DC 20044. Also, comments may
be hand delivered between the hours
of 8 a.m. and 4 p.m., Monday through
Friday, to CC:PA:LPD:DRU (Notice
2009–66), Courier’s Desk, Internal Rev-
enue Service, 1111 Constitution Avenue,
NW, Washington, DC, or sent electron-
ically via the following e-mail address:
notice.comments@irscounsel.treas.gov
(Notice 2009–66). All comments will be
available for public inspection.
DRAFTING INFORMATION
The principal author of this notice
is Roger Kuehnle of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regard-
ing this notice may be sent via email to
RetirementPlanQuestions@irs.gov.
Adding Automatic Enrollment
to SIMPLE IRA Plans —
Sample Amendment
Notice 2009–67
I. PURPOSE
This notice facilitates automatic en-
rollment by providing a sample plan
amendment that a prototype sponsor of
a SIMPLE IRA plan (using a designated
financial institution) can use in drafting
an amendment to add an automatic contri-
bution arrangement to the SIMPLE IRA
plan.
II. BACKGROUND
Section 408(p) of the Internal Revenue
Code provides rules for a SIMPLE IRA
plan, which is a simplified tax-favored re-
tirement plan for small employers. Notice
98–4, 1998–1 C.B. 25, provides guidance
with respect to SIMPLE IRA plans.
An automatic contribution arrangement
is an arrangement under which, in the
absence of an affirmative election by an
employee, a default election applies under
which the employee is treated as having
elected to have a portion of the employee’s
compensation contributed to a tax-favored
retirement plan rather than paid to the
employee in cash. A SIMPLE IRA plan
may include an automatic contribution
arrangement. See Notice 2009–66, I.R.B.
2009–39, 418.
III. SAMPLE PLAN AMENDMENT
Sponsor Adoption.Asampleplan
amendment is provided in the Appendix
that a prototype sponsor of a SIMPLE
IRA plan (using a designated financial
institution) can use in drafting an amend-
ment to add an automatic contribution
arrangement. Because the amendment is
a sample amendment, prototype sponsors
are not required to adopt the amendment
September 28, 20094202009–39 I.R.B.

verbatim. In fact, it may be necessary for
prototype sponsors to modify the sample
amendment to conform to their SIM-
PLE IRA plan’s terms and administrative
procedures. Sponsors that amend their
prototype SIMPLE IRA plan documents
pursuant to this notice must furnish a copy
of the amendment to each adopting em-
ployer, regardless of whether the employer
will utilize the automatic contribution ar-
rangement.
Employer Adoption. An employer that
wants to add an automatic contribution ar-
rangement to its prototype SIMPLE IRA
plan (using a designated financial institu-
tion) must adopt the amendment, provided
by the prototype sponsor, before the ef-
fective date of the automatic contribution
arrangement. The timely adoption of the
amendment must be evidenced by a writ-
ten document that is signed and dated by
the employer and the designated financial
institution.
Effect on Reliance. The adoption of the
sample plan amendment (as modified, if
necessary to conform to the plan’s terms
and administrative procedures) in accor-
dance with the procedures described above
will not result in the loss of reliance on a
favorable opinion letter.
IV. MODEL FORMS
The Service expects to issue a revised
Form 5305–SIMPLE,Savings Incentive
Match Plan for Employees of Small Em-
ployers (SIMPLE) — for Use With a Des-
ignated Financial Institution,that includes
an automatic contribution arrangement.
DRAFTING INFORMATION
The principal author of this notice
is Roger Kuehnle of the Employee
Plans, Tax Exempt and Government
Entities Division. Questions regard-
ing this notice may be sent via email to
RetirementPlanQuestions@irs.gov.
2009–39 I.R.B.421September 28, 2009

Appendix
Sample SIMPLE IRA Plan Amendment
Article [ ] Automatic Contribution Arrangement
Section 1. Rules of Application
1.1 If this Article applies, default salary reduction contributions will be made in accordance with this Article. To the extent that
any other provision of the SIMPLE IRA Plan is inconsistent with the provisions of this Article, the provisions of this Article
shall govern.
1.2 Subject to the limits on salary reduction contributions contained in this SIMPLE IRA Plan, default salary reduction
contributions will only be made for an Eligible Employee who: (select either a or b)
[ ] a. does not have an affirmative election regarding salaryreduction contributions in effect on the effective date
of the Automatic Contribution Arrangement or on the date the employee first becomes eligible to make salary
reduction contributions, if later.
[ ] b. becomes eligible to make salary reduction contributions on or after the effective date of the Automatic
Contribution Arrangement and who does not have an affirmative election regarding salary reduction contributions in
effect on the date the employee first becomes eligible to make salary reduction contributions.
Default salary reduction contributionsbeing made on behalf of an Eligible Employee will cease as soon as administratively
feasible after the Eligible Employee makes an affirmative election.
1.3 The Default Percentage under the SIMPLE IRA Plan foran Eligible Employee described in Section 1.2 above is: (Select
either a or b and fill in the blanks.)
[]a.Fixed.The Default Percentage is [ ]%.
[]b.Increasing.The initial Default Percentage is [ ]%, andeach calendar year, beginning with the second
calendar year that begins after the Default Percentage first applies to the Eligible Employee, the Default Percentage
will increase by [ ] (insert a number) percentage point(s) until the Default Percentage is [ ]%. (Insert the highest
Default Percentage that will apply.) The increase will be effective beginningwith the first pay period that begins in
such calendar year.
1.4 No default salary reduction contributions will be made on an Eligible Employee’s behalf until after the 60-day election period.
Section 2. Definitions
2.1 An “Automatic Contribution Arrangement” is an arrangement under which, in the absence of an affirmative election by an
Eligible Employee, a certain percentage ofcompensation will be withheld from the Eligible Employee’s pay and contributed as a
salary reduction contribution to the SIMPLE IRA established under this SIMPLE IRA Plan for the Eligible Employee.
2.2 “Default salary reduction contributions” are the salary reduction contributions made to the SIMPLE IRAs of employees
described in Section 1.2 above.
2.3 The “Default Percentage” is the percentage of an employee’s compensation contributed to the plan as default salary reduction
contributions for a calendar year. The Default Percentage is specified in Section 1.3 above.
Section 3. Modified Notice Requirement
3.1 The notice provided to Eligible Employees immediately prior to the 60-day election period must include, for employees
described in Section 1.2 above, a comprehensive explanation of the employee’s rights and obligations under the Automatic
Contribution Arrangement, written in a manner calculated to be understood by the average employee described in Section 1.2
above.
3.2 The notice must accurately describe:
(a) The amount of default salary reduction contributionsthat will be made on the Eligible Employee’s behalf in the
absence of an affirmative election and when default salary reduction contributions will start;
(b) The Eligible Employee’s right to elect to have no salary reduction contributions made on his or her behalf or to
have a different amount of salary reduction contributions made;
(c) How default salary reduction contributions will be invested in the absence of the Eligible Employee’s investment
instructions; and
September 28, 20094222009–39 I.R.B.

(d) If not already permitted under the SIMPLE IRA Plan, the additional period (described in Section 4 below)
to make a transfer without cost or penalty from the SIMPLE IRA established for the Eligible Employee at the
designated financial institution.
Section 4. Modification of Designated Financial Institution Rules
Notwithstanding any limitation on an Eligible Employee’s rightto transfer, without cost or penalty, the balance in his or her
SIMPLE IRA maintained at a designated financial institution to another SIMPLE IRA, an employee described in Section 1.2
above may request such a transfer during the 60 days immediately following the employee’s first60-day election period under the
Automatic Contribution Arrangement. This period is in addition to any other periods provided under this SIMPLE IRA Plan, and
the transfer request can apply to the entire balance accrued sincedefault salary reduction contributions were first made on the
employee’s behalf and to the balance attributable tofuture contributions, at the employee’s request.
Section 5. Effective Date
This Article [ ] is effective
.(Insert January 1 of the first calendar year the Automatic Contribution Arrangement
applies or the date the SIMPLE IRA Plan is effective, if later.)
This Article applies only if the effective date is inserted above and the employer and designated financial institution properly
execute the amendment.
Name of Employer
By: SignatureDate
Name and title
Name of Financial Institution
By: SignatureDate
Name and title
Safe Harbor Explanation —
Eligible Rollover Distributions
Notice 2009–68
I. PURPOSE
This notice contains two safe harbor
explanations that may be provided to re-
cipients of eligible rollover distributions
from an employer plan in order to sat-
isfy § 402(f) of the Internal Revenue Code
(Code). The first safe harbor explana-
tion applies to a distribution not from a
designated Roth account (as described in
§ 402A). The second safe harbor explana-
tion applies to a distribution from a des-
ignated Roth account. These safe har-
bor explanations update the safe harbor
explanations that were published in No-
tice 2002–3, 2002–1 C.B. 289, to reflect
changes in the law. These safe harbor ex-
planations also reorganize and simplify the
presentation of the information.
II. BACKGROUND
Section 402(f) requires the plan admin-
istrator of a plan qualified under § 401(a)
to provide a written explanation to any
recipient of an eligible rollover distribu-
tion, as defined in § 402(c)(4). In addition,
§§ 403(a)(4)(B) and 457(e)(16)(B) require
a plan administrator of a § 403(a) plan,
or an eligible § 457(b) plan maintained
by a governmental employer described in
§ 457(e)(1)(A) (governmental § 457(b)
plan), to provide a written explanation to
any recipient of an eligible rollover distri-
bution. Further, § 403(b)(8)(B) requires a
payor under a § 403(b) plan to provide a
written explanation to the recipient of an
eligible rollover distribution.
An eligible rollover distribution is a
payment that may be rolled over to an
eligible retirement plan, as defined in
§ 402(c)(8)(B). The term eligible retire-
ment plan means an individual retirement
plan or an eligible employer plan. An
individual retirement plan (IRA) is de-
fined in § 7701(a)(37) as an individual
retirement account described in § 408(a)
or an individual retirement annuity de-
scribed in § 408(b). For purposes of this
notice, the term eligible employer plan
means: a plan qualified under § 401(a),
including a money purchase pension
plan, a profit-sharing or stock bonus plan
(whether or not the plan includes a qual-
ified cash or deferred arrangement under
§ 401(k)), and a defined benefit plan; a
§ 403(a) plan; a § 403(b) plan; or a gov-
ernmental § 457(b) plan.
The written explanation must describe
the direct rollover rules, the mandatory in-
come tax withholding rules for distribu-
tions not directly rolled over, the tax treat-
ment of distributions not rolled over, and
when distributions may be subject to dif-
ferent restrictions and tax consequences
after being rolled over. Section 402(f) pro-
vides that this explanation must be given
2009–39 I.R.B.423September 28, 2009

within a reasonable period of time before
the plan makes an eligible rollover distri-
bution. Under § 1.402(f)–1, A–5, of the
Income Tax Regulations, the requirements
of § 402(f) are satisfied if this explanation
(§ 402(f) notice) is provided through the
use of an electronic medium that complies
with the requirements of § 1.401(a)–21.
This explanation should be provided only
to participants who are eligible to receive
distributions that are eligible rollover dis-
tributions.
Section 1.402(f)–1, A–1(b), provides
that a plan administrator is deemed to
have complied with the requirement that
a § 402(f) notice contain certain speci-
fied information if the plan administrator
provides the applicable model § 402(f)
notice published by the IRS. The safe har-
bor explanations in this notice constitute
applicable model § 402(f) notices for this
purpose.
This notice provides updated safe har-
bor explanations that reflect changes made
totheCodethataffecttheinformation
required to be provided in a § 402(f) no-
tice, including sections 617 and 657 of
theEconomicGrowthandTaxRelief
Reconciliation Act of 2001 (EGTRRA),
P.L.107–16, and sections 824, 827, 828,
829, and 845 of the Pension Protection Act
of 2006 (PPA ’06), P.L. 109–280. Section
617(a) of EGTRRA added § 402A of the
Code, which allows a plan to permit an
employee who makes elective contribu-
tions under a qualified cash or deferred
arrangement to designate some or all of
those contributions as designated Roth
contributions.
1
Section 402A(c)(3) pro-
vides that a rollover contribution of any
payment or distribution to an individual
from a designated Roth account may be
made only if the contribution is to another
designated Roth account of the individual
or to a Roth IRA of the individual.
Section 657 of EGTRRA amended
§ 401(a)(31)(B) of the Code to require
that a mandatory distribution of more
than $1,000 from a plan qualified under
§ 401(a) be paid in a direct rollover to an
IRA of a designated trustee or issuer if the
distributee does not make an affirmative
election to have the amount paid in a direct
rollover to an eligible retirement plan or to
receive the distribution directly. Section
403(a) plans, § 403(b) plans, and govern-
mental § 457(b) plans are also required to
comply with § 401(a)(31)(B).
Section 824 of PPA ’06 amended the
definition of qualified rollover contribu-
tion in § 408A of the Code (relating to
rollovers to a Roth IRA) to include rollover
contributions from any eligible retirement
plan as defined in § 402(c)(8)(B). Prior to
this amendment, a Roth IRA could only
accept rollover contributions from another
Roth IRA, a non-Roth IRA, or a designated
Roth account described in § 402A. Section
408A(d)(3)(A) provides that a taxpayer
who makes a rollover to a Roth IRA from
an eligible employer plan that is not from
a designated Roth account must include in
gross income the amount of the rollover
contribution (other than after-tax contri-
butions). Such a rollover to a Roth IRA
is permitted only if the recipient’s modi-
fied adjusted gross income for the year of
the distribution does not exceed $100,000
and, if married, the recipient files a joint
return. Pursuant to section 512 of the Tax
Increase Prevention and Reconciliation
Act of 2005 (TIPRA), P.L. 109–222, the
$100,000 income and joint filing require-
ments do not apply to distributions made
after 2009. Section 408A(d)(3)(A), as
modified by TIPRA, provides that, in the
absence of a contrary election, the amount
otherwise required to be included in gross
income for any taxable year beginning in
2010 is included in gross income ratably
over the 2-year period beginning in 2011.
For distributions after 2010, the amount
requiredtobeincludedinincomeasa
result of the distribution being rolled over
to a Roth IRA is included in gross income
in the year of the distribution.
Under § 72(t)(2)(G) of the Code (as
added by section 827 of PPA ’06 and
modified by section 107 of the Heroes
Earnings Assistance and Relief Tax Act of
2008, P.L. 110–245), the 10% additional
income tax on early distributions described
in § 72(t) does not apply to a qualified
reservist distribution. A qualified reservist
distribution generallymeans a distribution
from an IRA, or from amounts attributable
to employer contributions made as elec-
tive deferrals described in § 402(g)(3)(A)
or (C) or § 501(c)(18)(D)(iii), made to an
individual who was called to active duty
for a period in excess of 179 days. Section
72(t)(2)(G) also provides that any indi-
vidual who receives a qualified reservist
distribution may re-contribute the distri-
bution to an IRA without regard to the
applicable dollar limitations on contribu-
tions.
Under § 72(t)(10) of the Code (as added
by section 828 of PPA ’06), the 10% ad-
ditional income tax on early distributions
under § 72(t) does not apply to a distri-
bution from a governmental plan, as de-
fined in § 414(d), that is a defined ben-
efit plan if the distribution is made to a
qualified public safety employee who sep-
arates from service after attainment of age
50. Under § 72(t)(10)(B), a qualified pub-
lic safety employee is any employee of a
State (or political subdivision of a State)
who provides police protection, firefight-
ing services, or emergency medical ser-
vices for any area within the jurisdiction
of the State (or political subdivision of the
State).
Under § 402(c)(11) of the Code (as
added by section 829 of PPA ’06), a direct
trustee-to-trustee transfer of a distribu-
tion from an eligible employer plan to
an inherited IRA (within the meaning of
§ 408(d)(3)(C)) for a nonspouse desig-
nated beneficiary is treated as a direct
rollover of an eligible rollover distribution
for purposes of § 402(c). For plan years
beginning after December 31, 2009, pur-
suant to section 108(f)(2) of the Worker,
Retiree, and Employer Recovery Act of
2008 (WRERA ’08), P.L. 110–458, the
notice requirement of § 402(f) applies to
distributions to a nonspouse designated
beneficiary.
Section 845 of PPA ’06 added § 402(l)
of the Code, which generally provides a
limited exclusion from gross income for
distributions from an eligible employer
plan that is a governmental plan (as de-
fined in § 414(d)) that are paid directly
to an accident or health plan or a quali-
fied long-term care insurance contract for
health or long-term care insurance pre-
miums of an eligible retired public safety
officer, his or her spouse, or his or her de-
pendents. Under § 457(a)(3), the § 402(l)
1
A designated Roth contribution is an elective contribution under a cash or deferred arrangement that is (i) designated by the employee at the time of the cash or deferred election as a
designated Roth contribution that is being made in lieu of all or a portion of the pre-tax elective contribution the employee is eligible to make under the plan, (ii) treated by the employer as
includible in the employee’s gross income at the time the employee would have received the amount in cash if the employee had not made the cash or deferred election, and (iii) maintained
by the plan in a separate account.
September 28, 20094242009–39 I.R.B.

exclusion also applies to distributions
from a governmental § 457(b) plan. An
eligible retired public safety officer is a
public safety officer who, by reason of dis-
ability or attainment of normal retirement
age, is separated from service as a pub-
lic safety officer with the employer that
maintains the plan. A public safety officer
is defined under section 1204(9)(A) of the
Omnibus Crime Control and Safe Streets
Act of 1968 (P.L. 90–351, 42 U.S.C.
3796b(9)(A)) as “an individual serving
a public agency in an official capacity,
with or without compensation, as a law
enforcement officer, as a firefighter, as a
chaplain, or as a member of a rescue squad
or ambulance crew.” The total amount
excluded from gross income pursuant to
§ 402(l) cannot exceed $3,000 annually.
Under § 414(w) (as added by section
902 of PPA ’06), an applicable employer
plan that contains an eligible automatic
contribution arrangement is permitted to
allow employees to elect to receive a dis-
tribution equal to the amount of the elec-
tive contributions under the arrangement
(and attributable earnings) made with re-
spect to the employee beginning with the
first payroll period to which the arrange-
ment applies to the employee and ending
with the effective date of the election. The
election must be made within 90 days af-
ter the date of the first elective contribution
with respect to the employee under the ar-
rangement. The amount of the distribution
is not an eligible rollover distribution and
is includible in gross income (to the extent
not a return of designated Roth contribu-
tions) for the taxable year in which the dis-
tribution is made, but is not subject to the
10% additional income tax on early distri-
butions under § 72(t).
III. SAFE HARBOR EXPLANATIONS
A principal purpose of the changes in
the safe harbor explanations in this notice
is to simplify the presentation and de-
scription of the participant’s options upon
receiving an eligible rollover distribution.
The new safe harbor explanations also
broaden the information to reflect changes
in law, such as information on a distribu-
tion from a designated Roth account under
an employer plan. The information has
also been expanded to explain rules that
apply in special situations, for example,
when a distribution is made to a nonresi-
dent alien.
There are two safe harbor explanations
in this notice. The first safe harbor ex-
planation does not include information rel-
evant to distributions from a designated
Roth account. Thus, the first safe harbor
explanation should only be used for a dis-
tribution that is not from a designated Roth
account. The second safe harbor expla-
nation reflects the rules relating to distri-
butions from a designated Roth account.
Thus, the second safe harbor explanation
should only be used for a distribution from
a designated Roth account, and the IRS
and the Department of the Treasury recom-
mend that it only be provided to a partic-
ipant with a designated Roth account un-
der the Plan. Both explanations should be
provided to a participant if the participant
is eligible to receive eligible rollover dis-
tributions both from a designated Roth ac-
count and from an account other than a
designated Roth account.
The safe harbor explanation in this no-
tice for distributions not from a designated
Roth account meets the requirements of
§ 402(f) for an eligible rollover distribu-
tion that is not from a designated Roth ac-
count if provided to the recipient of the
eligible rollover distribution within a rea-
sonable period of time before the distri-
bution is made. Similarly, the safe har-
bor explanation in this notice for distri-
butions from a designated Roth account
meets the requirements of § 402(f) for an
eligible rollover distribution from a desig-
nated Roth account if provided to the re-
cipient of the eligible rollover distribution
within a reasonable period of time before
the distribution is made.
Section 1.402(f)–1,A–2, currently pro-
vides, in general, that a reasonable period
of time for providing an explanation is no
less than 30 days (subject to waiver) and
no more than 90 days before the date on
which a distribution is made. Section 1102
of PPA ’06 directs that this regulation be
modified to permit a notice required to be
provided under § 402(f) to be provided
to a participant as much as 180 days be-
fore the date on which the distribution is
made. Thus, the § 402(f) notice may be
provided as much as 180 days before the
annuity starting date (or the date on which
the distribution is made). See § 1.402(f)–1,
A–2(a), of the Proposed Income Tax Reg-
ulations (73 FR 59575).
A plan administrator or payor may cus-
tomize a safe harbor explanation by omit-
ting any information that does not apply
to the plan. For example, if the plan does
not hold after-tax employee contributions,
it would be appropriate for the section “If
your payment includes after-tax contribu-
tions” in the explanation for payments not
from a designated Roth account to be elim-
inated. Similarly, if the plan does not pro-
vide for distributions of employer stock or
other employer securities, it would be ap-
propriate for the section “If your payment
includes employer stock that you do not
roll over” to be eliminated. Other informa-
tion that may not be relevant to a particu-
lar plan includes, for example, the sections
“If your payment is from a governmental
section 457(b) plan,” and “If you are an el-
igible retired public safety officer and your
pension payment is used to pay for health
coverage or qualified long-term care in-
surance.” In addition, the plan adminis-
trator or payor may provide additional in-
formation with a safe harbor explanation
if the information is not inconsistent with
§ 402(f).
Alternatively, a plan administrator or
payor can satisfy § 402(f) by providing
an explanation that is different from a
safe harbor explanation. Any explanation
must contain the information required by
§ 402(f) and must be written in a manner
designed to be easily understood.
If the law governing the tax treatment of
distributions or other provisions described
in a safe harbor explanation in this no-
tice is amended after September 28, 2009,
the safe harbor explanation will not sat-
isfy § 402(f) to the extent that the safe har-
bor explanation no longer accurately de-
scribes the relevant law. The safe harbor
explanations in Notice 2002–3, appropri-
ately modified to reflect statutory changes
since Notice 2002–3 was published, will
continue to be safe harbor explanations
with respect to notices provided through
December 31, 2009.
It is expected that the IRS will publish
a Spanish translation of these safe harbor
explanations.
EFFECT ON OTHER DOCUMENTS
Notice 2002–3 is modified and super-
seded.
2009–39 I.R.B.425September 28, 2009

DRAFTING INFORMATION
The principal authors of this notice
are Kathleen Herrmann of the Employee
Plans, Tax Exempt and Government En-
tities Division, and Michael P. Brewer of
the Office of the Division Counsel/As-
sociate Chief Counsel (Tax Exempt and
Government Entities). Questions regard-
ing this notice may be sent via e-mail
toretirementplanquestions@irs.gov.
Mr.Brewer may be reached at
202–622–6090 (not a toll-free call).
***
September 28, 20094262009–39 I.R.B.

For Payments Not From a
Designated Roth Account
Y
OURROLLOVEROPTIONS
You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the
“Plan”)iseligibletoberolledovertoanIRAoranemployerplan. This notice is intended to help you decide whether to
do such a rollover.
This notice describes the rollover rules that apply to payments from the Plan that arenotfrom a designated Roth account (a type
of account with special tax rules in some employer plans). Ifyou also receive a payment from a designated Roth account in
the Plan, you will be provided a different notice for that payment, and the Plan administrator or the payor will tell you the
amount that is being paid from each account.
Rules that apply to most payments from a plan are described in the “General Information About Rollovers” section. Special rules
that only apply in certain circumstances are described in the “Special Rules and Options” section.
GENERAL INFORMATION ABOUT ROLLOVERS
How can a rollover affect my taxes?
You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 59
1
/2and do not do a rollover, you
will also have to pay a 10% additional income tax on early distributions (unless an exception applies). However, if you do a
rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax will not apply if those
payments are made after you are age 59
1
/2(or if an exception applies).
Where may I roll over the payment?
You may roll over the payment to either an IRA (an individual retirement account or individual retirement annuity) or an employer
plan (a tax-qualified plan, section 403(b) plan, or governmental section 457(b) plan) that will accept the rollover. The rules of the
IRA or employer plan that holds the rollover will determine yourinvestment options, fees, and rights to payment from the IRA or
employer plan (for example, no spousal consent rules apply to IRAs and IRAs may not provide loans). Further, the amount rolled
over will become subject to the tax rules that apply to the IRA or employer plan.
How do I do a rollover?
Therearetwowaystodoarollover.Youcandoeither a direct rollover or a 60-day rollover.
If you do a direct rollover, the Plan will make the payment directly to your IRA or an employer plan. You should contact the IRA
sponsor or the administrator of the employer plan for information on how to do a direct rollover.
If you do not do a direct rollover, you may still do a rollover by making a deposit into an IRA or eligible employer plan that will
accept it. You will have 60 days after you receive the payment to make the deposit. If you do not do a direct rollover, the Plan is
required to withhold 20% of the payment for federal income taxes (up to the amount of cash and property received other than
employer stock). This means that, in order to roll over the entire payment in a 60-day rollover, you must use other funds to make
up for the 20% withheld. If you do not roll over the entire amount of the payment, the portion not rolled over will be taxed and
will be subject to the 10% additional income tax on early distributions if you are under age 59
1
/2(unless an exception applies).
How much may I roll over?
If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is
eligible for rollover, except:
•Certain payments spread over a period of at least 10 years or over your life or life expectancy (or thelives or joint life expectancy
of you and your beneficiary)
•Required minimum distributions after age 70
1
/2(or after death)
•Hardship distributions
•ESOP dividends
•Corrective distributions of contributions that exceed tax law limitations
•Loans treated as deemed distributions (for example, loans in default due to missedpayments before your employment ends)
•Cost of life insurance paid by the Plan
•Contributions made under special automatic enrollment rulesthat are withdrawn pursuant to your request within 90 days of
enrollment
•Amounts treated as distributed because of a prohibited allocation of S corporation stock under an ESOP (also, there will gener-
ally be adverse tax consequences if you roll over adistribution of S corporation stock to an IRA).
2009–39 I.R.B.427September 28, 2009

The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.
If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?
If you are under age 59
1
/2, you will have to pay the 10% additional income tax on early distributions for any payment from the
Plan (including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below applies.
This tax is in addition to the regular income tax on the payment not rolled over.
The 10% additional income tax does not apply to the following payments from the Plan:
•Payments made after you separate from service if youwill be at least age 55 in the year of the separation
•Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life or
life expectancy (or the lives or joint life expectancy of you and your beneficiary)
•Payments from a governmental defined benefit pension plan made after you separatefromserviceifyouareapublicsafety
employee and you are at least age50 in the year of the separation
•Payments made due to disability
•Payments after your death
•Payments of ESOP dividends
•Corrective distributions of contributions that exceed tax law limitations
•Cost of life insurance paid by the Plan
•Contributions made under special automatic enrollment rulesthat are withdrawn pursuant to your request within 90 days of
enrollment
•Payments made directly to the government to satisfy a federal tax levy
•Payments made under a qualified domestic relations order (QDRO)
•Payments up to the amount of your deductible medical expenses
•Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days
•Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution.
If I do a rollover
to an IRA, will the 10% additional income taxapplytoearlydistributionsfromtheIRA?
If you receive a payment from an IRA when you are under age 59
1
/2, you will have to pay the 10% additional income tax on
early distributions from the IRA, unless an exception applies. In general, the exceptions to the 10% additional income tax for
early distributions from an IRA are the same as the exceptions listed above for early distributions from a plan. However, there
are a few differences for payments from an IRA, including:
•There is no exception for payments after separation from service thatare made after age 55.
•The exception for qualified domestic relations orders (QDROs) does not apply (although a special rule applies under which, as
part of a divorce or separation agreement, a tax-free transfer may be made directly to an IRA of a spouse or former spouse).
•The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without
regard to whether you have had a separation from service.
•There are additional exceptions for (1) payments for qualified higher education expenses, (2) payments up to $10,000 used in a
qualified first-time home purchase, and (3) payments after you have received unemployment compensation for 12 consecutive
weeks (or would have been eligible to receive unemployment compensation but for self-employed status).
Will I owe State income taxes?
This notice does not describe any State or local income tax rules (including withholding rules).
SPECIAL RULES AND OPTIONS
If your payment includes after-tax contributions
After-tax contributions included in a payment are not taxed. If a payment is only part of your benefit, an allocable portion of your
after-tax contributions is generally included in the payment. If you have pre–1987 after-tax contributions maintained in a separate
account, a special rule may apply to determine whether the after-tax contributions are included in a payment.
September 28, 20094282009–39 I.R.B.

You may roll over to an IRA a payment that includes after-tax contributions through either a direct rollover or a 60-day rollover.
You must keep track of the aggregate amount of the after-tax contributions in all of your IRAs (in order to determine your taxable
income for later payments from the IRAs). If you do a direct rollover of only a portion of the amount paid from the Plan and a
portion is paid to you, each of the payments will include an allocable portion of the after-tax contributions. If you do a 60-day
rollover to an IRA of only a portion of the payment made to you, theafter-tax contributions are treated as rolled over last. For
example, assume you are receiving a complete distribution of your benefit which totals $12,000,of which $2,000 is after-tax
contributions. In this case, if you roll over $10,000 to an IRA in a 60-day rollover, no amount is taxable because the $2,000
amount not rolled over is treated as being after-tax contributions.
You may roll over to an employer plan all of a payment that includes after-tax contributions, but only through a direct rollover
(and only if the receiving plan separately accounts for after-taxcontributions and is not a governmental section 457(b) plan).
You can do a 60-day rollover to an employer plan of part of a payment that includes after-tax contributions, but only up to the
amount of the payment that would be taxable if not rolled over.
If you miss the 60-day rollover deadline
Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline
under certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the
60-day rollover deadline. To apply for a waiver, you must file a private letter ruling request with the IRS. Private letter ruling
requests require the payment of a nonrefundable user fee. For more information, see IRS Publication 590,Individual Retirement
Arrangements (IRAs).
If your payment includes employer stock that you do not roll over
If you do not do a rollover, you can apply a special rule to payments of employer stock (or other employer securities) that are
either attributable to after-tax contributions or paid in a lump sum after separation from service (or after age 59
1
/2, disability, or the
participant’s death). Under the special rule, the net unrealized appreciation on the stock will not be taxed when distributed from
the Plan and will be taxed at capital gain rates when you sell the stock. Net unrealized appreciation is generally the increase in
the value of employer stock after it was acquired by the Plan. If you do a rollover for a payment that includes employer stock
(for example, by selling the stock and rolling over the proceeds within 60 days of the payment), the special rule relating to the
distributed employer stock will not apply to any subsequent payments from the IRA or employer plan. The Plan administrator
can tell you the amount of any net unrealized appreciation.
If you have an outstanding loan that is being offset
If you have an outstanding loan from the Plan, your Plan benefit may be offset by the amount of the loan, typically when your
employment ends. The loan offset amount is treated as a distribution to you at the time of the offset and will be taxed (including
the 10% additional income tax on early distributions, unless an exception applies) unless you do a 60-day rollover in the amount
of the loan offset to an IRA or employer plan.
If you were born on or before January 1, 1936
If you were born on or before January 1, 1936 and receive a lump sum distribution that you do notroll over, special rules for
calculating the amount of the tax on the payment might apply to you. For more information, see IRS Publication 575,Pension
and Annuity Income.
If your payment is from a governmental section 457(b) plan
If the Plan is a governmental section 457(b) plan, the same rules described elsewhere in this notice generally apply, allowing you
to roll over the payment to an IRA or an employer plan that acceptsrollovers. One difference is that, if you do not do a rollover,
you will not have to pay the 10% additional income tax on early distributions from the Plan even if you are under age 59
1
/2(unless
the payment is from a separate account holding rollover contributions that were made to the Plan from a tax-qualified plan, a
section 403(b) plan, or an IRA). However, if you do a rollover to an IRA or to an employer plan that is not a governmental section
457(b) plan, a later distribution made before age 59
1
/2will be subject to the 10% additional income tax on early distributions
(unless an exception applies). Other differences are that youcannot do a rollover if the payment is due to an “unforeseeable
emergency” and the special rules under “If your payment includes employer stock that you do not roll over” and “If you were
born on or before January 1, 1936” do not apply.
2009–39 I.R.B.429September 28, 2009

If you are an eligible retired public safety officer and your pension payment is used to pay for health coverage or qualified
long-term care insurance
If the Plan is a governmental plan, you retired as a public safety officer, and your retirement was by reason of disability or was
after normal retirement age, you can exclude from your taxable income plan payments paid directly as premiums to an accident
or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse, or your
dependents, up to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement officer, firefighter,
chaplain, or member of a rescue squad or ambulance crew.
If you roll over your payment to a Roth IRA
You can roll over a payment from the Plan made before January 1, 2010 to a Roth IRA only if your modified adjusted gross
income is not more than $100,000 for the year the payment is made to you and, if married, you file a joint return. These limitations
do not apply to payments made to you from the Plan after 2009. If you wish to roll over the payment to a Roth IRA, but
you are not eligible to do a rollover to a Roth IRA until after 2009, you can do a rollover to a traditional IRA and then, after
2009, elect to convert the traditional IRA into a Roth IRA.
If you roll over the payment to a Roth IRA, a special rule applies under which the amount of the payment rolled over (reduced by
any after-tax amounts) will be taxed. However, the 10% additional income tax on early distributionswill not apply (unless you take
the amount rolled over out of the Roth IRA within 5 years, counting from January 1 of the year of the rollover). For payments from
the Plan during 2010 that are rolled over to a Roth IRA, the taxable amount can be spread over a 2-year period starting in 2011.
If you roll over the payment to a Roth IRA, later payments from the Roth IRA that are qualified distributions will not be taxed
(including earnings after the rollover). A qualified distribution from a Roth IRA is a payment made after you are age 59
1
/2(or
after your death or disability, or as a qualified first-time homebuyer distribution of up to $10,000) and after you have had a Roth
IRA for at least 5 years. In applying this 5-year rule, you countfrom January 1 of the year for which your first contribution was
made to a Roth IRA. Payments from the Roth IRA that are not qualified distributions will be taxed to the extent of earnings after
the rollover, including the 10% additional income tax on early distributions (unless an exception applies). You do not have to
take required minimum distributions from a Roth IRA duringyour lifetime. For more information, see IRS Publication 590,
Individual Retirement Arrangements (IRAs).
You cannot roll over a payment from the Plan to adesignated Roth account in an employer plan.
If you are not a plan participant
Payments after death of the participant. If you receive a distribution after the participant’s death that you do not roll over, the
distribution will generally be taxed in the same manner described elsewhere in thisnotice. However, the 10% additional income
tax on early distributions and the special rules for public safetyofficers do not apply, and the special rule described under the
section “If you were born on or before January 1, 1936” applies only if the participant was born on or before January 1, 1936.
If you are a surviving spouse.If you receive a payment from the Plan as the surviving spouse of a deceased
participant, you have the same rollover options that the participant would have had, as described elsewhere
in this notice. In addition, if you choose to do a rollover to an IRA, you may treat the IRA as your own or as
an inherited IRA.
An IRA you treat as your own is treated like any other IRA of yours, so that payments made to you before you are
age 59
1
/2will be subject to the 10% additional income tax on earlydistributions (unless an exception applies) and
required minimum distributions from your IRA do not have to start until after you are age 70
1
/2.
If you treat the IRA as an inherited IRA, payments from the IRA will not be subject to the 10% additional income tax
on early distributions. However, if the participant had started taking required minimum distributions, you will have
to receive required minimum distributions from the inherited IRA. If the participant had not started taking required
minimum distributions from the Plan,you will not have to start receiving required minimum distributions from
the inherited IRA until the year the participant would have been age 70
1
/2.
If you are a surviving beneficiary other than a spouse.If you receive a payment from the Plan because of the
participant’s death and you are a designated beneficiary other than a surviving spouse, the only rollover option you
have is to do a direct rollover to an inherited IRA. Payments from the inherited IRA will not be subject to the
10% additional income tax on early distributions. You will have to receive required minimum distributions from
the inherited IRA.
Payments under a qualified domestic relations order. If you are the spouse or former spouse of the participant who receives a
payment from the Plan under a qualified domestic relations order (QDRO), you generally have the same options the participant
would have (for example, you may roll over the payment to your own IRA or an eligible employer plan that will accept it).
Payments under the QDRO will not be subject to the 10%additional income tax on early distributions.
September 28, 20094302009–39 I.R.B.

If you are a nonresident alien
If you are a nonresident alien and you do not do a direct rollover to a U.S. IRA or U.S. employer plan, instead of withholding
20%, the Plan is generally required to withhold 30% of the payment for federal income taxes. If the amount withheld exceeds
the amount of tax you owe (as may happen if you do a 60-day rollover), you may request an income tax refund by filing Form
1040NR and attaching your Form 1042–S. See Form W–8BEN for claiming that you are entitled to a reduced rate of withholding
under an income tax treaty. For more information, see also IRS Publication 519,U.S. Tax Guide for Aliens,and IRS Publication
515,Withholding of Tax on Nonresident Aliens and Foreign Entities.
Other special rules
If a payment is one in a series of payments for less than 10 years,your choice whether to make a direct rollover will apply to all
later payments in the series (unless you make a different choice for later payments).
If your payments for the year are less than $200 (not including payments from a designated Roth account in the Plan), the Plan
is not required to allow you to do a direct rollover and is not required to withhold for federal income taxes. However, you
may do a 60-day rollover.
Unless you elect otherwise, a mandatory cashout of more than $1,000 (not including payments from a designated Roth account in
the Plan) will be directly rolled over to an IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment
from a plan to a participant made before age 62 (or normal retirement age, if later) and without consent, where the participant’s
benefit does not exceed $5,000 (not including any amounts heldunder the plan as a result of a prior rollover made to the plan).
You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information, see IRS Publication
3,Armed Forces’ Tax Guide.
FOR MORE INFORMATION
You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from the
Plan. Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS
Publication 575,Pension and Annuity Income;IRS Publication 590,Individual Retirement Arrangements (IRAs);and IRS
Publication 571,Tax-Sheltered Annuity Plans (403(b) Plans).These publications are available from a local IRS office, on
the web atwww.irs.gov, or by calling 1–800–TAX–FORM.
***
2009–39 I.R.B.431September 28, 2009

For Payments From a
Designated Roth Account
Y
OURROLLOVEROPTIONS
You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the
“Plan”) is eligible to be rolled over to a Roth IRA or designated Roth account in an employer plan. This notice is intended to help
you decide whether to do a rollover.
This notice describes the rollover rules that apply to payments from the Plan that are from a designated Roth account.Ifyou
also receive a payment from the Plan that is not from a designated Roth account, you will be provided a different notice for that
payment, and the Plan administrator or the payor will tell you the amount that is being paid from each account.
Rules that apply to most payments from a designated Roth account are described in the “General Information About Rollovers”
section. Special rules that only apply in certain circumstances are described in the “Special Rules and Options” section.
GENERAL INFORMATION ABOUT ROLLOVERS
How can a rollover affect my taxes?
After-tax contributionsincluded in a payment from a designated Roth account are not taxed, but earnings might be taxed. The tax
treatment of earnings included in the payment depends on whether thepayment is a qualified distribution. If a payment is only part
of your designated Roth account, the payment will include an allocable portion of the earnings in your designated Roth account.
If the payment from the Plan is not a qualified distribution andyou do not do a rollover to a Roth IRA or a designated Roth account
in an employer plan, you will be taxed on the earnings in the payment. If you are under age 59
1
/2, a 10% additional income tax on
early distributions will also apply to the earnings (unless an exception applies). However, if you do a rollover, you will not have to
pay taxes currently on the earnings and you will not have to pay taxes later on payments that are qualified distributions.
If the payment from the Plan is a qualified distribution, you will not be taxed on any part of the payment even if you do not
do a rollover. If you do a rollover, you will not be taxed on the amount you roll over and any earnings on the amount you roll
over will not be taxed if paid later in a qualified distribution.
A qualified distribution from a designated Roth account in the Plan is a payment made after you are age 59
1
/2(or after your death
or disability) and after you have had a designated Roth account in the Plan for at least 5 years. In applying the 5-year rule, you
count from January 1 of the year your first contribution was made to the designated Roth account. However, if you did a direct
rollover to a designated Roth account in the Plan from a designated Roth account in another employer plan, your participation
will count from January 1 of the year your first contribution wasmade to the designated Roth account in the Plan or, if earlier,
to the designated Roth account in the other employer plan.
Where may I roll over the payment?
You may roll over the payment to either a Roth IRA (a Roth individual retirement account or Roth individual retirement annuity) or
a designated Roth account in an employer plan (a tax-qualified plan or section 403(b) plan) that will accept the rollover. The rules
of the Roth IRA or employer plan that holds the rollover will determine your investment options, fees, and rights to payment from
the Roth IRA or employer plan (for example, no spousal consent rules apply to Roth IRAs and Roth IRAs may not provide loans).
Further, the amount rolled over will become subject to the tax rules that apply to the Roth IRA or the designated Roth account in
the employer plan. In general, these tax rules are similar to those described elsewhere in this notice, but differences include:
•Ifyoudoar
ollover to a Roth IRA, all of your Roth IRAs will be considered for purposes of determining whether you have
satisfied
the 5-year rule (counting from January 1 of the year for which your first contribution was made to any of your Roth
IRAs).
•Ifyoudoar
ollover to a Roth IRA, you will not be required to take a distribution from the Roth IRA during your lifetime and
you must ke
ep track of the aggregate amount of the after-tax contributions in all of your Roth IRAs (in order to determine your
taxable in
come for later Roth IRA payments that are not qualified distributions).
•Eligible r
ollover distributions from a Roth IRA canonly be rolled over to another Roth IRA.
How do I do a rollover?
There are two ways to do a rollover. You can either do a direct rollover or a 60-day rollover.
If you do a direct rollover, the Plan will make the payment directly to your Roth IRA or designated Roth account in an employer
plan. You should contact the Roth IRA sponsor or the administrator of the employer plan for information on how to do a
direct rollover.
September 28, 20094322009–39 I.R.B.

If you do not do a direct rollover, you may still do a rollover by making a deposit within 60 days into a Roth IRA, whether the
payment is a qualified or nonqualified distribution. In addition, you can do a rollover by making a deposit within 60 days into a
designated Roth account in an employer plan if the payment is a nonqualified distribution and the rollover does not exceed the
amount of the earnings in the payment. You cannot do a 60-day rollover to an employer plan of any part of a qualified distribution.
If you receive a distribution that is a nonqualified distribution and you do not roll over anamount at least equal to the earnings
allocable to the distribution, you will be taxed on the amount of those earnings not rolled over, including the 10% additional
income tax on early distributions if you are under age 59
1
/2(unless an exception applies).
If you do a direct rollover of only a portion of the amount paid from the Plan and a portion is paid to you, each of the payments
will include an allocable portion of the earnings in your designated Roth account.
If you do not do a direct rollover and the payment is not a qualified distribution, the Plan is required to withhold 20% of the
earnings for federal income taxes (up to the amount of cash and property received other than employer stock). This means that, in
order to roll over the entire payment in a 60-day rollover to a Roth IRA, you must use other funds to make up for the 20% withheld.
How much may I roll over?
If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is
eligible for rollover, except:
•Certain payments spread over a period of at least 10 years or over your life or life expectancy (or thelives or joint life expectancy
of you and your beneficiary)
•Required minimum distributions after age 70
1
/2(or after death)
•Hardship distributions
•ESOP dividends
•Corrective distributions of contributions that exceed tax law limitations
•Loans treated as deemed distributions (for example, loans in default due to missedpayments before your employment ends)
•Cost of life insurance paid by the Plan
•Contributions made under special automatic enrollment rulesthat are withdrawn pursuant to your request within 90 days of
enrollment
•Amounts treated as distributed because of a prohibited allocation of S corporation stock under an ESOP (also, there will gener-
ally be adverse tax consequences if S corporation stock is held by an IRA).
The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.
If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?
If a payment is
not a qualified distribution and you are under age 59
1
/2, you will have to pay the 10% additional income tax on
early distrib
utions with respect to the earnings allocated to the payment that you do not roll over (including amounts withheld
for income tax
), unless one of the exceptions listed below applies. This tax is in addition to the regular income tax on the
earnings not r
olled over.
The 10% additi
onal income tax does not apply to the following payments from the Plan:
•Payments made after you separate from service if youwill be at least age 55 in the year of the separation
•Payments that start after you separate from service if paid at least annually in equal or close to equal amounts over your life or
life expectancy (or the lives or joint life expectancy of you and your beneficiary)
•Payments made due to disability
•Payments after your death
•Payments of ESOP dividends
•Corrective distributions of contributions that exceed tax law limitations
•Cost of life insurance paid by the Plan
•Contributions made under special automatic enrollment rulesthat are withdrawn pursuant to your request within 90 days of
enrollment
•Payments made directly to the government to satisfy a federal tax levy
•Payments made under a qualified domestic relations order (QDRO)
•Payments up to the amount of your deductible medical expenses
•Certain payments made while you are on active duty if you were a member of a reserve component called to duty after September
11, 2001 for more than 179 days
•Payments of certain automatic enrollment contributions requested to be withdrawn within 90 days of the first contribution.
2009–39 I.R.B.433September 28, 2009

If I do a rollover to a Roth IRA, will the 10% additional income tax apply to early distributions from the IRA?
If you receive a payment from a Roth IRA when you are under age 59
1
/2, you will have to pay the 10% additional income tax on
early distributions on the earnings paid from the Roth IRA, unlessan exception applies or the payment is a qualified distribution.
In general, the exceptions to the 10% additional income tax for early distributions from a Roth IRA listed above are the same as
the exceptions for early distributions from a plan. However, there are a few differences for payments from a Roth IRA, including:
•There is no special exception for payments after separation from service.
•The exception for qualified domestic relations orders (QDROs) does not apply (although a special rule applies under which, as
part of a divorce or separation agreement, a tax-free transfer may be made directly to a Roth IRA of a spouse or former spouse).
•The exception for payments made at least annually in equal or close to equal amounts over a specified period applies without
regard to whether you have had a separation from service.
•There are additional exceptions for (1) payments for qualified higher education expenses, (2) payments up to $10,000 used in a
qualified first-time home purchase, and (3) payments after you have received unemployment compensation for 12 consecutive
weeks (or would have been eligible to receive unemployment compensation but for self-employed status).
Will I owe Stat
eincometaxes?
This notice do
es not describe any State or local income tax rules (including withholding rules).
SPECIAL RULES AND OPTIONS
If you miss the 60-day rollover deadline
Generally, the 60-day rollover deadline cannot be extended. However, the IRS has the limited authority to waive the deadline
under certain extraordinary circumstances, such as when external events prevented you from completing the rollover by the
60-day rollover deadline. To apply for a waiver, you must file a private letter ruling request with the IRS. Private letter ruling
requests require the payment of a nonrefundable user fee. For more information, see IRS Publication 590,Individual Retirement
Arrangements (IRAs).
If your payme
nt includes employer stock that you do not roll over
If you receive
a payment that is not a qualified distribution and you do not roll it over, you can apply a special rule to payments
of employer s
tock (or other employer securities) that are paid in a lump sum after separation from service (or after age 59
1
/2,
disability,
or the participant’s death). Under the special rule, the net unrealized appreciation on the stock included in the earnings
in the paymen
t will not be taxed when distributed to you from the Plan and will be taxed at capital gain rates when you sell the
stock. If you
do a rollover to a Roth IRA for a nonqualified distribution that includes employer stock (for example, by selling the
stock and ro
lling over the proceeds within 60 days of the distribution), you will not have any taxable income and the special rule
relating to
the distributed employer stock will not apply to any subsequent payments from the Roth IRA or employer plan. Net
unrealized
appreciation is generally the increase in the value of theemployer stock after it was acquired by the Plan. The Plan
administra
tor can tell you the amount of any net unrealized appreciation.
If you recei
ve a payment that is a qualified distribution that includes employer stock and you do not roll it over, your basis in
the stock (u
sed to determine gain or loss when you later sell the stock) will equal the fair market value of the stock at the
time of the
payment from the Plan.
If you have an outstanding loan that is being offset
If you have an outstanding loan from the Plan, your Plan benefit may be offset by the amount of the loan, typically when your
employment ends. The loan offset amount is treated as a distribution to you at the time of the offset and, if the distribution is
a nonqualified distribution, the earnings in the loan offsetwill be taxed (including the 10% additional income tax on early
distributions, unless an exception applies) unless you do a 60-day rollover in the amount of the earnings in the loan offset to a
Roth IRA or designated Roth account in an employer plan.
If you receive a nonqualified distribution and you were born on or before January 1, 1936
If you were born on or before January 1, 1936, and receive a lump sumdistribution that is not a qualified distribution and that you
do not roll over, special rules for calculating the amount of the tax on the earnings in the payment might apply to you. For more
information, see IRS Publication 575,Pension and Annuity Income.
September 28, 20094342009–39 I.R.B.

If you receive a nonqualified distribution, are an eligible retired public safety officer, and your pension payment is used to
pay for health coverage or qualified long-term care insurance
If the Plan is a governmental plan, you retired as a public safety officer, and your retirement was by reason of disability or was
after normal retirement age, you can exclude from your taxable income nonqualified distributions paid directly as premiums to an
accident or health plan (or a qualified long-term care insurance contract) that your employer maintains for you, your spouse, or
your dependents, up to a maximum of $3,000 annually. For this purpose, a public safety officer is a law enforcement officer,
firefighter, chaplain, or member of a rescue squad or ambulance crew.
If you are not a plan participant
Payments after death of the participant. If you receive a distribution after the participant’s death that you do not roll over, the
distribution will generally be taxed in the same manner described elsewhere in this notice. However, whether the payment is a
qualified distribution generally dependson when the participant first made a contribution to the designated Roth account in the
Plan. Also, the 10% additional income tax on early distributions and the special rules for public safety officers do not apply, and
the special rule described under the section “If you receive a nonqualified distribution and you were born on or before January 1,
1936” applies only if the participant was born on or before January 1, 1936.
If you are a surviving spouse.If you receive a payment from the Plan as the surviving spouse of a deceased
participant, you have the same rollover options that the participant would have had, as described elsewhere in this
notice. In addition, if you choose to do a rollover to a Roth IRA, you may treat the Roth IRA as your own or as
an inherited Roth IRA.
A Roth IRA you treat as your own is treated like any other Roth IRA of yours, so that you will not have to receive any
required minimum distributions duringyour lifetime and earnings paid to youin a nonqualified distribution before
you are age 59
1
/2will be subject to the 10% additional income tax on early distributions (unless an exception applies).
If you treat the Roth IRA as an inherited Roth IRA, payments from the Roth IRA will not be subject to the 10%
additional income tax on early distributions. An inherited Roth IRA is subject to required minimum distributions. If
the participant had started taking required minimum distributions from the Plan, you will have to receive required
minimum distributions from the inherited Roth IRA. If the participant had not started taking required minimum
distributions, you will not have to startreceiving required minimum distributions from the inherited Roth IRA until
the year the participant would have been age 70
1
/2.
If you are a surviving beneficiary other than a spouse. If you receive a payment from the Plan because of the
participant’s death and you are a designated beneficiary other than a surviving spouse, the only rollover option you
have is to do a direct rollover to an inherited Roth IRA. PaymentsfromtheinheritedRothIRA,evenifmadeina
nonqualified distribution, will not be subject to the 10% additional income tax on early distributions. You will have
to receive required minimum distributions from the inherited Roth IRA.
Payments under a qualified domestic relations order. If you are the spouse or a former spouse of the participant who receives a
payment from the Plan under a qualified domestic relations order (QDRO), you generally have the same options the participant
would have (for example, you may roll over the payment as described in this notice).
If you are a nonresident alien
If you are a nonresident alien and you do not do a direct rollover to a U.S. IRA or U.S. employer plan, instead of withholding
20%, the Plan is generally required to withhold 30% of the payment for federal income taxes. If the amount withheld exceeds
the amount of tax you owe (as may happen if you do a 60-day rollover), you may request an income tax refund by filing Form
1040NR and attaching your Form 1042–S. See Form W–8BEN for claiming that you are entitled to a reduced rate of withholding
under an income tax treaty. For more information, see also IRS Publication 519,U.S. Tax Guide for Aliens, and IRS Publication
515,Withholding of Tax on Nonresident Aliens and Foreign Entities.
Other special rules
If a payment is one in a series of payments for less than 10 years,your choice whether to make a direct rollover will apply to all
later payments in the series (unless you make a different choice for later payments).
If your payments for the year (only including payments from the designated Rothaccount in the Plan) are less than $200, the
Plan is not required to allow you to do a direct rollover and is not required to withhold for federal income taxes. However,
you can do a 60-day rollover.
2009–39 I.R.B.435September 28, 2009

Unless you elect otherwise, a mandatory cashout from the designated Roth account in the Plan of more than $1,000 will be
directly rolled over to a Roth IRA chosen by the Plan administrator or the payor. A mandatory cashout is a payment from a plan to
a participant made before age 62 (or normal retirement age, if later) and without consent, where theparticipant’s benefit does not
exceed $5,000 (not including any amounts held under the plan as a result of a prior rollover made to the plan).
You may have special rollover rights if you recently served in the U.S. Armed Forces. For more information, see IRS Publication
3,Armed Forces’ Tax Guide.
FOR MORE INFORMATION
You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from the
Plan. Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS
Publication 575,Pension and Annuity Income; IRS Publication 590,Individual Retirement Arrangements (IRAs);andIRS
Publication 571,Tax-Sheltered Annuity Plans (403(b) Plans).These publications are available from a local IRS office, on
the web atwww.irs.gov, or by calling 1–800–TAX–FORM.
Rollovers from Employer
Plans to Roth IRAs
Notice 2009–75
I. PURPOSE
This notice describes the federal in-
come tax consequences of rolling over
an eligible rollover distribution from a
qualified plan described in § 401(a) of
the Internal Revenue Code (Code), an an-
nuity plan described in § 403(a), a plan
described in § 403(b), or an eligible gov-
ernmental plan under § 457(b) to a Roth
IRA described in § 408A.
II. BACKGROUND
Section 401(k) sets forth rules for qual-
ified cash or deferred arrangements under
which an employee may make an election
between cash and an employer contribu-
tion to a plan qualified under § 401(a).
Section 403(b) permits a similar salary re-
duction agreement under which payments
are made to a § 403(b) plan. Amounts con-
tributed pursuant to these qualified cash
or deferred arrangements and salary reduc-
tion agreements are defined in § 402(g)(3)
as elective deferrals.
A designated Roth contribution is de-
scribedin§402A,whichwasaddedtothe
Code by section 617(a) of the Economic
Growth and Tax Relief Reconciliation Act
of 2001, Public Law 107–16 (115 Stat.
103) (EGTRRA), for taxable years begin-
ning after December 31, 2005. A desig-
nated Roth contribution is an elective de-
ferral, as described in § 402(g)(3)(A) or
(C) of the Code, that has been designated
by an employee, pursuant to § 402A, as
not excludable from the employee’s gross
income. Under § 402A(b)(2), designated
Roth contributions made to the plan must
be maintained in a separate account (a des-
ignated Roth account).
Under § 402(a), a distribution from a
plan qualified under § 401(a) generally is
taxable under § 72 to the distributee in the
taxable year distributed. However, pur-
suant to § 402A(d)(1), a qualified distribu-
tion from a designated Roth account is ex-
cludable from gross income. A qualified
distribution is defined in § 402A(d)(2) as a
distribution that is made after completion
of a specified 5-year period and the satis-
faction of other specified requirements. If
the distribution is not a qualified distribu-
tion, then, pursuant to § 72, the distribu-
tion is included in the distributee’s gross
income to the extent allocable to income
on the contract and excluded from gross in-
come to the extent allocable to investment
in the contract (commonly referred to as
basis).
Section 402(c) sets forth rules under
which an eligible rollover distribution
from a plan qualified under § 401(a) may
be rolled over to an eligible retirement
plan. In such a case, the distribution gen-
erally is not currently includible in the
distributee’s grossincome. An eligible
retirement plan means an individual retire-
ment plan or an “eligible employer plan.”
An individual retirement plan (IRA) is
defined in § 7701(a)(37) as an individual
retirement account described in § 408(a)
or an individual retirement annuity de-
scribed in § 408(b). For purposes of this
notice, an eligible employer plan means
a plan qualified under § 401(a), includ-
ing a profit-sharing or stock bonus plan
(whether or not the plan includes a qual-
ified cash or deferred arrangement under
§ 401(k)), a money purchase pension
plan, or a defined benefit pension plan;
a § 403(a) annuity plan; a § 403(b) plan;
and an eligible § 457(b) plan maintained
by a governmental employer described in
§ 457(e)(1)(A) (a “governmental § 457(b)
plan”).
Under §§ 402(c)(8) and 402A(c)(3),
a distribution from a designated Roth
account may be rolled over only to an-
other designated Roth account or to a
Roth IRA under § 408A. A Roth IRA is
a type of IRA under which contributions
are not deductible and qualified distribu-
tions are excludable from gross income.
Under § 408A(d)(2), a qualified distri-
bution from an individual’s Roth IRA is
a distribution that is made (1) after the
5-taxable-year period beginning with the
first taxable year for which the individual
had a Roth IRA; and (2) after age 59
1
/2,
after death, on account of disability, or for
a first-time home purchase under certain
circumstances. Section 408A(d)(4) sets
forth special ordering rules for the return
of after-tax contributions in the case of a
distribution from a Roth IRA. Under these
ordering rules, after-tax contributions are
recovered before income.
A taxpayer may convert an amount held
in an IRA that is not a Roth IRA (non-Roth
IRA) to an amount held in a Roth IRA,
pursuant to the rules in § 408A relating
to qualified rollover contributions. A con-
version may be accomplished by means
of a rollover, trustee-to-trustee transfer, or
account redesignation. Regardless of the
means used to convert, any amount con-
verted from a non-Roth IRA to a Roth IRA
is treated as distributed from the non-Roth
IRA and rolled over to the Roth IRA.
In the case of such a conversion, the
taxpayer must include in gross income
September 28, 20094362009–39 I.R.B.

the value of the non-Roth IRA being
converted (other than the amount of any
after-tax contributions included in the
conversion). For taxable years beginning
before January 1, 2010, such a conversion
is not permitted to be made by a taxpayer
whose modified adjusted gross income
for the year of the distribution exceeds
$100,000 (or who, if married, does not file
jointly). The regulations under § 408A,
in particular §§ 1.408A–4 and 1.408A–5,
provide guidance relating to conversions
from a non-Roth IRA to a Roth IRA (in-
cluding special rules where a non-Roth
IRA annuity is converted into a Roth IRA
annuity). These sections of the regula-
tions were issued in 1999 and, thus, do not
reflect the statutory revisions described
below. Treasury and the Internal Revenue
Service expect to incorporate the guidance
in this notice into the regulations when
those regulations are updated to reflect
those statutory revisions.
Under §§ 402A and 408A (as amended
by a technical correction in section 108(d)
of the Worker, Retiree, and Employer
Recovery Act of 2008, Pub. Law No.
110–458, 122 Stat. 5092 (WRERA 2008)),
an eligible rollover distribution made from
a designated Roth account in an eligible
employer plan can be rolled over to a Roth
IRA.
Prior to enactment of section 824 of
the Pension Protection Act of 2006, Public
Law 109–280 (120 Stat. 780) (PPA ’06),
an eligible rollover distribution from an el-
igible employer plan not made from a des-
ignated Roth account could be rolled over
to a non-Roth IRA and then converted to a
Roth IRA, but could not be rolled over to a
Roth IRA without an intervening rollover
to a non-Roth IRA followed by a conver-
sion to a Roth IRA. See Notice 2008–30,
2008–12 I.R.B. 638.
Section 824 of PPA ’06 amended the
definition of qualified rollover contribu-
tion in § 408A of the Code (relating to Roth
IRAs) for distributions on or after January
1, 2008, to allow the recipient of an eli-
gible rollover distribution not made from
a designated Roth account to roll over the
amount of the distribution to a Roth IRA
without first contributing that amount to
a non-Roth IRA. The Joint Committee on
Taxation Report explains the change made
by section 824 of PPA ’06 as follows:
The provision allows distributions from
tax qualified retirement plans, tax-shel-
tered annuities, and governmental 457
plans to be rolled over directly from
such plan into a Roth IRA, subject to the
present law rules that apply to rollovers
from a traditional IRA into a Roth IRA.
For example, a rollover from a tax-qual-
ified retirement plan into a Roth IRA
is includible in gross income (except to
the extent it represents a return of after-
tax contributions), and the 10-percent
early distribution tax does not apply.
1
Thus, under § 402A and § 408A, as
amended by section 824 of PPA ’06, a
rollover from an eligible employer plan
(other than from a designated Roth ac-
count) to a Roth IRA results in the same
federal income tax consequences for a
participant as a rollover to a non-Roth
IRA immediately followed by a conver-
sion to a Roth IRA (except that the spe-
cial rule at § 408(d)(2) for aggregating
after-tax amounts would not apply).
For taxable years beginning before Jan-
uary 1, 2010, a rollover from an eligible
employer plan not made from a designated
Roth account is available only to a tax-
payer whose modified adjusted gross in-
come for the year of the distribution does
not exceed $100,000 (and who, if married,
files jointly). The mandatory withholding
requirements provided in § 3405(c) do not
applytoadistributionpaidfromaneli-
gible employer plan to a Roth IRA in a
direct rollover, even though the distribu-
tion is includible in gross income. Also,
the additional income tax on early distri-
butions provided in § 72(t) generally does
not apply to a rollover from an eligible
retirement plan to a Roth IRA. However,
§ 408A(d)(3)(F), § 1.408A–6 A–5, and
Notice 2008–30, Q&A–3, describe a spe-
cial rule relating to the additional income
tax on early distributions for distributions
made from a Roth IRA within a specified
5-year period after a rollover.
This notice supplements the regula-
tions under § 408A and Notice 2008–30 to
provide additional guidance on a rollover
from an eligible employer plan to a Roth
IRA. For additional information, see also
Publication 590,Individual Retirement
Arrangements.
III. ROLLOVERS FROM AN
ELIGIBLE EMPLOYER PLAN TO A
ROTH IRA
Q–1: What amount is included in gross
income as a consequence of a rollover to a
Roth IRA from an eligible employer plan
(i.e.,a qualified plan described in § 401(a),
an annuity plan described in § 403(a), a
plan described in §403(b), or a governmen-
tal § 457(b) plan)?
A–1: (a)Rollovers to a Roth IRA of dis-
tributions that are not made from a desig-
nated Roth account. If an eligible rollover
distribution from an eligible employer plan
is rolled over to a Roth IRA and the dis-
tribution is not made from a designated
Roth account, then the amount that would
be includible in gross income were it not
part of a qualified rollover contribution is
included in the distributee’s gross income
for the year of the distribution. For this
purpose, the amount included in gross in-
come is equal to the amount rolled over, re-
duced by the amount of any after-tax con-
tributions that are included in the amount
rolled over, in the same manner as if the
distribution had been rolled over to a non-
Roth IRA that was the participant’s only
non-Roth IRA and that non-Roth IRA had
then been immediately converted to a Roth
IRA. Thus, the special rules relating to
net unrealized appreciation at § 402(e)(4)
and certain optional methods for calculat-
ing tax available to participants born on or
before January 1, 1936 are not applicable.
(b)Rollovers to a Roth IRA of distri-
butions made from a designated Roth ac-
count. If an eligible rollover distribution
made from a designated Roth account in
an eligible employer plan is rolled over to a
Roth IRA, the amount rolled over is not in-
cludible in the distributee’s gross income,
whether or not the distribution is a quali-
fied distribution from the designated Roth
account.
Q–2: What are the modified adjusted
gross income limitations and joint filing
requirements for a rollover to a Roth IRA
of a distribution from an eligible employer
plan made either before January 1, 2010 or
on or after January 1, 2010?
1
Joint Committee on Taxation,Technical Explanation of H.R. 4, the “Pension Protection Act of 2006,” as Passed by the House on July 28, 2006, and as Considered in the Senate on August
3, 2006(JCX–38–06), August 3, 2006, at 174.
2009–39 I.R.B.437September 28, 2009

A–2: (a)Distributions not made from a
designated Roth account. Except for a dis-
tribution from a designated Roth account,
an eligible rollover distribution made be-
foreJanuary1,2010fromaneligibleem-
ployer plan may not be rolled over to a
Roth IRA unless, for the year of the distri-
bution, the distributee’s modified adjusted
gross income does not exceed $100,000
and, in the case of a married distributee,
the distributee files a joint federal income
tax return with his or her spouse. The
$100,000 limit and the requirement that a
married distributee file a joint return do
not apply to distributions made on or af-
ter January 1, 2010. If an eligible rollover
distribution made before 2010 is ineligible
to be rolled over to a Roth IRA either be-
cause the distributee’s modified adjusted
gross income exceeds $100,000 or because
a married distribute does not file a joint
return, the distribution can be rolled over
into a non-Roth IRA and then the non-Roth
IRA can be converted, on or after January
1, 2010, into a Roth IRA.
(b)Distributions made from a desig-
nated Roth account. There are no restric-
tions based on the modified adjusted gross
income limitations and joint filing require-
ments that apply to a rollover of an eligi-
ble rollover distribution made from a des-
ignated Roth account under an eligible em-
ployer plan to a Roth IRA.
EFFECT ON OTHER DOCUMENTS
Notice 2008–30, 2008–12 I.R.B. 638, is
amplified and clarified.
CONTACT INFORMATION
The principal author of this notice
is Kathleen Herrmann of Employee
Plans, Tax Exempt and Government
Entities Division. Questions regarding
this notice may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, § 42; 1.42–14.)
Rev. Proc. 2009–40
SECTION 1. PURPOSE
This revenue procedure publishes the
amounts of unused housing credit carry-
overs allocated to qualified states under
§ 42(h)(3)(D) of the Internal Revenue
Code for calendar year 2009.
SECTION 2. BACKGROUND
Rev. Proc. 92–31, 1992–1 C.B. 775,
provides guidance tostate housing credit
agencies of qualified states on the pro-
cedure for requesting an allocation of
unused housing credit carryovers under
§ 42(h)(3)(D). Section 4.06 of Rev. Proc.
92–31 provides that the Internal Rev-
enue Service will publish in the Internal
Revenue Bulletin the amount of unused
housing credit carryovers allocated to
qualified states for a calendar year from
a national pool of unused credit authority
(the National Pool). This revenue proce-
dure publishes these amounts for calendar
year 2009.
SECTION 3. PROCEDURE
The unused housing credit carryover
amount allocated from the National Pool
by the Secretary to each qualified state for
calendar year 2009 is as follows:
Quali
fied State
Amoun
t Allocated
Alaba
ma
$104,336
California882,632
Connecticut78,360
Dela
ware
19,540
Florida410,197
Georgia216,772
Illi
nois
288,743
Kansas62,713
Kentucky
95,54
8
Mai
ne
29,46
3
Maryland126,083
Massachusetts
14
5
,4
28
Mi
chigan
22
3
,8
81
Minnesota
116,835
New Hampshire29,448
N
ew Jersey
1
94
,
322
New Mexico44,411
New York436,202
N
orth Dakota
14,365
Ohio
257,060
Oregon84,823
Pennsylvania
278,599
Rhode Island
23,517
South Dakota17,998
Tennessee139,092
Utah61,243
Vermont13,904
September 28, 20094382009–39 I.R.B.

Qualified StateAmount Allocated
Virginia173,876
West Virginia40,609
EFFECTIVE DATE
This revenue procedure is effective
for allocations of housing credit dollar
amounts attributable to the National Pool
component of a qualified state’s housing
credit ceiling for calendar year 2009.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Christopher J. Wilson of
the Office of Associate Chief Counsel
(Passthroughs and Special Industries). For
further information regarding this revenue
procedure contact Mr. Wilson at (202)
622–3040 (not a toll-free call).
26 CFR 601.201: Rulings and determinations letters.
(Also: Part 1, §§ 7701; 301.7701–1, 301.7701–2,
301.7701–3, 301.9100–1, 301.9100–3.)
Rev. Proc. 2009–41
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance under § 7701 of the Internal Rev-
enue Code for an eligible entity that re-
quests relief for a lateclassification elec-
tion filed with the applicable IRS service
center within 3 years and 75 days of the
requested effective date of the eligible en-
tity’s classification election. The revenue
procedure also provides guidance for those
eligible entities that do not qualify for re-
lief under this revenue procedure and that
are required to request a letter ruling in or-
der to request relief for a late entity classi-
fication election.
SECTION 2. BACKGROUND
.01 Section 301.7701–3(a) of the Pro-
cedure and Administration Regulations
provides in part that a business entity
that is not classified as a corporation un-
der § 301.7701–2(b)(1), (3), (4), (5), (6),
(7), or (8) (an eligible entity) can elect
its classification for federal tax purposes
as provided in § 301.7701–3. An eligi-
ble entity with at least two members can
elect to be classified as either an asso-
ciation (and thus as acorporation under
§ 301.7701–2(b)(2)) or a partnership, and
an eligible entity with a single owner can
elect to be classified as an association or
to be disregarded as an entity separate
from its owner. Section 301.7701–3(b)
provides a default classification for an
eligible entity that does not file an entity
classification election. Thus, an entity
classification election is necessary only
when an eligible entity chooses to be clas-
sified initially as other than its default
classification or when an eligible entity
chooses to change its classification.
.02 Section 301.7701–3(c)(1)(i) pro-
vides the general rules for the time and
place for filing an entity classification
election. Section 301.7701–3(c)(1)(i)
provides that, except as provided in para-
graphs (c)(1)(iv) (limitation) or (c)(1)(v)
(deemed elections) of § 301.7701–3,
an eligible entity may elect to be clas-
sified other than as provided under
§ 301.7701–3(b), or to change its clas-
sification, by filing Form 8832, “Entity
Classification Election,” with the IRS ser-
vice center designated on Form 8832. An
election will not be accepted unless all of
the information required by the form and
instructions, including the taxpayer identi-
fying number of the entity, is provided on
Form 8832. See § 301.6109–1 for rules
on applying for and displaying Employer
Identification Numbers.
.03 Section 301.7701–3(c)(1)(ii) pro-
vides that an eligible entity required to file
a federal tax or information return for the
taxable year for which an election is made
must attach a copy of its Form 8832 to its
federal tax or information return for that
year. If the entity is not required to file a
return for that year, a copy of its Form 8832
must be attached to the federal income tax
or information return of any direct or in-
direct owner of the entity for the taxable
year of the owner that includes the date on
which the election was effective.
.04 Section 301.7701–3(c)(1)(iii)
provides that an election made under
§ 301.7701–3(c)(1)(i) will be effective on
the date specified by the entity on Form
8832 or on the date filed if no such date
is specified on the election form. The
effective date specified on Form 8832
cannot be more than 75 days prior to the
date on which the election is filed and
cannot be more than 12 months after the
date on which the election is filed. If an
election specifies an effective date more
than 75 days prior to the date on which
the election is filed, it will be effective 75
days prior to the date it was filed. If an
election specifies an effective date more
than 12 months from the date on which
the election is filed, it will be effective 12
months after the date it was filed.
.05 Section 301.7701–3(d)(1) provides
in general that a foreign eligible entity’s
classification is relevant when its classifi-
cation affects the liability of any person for
federal tax or information purposes.
.06 Under § 301.9100–1(c) the Com-
missioner may grant a reasonable exten-
sion of time to make a regulatory election
or certain statutory elections under all sub-
titles of the Code, except subtitles E, G, H,
and I.
.07 Section 301.9100–1(b) defines the
term “regulatory election” as an election
whose due date is prescribed by a regula-
tion published in the Federal Register, or a
revenue ruling, revenue procedure, notice,
or announcement published in the Internal
Revenue Bulletin. An entity classification
election made pursuant to § 301.7701–3(c)
is a regulatory election.
.08 The Commissioner has authority
under § 301.9100–1 and § 301.9100–3
to grant an extension of time if a tax-
payer fails to file a timely election under
§ 301.7701–3(c). Section 301.9100–3
provides that the Commissioner will grant
an extension of time when the taxpayer
provides the evidence to establish to the
satisfaction of the Commissioner that the
taxpayer has acted reasonably and in good
faith and the grant of relief will not preju-
dice the interests of the government.
.09 Rev. Proc. 2002–59, 2002–2
C.B. 615, provides guidance under
§ 301.7701–3 for entities newly formed
under local law to request relief for a late
initial classification election filed by the
due date for the first federal tax return (ex-
cluding extensions) of the entity’s desired
2009–39 I.R.B.439September 28, 2009

classification for the year of the entity’s
formation.
SECTION 3. SCOPE
.01 This revenue procedure supersedes
Rev. Proc. 2002–59 by extending late en-
tity classification relief to both initial clas-
sification elections and changes in clas-
sification elections along with extending
the time for filing late entity classification
elections to within 3 years and 75 days of
the requested effective date of the eligible
entity’s classification. Thus, the extended
filing period no longer is limited, as it was
under Rev. Proc. 2002–59, to entities
newly formed under local law requesting
relief to file an initialclassification elec-
tion and to the due date for the first federal
tax return (excluding extensions) of the en-
tity’s desired classification for the year of
the entity’s formation. For those entities
that satisfy the requirements set forth in
Section 4.01, this revenue procedure is the
exclusive means for obtaining relief for a
late entity classification election and is in
lieu of the letter ruling procedure that is
used to obtain relief for a late entity classi-
fication election under § 301.9100–1 and
§ 301.9100–3. Accordingly, user fees do
not apply to action under this revenue pro-
cedure.
.02 An eligible entity may qual-
ify for alternative relief under
§ 301.7701–3(c)(1)(v)(C), which treats
an entity as having made a classification
election to be treated as an association
when it timely elects to be an S cor-
poration under § 1362(a)(1). Also, see
Rev. Proc. 2004–48, 2004–2 C.B. 172,
and Rev. Proc. 2007–62, 2007–2 C.B.
786, or their successors for special rules
applicable to late S corporation elections
and late entity classification elections.
.03 An entity that does not satisfy the
requirements for relief under this revenue
procedure may request relief by applying
for a letter ruling. Additionally, eligible
entities that do not qualify for relief un-
der this revenue procedure, because they
do not satisfy all of the requirements set
forth in Section 4.01, and that request a let-
ter ruling for late entity classification relief
either must include as part of their letter
ruling request the affirmative representa-
tion in Section 4.04 or an explanation why
the entity cannot make the affirmative rep-
resentation in Section 4.04. The proce-
dural requirements for requesting a letter
ruling are described in Rev. Proc. 2009–1,
2009–1 I.R.B. 1 (or its successor).
SECTION 4. RELIEF FOR LATE
CLASSIFICATION ELECTIONS
.01Eligibility for relief. An entity is
eligible for relief under Section 4.03 of this
revenueprocedureforalateclassification
election if the following requirements are
met:
(1)(a) the entity failed to obtain its
requested classification as of the date of
its formation or upon the entity’s clas-
sification becoming relevant within the
meaning of § 301.7701–3(d) solely be-
cause Form 8832 was not filed timely
under § 301.7701–3(c)(1)(iii); or
(b) the entity failed to obtain its re-
quested change in classification (subject to
the limitations of § 301.7701–3(c)(1)(iv))
solely because Form 8832 was not filed
timely under § 301.7701–3(c)(1)(iii); and
(2)(a) the eligible entity seeking an ex-
tension of time to make an entity classifi-
cation election has not filed a federal tax
or information return for the first year in
which the election was intended because
the due date has not passed for that year’s
federal tax or information return; or
(b) the eligible entity seeking an ex-
tension of time to make an entity classi-
fication election timely filed all required
federal tax returns and information returns
consistent with its requested classification
for all of the years the entity intended the
requested election to be effective and no
inconsistent tax or information returns
have been filed by or with respect to the
entity during any of the taxable years. For
changes in an eligibleentity’s classifica-
tion election, consistent filing of returns
includes filing returns consistent with
the deemed treatment of elective changes
under § 301.7701–3(g). Under this rev-
enue procedure, if the eligible entity is
not required to file a federal tax return or
information return, each affected person,
who is required to file a federal tax return
or information return, must have timely
filed all such returns consistent with the
entity’s requested classification for all of
the years the entity intended the requested
election to be effective and no inconsistent
tax or information returns have been filed
during any of the taxable years. Solely
for purposes of this section 4.01(2)(b),
an entity and an affected person will be
treated as having timely filed a required
tax or information return if the return is
filed within 6 months after its due date,
excluding extensions. An indirect owner
of an eligible entity (such as a partner in
a partnership that holds an interest in the
eligible entity) is not an affected person
if an entity in which the indirect owner
holds a direct or indirect interest would be
required to attach a copy of the eligible
entity’s Form 8832 to its federal tax or
information return in the circumstances
described in section 4.01(2)(b)(i) or (ii) .
An affected person is either:
(i) with respect to the effective date of
the eligible entity’s classification election,
a person who would have been required
under § 301.7701–3(c)(1)(ii) to attach a
copy of the Form 8832 for the eligible en-
tity to its federal tax or information return
for the taxable year of the person which in-
cludes that date; or
(ii) with respect to any subsequent
date after the entity’s requested effective
date of the classification election, a per-
son who would have been required under
§ 301.7701–3(c)(1)(ii) to attach a copy
of the Form 8832 for the eligible entity
to its federal tax or information return
for the person’s taxable year that includes
that subsequent date had the election first
become effective on that subsequent date;
and
(3) the eligible entity has reasonable
cause for its failure to timely make the en-
tity classification election; and
(4) 3 years and 75 days from the re-
quested effective date of the eligible
entity’s classification election have not
passed.
.02Procedural requirements for re-
questing relief. Within 3 years and 75
days from the requested effective date of
the eligible entity’s classification election,
the eligible entity must file with the ap-
plicable IRS service center (determined in
accordance with the instructions to Form
8832) a completed Form 8832, signed in
accordance with § 301.7701–3(c)(2). The
Form 8832 must indicate that it is being
filed pursuant to this revenue procedure
in accordance with the Form 8832 and
accompanying instructions. The Form
8832 must include both a declaration that
the elements required for relief in Section
4.01 of this revenue procedure have been
satisfied and a statement explaining the
September 28, 20094402009–39 I.R.B.

reason for the failure to file a timely en-
tity classification election (referred to as
“the reasonable cause statement”). (Un-
til Form 8832 is modified to include the
declaration contained in this revenue pro-
cedure and space for a reasonable cause
statement, the eligible entity should write
“Filed Pursuant to Rev. Proc. 2009–41” at
the top of Form 8832 and attach both the
declaration and the reasonable cause state-
ment to its Form 8832 that is filed with
the applicable IRS service center. The
declaration and reasonable cause state-
ment must be accompanied by a dated
declaration, signed by an authorized rep-
resentative of the eligible entity and the
affected person(s), if any, which states:
“Under penalties of perjury, I (we) declare
that I (we) have examined this election,
including accompanying documents, and,
to the best of my (our) knowledge and
belief, the election contains all the rele-
vant facts relating to the election, and such
facts are true, correct, and complete.” The
individual or individuals who sign must
have personal knowledge of the facts and
circumstances related to the election. The
copy of the Form 8832 that is required un-
der §301.7701–3(c)(1)(ii) to be attached to
either the eligible entity’s or the affected
person’s return does not need the writing
at the top of the Form 8832 or the attach-
ments described in this section 4.02.)
.03Relief for late entity classification
elections.Upon receipt of a completed
Form 8832 requesting relief under Section
4.01 of this revenue procedure, the IRS
service center will determine whether the
requirements for granting the late entity
classification election have been satisfied
and will notify the entity of the result of its
determination. An entity receiving relief
under this revenue procedure is treated as
having made a timely entity classification
election as of the requested effective date
of the election.
.04Eligible entities that do not meet all
of the eligibility requirements under Sec-
tion 4.01 of this revenue procedure.Eli-
gible entities requesting a letter ruling be-
cause they do not meet all of the eligibility
requirements of Section 4.01 of this rev-
enue procedure must include either the fol-
lowing representation as part of the entity’s
request for a letter ruling or an explanation
regarding why they do not qualify to do
so: “All required U.S. tax and information
returns of the entity (or, if the entity was
not required to file any such returns under
the desired classification, then all required
U.S. tax and information returns of each
affected person as defined in Section 4.02
of Rev. Proc. 2009–41) were filed timely
or within 6 months of the due date of the re-
spective return (excluding extensions) as if
the entity classification election had been
in effect on the requested date. No U.S. tax
or information returns were filed inconsis-
tently with those described in the prior sen-
tence.”
SECTION 5. EFFECTIVE DATE
.01In general. Except as provided in
section 5.02, this revenue procedure is ef-
fective September 28, 2009, the date of
publication of this revenue procedure in
the Internal Revenue Bulletin. This rev-
enue procedure applies to requests pend-
ing with the IRS service center pursuant
to Rev. Proc. 2002–59 on September 28,
2009, and to requests received thereafter.
It also applies to all ruling requests pend-
ing in the national office on September 28,
2009, and to requests for relief received
thereafter.
.02Transition rule for pending letter
ruling requests.Ifanentityhasfiledare-
quest for a letter ruling seeking relief for
a late entity classification election and that
letter ruling request is pending in the na-
tional office on September 28, 2009, the
entity may rely on this revenue procedure,
withdraw that letter ruling request and re-
ceive a refund of its user fee. However, the
national office will process letter ruling re-
quests pending on September 28, 2009, un-
less, prior to the earlier of November 12,
2009, or the issuance of the letter ruling,
the entity notifies the national office that
it will rely on this revenue procedure and
withdraw its letter ruling request.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2002–59 is superseded.
SECTION 7. PAPERWORK
REDUCTION ACT
The collections of information con-
tained in this revenue procedure have been
reviewed and approved by the Office of
Management and Budget (OMB) in accor-
dance with the Paperwork Reduction Act
of 1995 (44 U.S.C. 3507(d)) under control
number 1545–1771.
The collection of information in these
regulations is in Sections 4.02 and 4.04 of
this revenue procedure. The information
will help the IRS to determine if an eligi-
ble entity meets the requirements of Sec-
tion 4.01 of this revenue procedure. The
collection of information is required to ob-
tain permission to file a late entity classi-
fication election. The information will be
reported on Form 8832 or submitted as part
of a letter ruling request. The time needed
to complete and file a letter ruling request
or a Form 8832 will vary depending on
individual circumstances. The estimated
burden for eligible entities filing a letter
ruling request or Form 8832 are included
in the estimates shown in the Paperwork
Reduction Act of the annually published
letter ruling revenue procedure and the in-
structions for Form 8832 respectively.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
SECTION 8. DRAFTING
INFORMATION
The principal author of this rev-
enue procedure is Richard T. Probst of
the Office of Associate Chief Counsel
(Passthroughs & Special Industries). For
further information regarding this revenue
procedure, contact Richard T. Probst at
(202) 622–3060 (not a toll-free call).
2009–39 I.R.B.441September 28, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
September 28, 2009i2009–39 I.R.B.

Numerical Finding List
1
Bulletins 2009–27 through 2009–39
Announcements:
2009-56, 2009-28 I.R.B.145
2009-57, 2009-29 I.R.B.158
2009-58, 2009-29 I.R.B.158
2009-59, 2009-29 I.R.B.158
2009-60, 2009-30 I.R.B.166
2009-61, 2009-33 I.R.B.246
2009-62, 2009-33 I.R.B.247
2009-63, 2009-33 I.R.B.248
2009-64, 2009-36 I.R.B.319
2009-65, 2009-36 I.R.B.319
2009-66, 2009-37 I.R.B.364
2009-67, 2009-38 I.R.B.388
2009-68, 2009-38 I.R.B.388
Notices:
2009-51, 2009-28 I.R.B.128
2009-55, 2009-31 I.R.B.170
2009-57, 2009-29 I.R.B.147
2009-58, 2009-30 I.R.B.163
2009-59, 2009-31 I.R.B.170
2009-60, 2009-32 I.R.B.181
2009-61, 2009-32 I.R.B.181
2009-62, 2009-35 I.R.B.260
2009-63, 2009-34 I.R.B.252
2009-64, 2009-36 I.R.B.307
2009-65, 2009-39 I.R.B.413
2009-66, 2009-39 I.R.B.418
2009-67, 2009-39 I.R.B.420
2009-68, 2009-39 I.R.B.423
2009-69, 2009-35 I.R.B.261
2009-70, 2009-34 I.R.B.255
2009-71, 2009-35 I.R.B.262
2009-72, 2009-37 I.R.B.325
2009-73, 2009-38 I.R.B.369
2009-74, 2009-38 I.R.B.370
2009-75, 2009-39 I.R.B.436
Proposed Regulations:
REG-152166-05, 2009-32 I.R.B.183
REG-112994-06, 2009-28 I.R.B.144
REG-113289-08, 2009-33 I.R.B.244
REG-130200-08, 2009-31 I.R.B.174
Revenue Procedures:
2009-30, 2009-27 I.R.B.27
2009-31, 2009-27 I.R.B.107
2009-32, 2009-28 I.R.B.142
2009-33, 2009-29 I.R.B.150
2009-34, 2009-34 I.R.B.258
2009-35, 2009-35 I.R.B.265
2009-36, 2009-35 I.R.B.304
Revenue Procedures— Continued:
2009-37, 2009-36 I.R.B.309
2009-38, 2009-37 I.R.B.362
2009-39, 2009-38 I.R.B.371
2009-40, 2009-39 I.R.B.438
2009-41, 2009-39 I.R.B.439
Revenue Rulings:
2009-18, 2009-27 I.R.B.1
2009-19, 2009-28 I.R.B.111
2009-20, 2009-28 I.R.B.112
2009-21, 2009-30 I.R.B.162
2009-22, 2009-31 I.R.B.167
2009-23, 2009-32 I.R.B.177
2009-24, 2009-36 I.R.B.306
2009-25, 2009-38 I.R.B.365
2009-26, 2009-38 I.R.B.366
2009-27, 2009-39 I.R.B.404
2009-28, 2009-39 I.R.B.391
2009-29, 2009-37 I.R.B.322
2009-30, 2009-39 I.R.B.391
2009-31, 2009-39 I.R.B.395
2009-32, 2009-39 I.R.B.398
Treasury Decisions:
9452, 2009-27 I.R.B.1
9453, 2009-28 I.R.B.114
9454, 2009-32 I.R.B.178
9455, 2009-33 I.R.B.239
9456, 2009-33 I.R.B.188
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin
2009–26, dated June 29, 2009.
2009–39 I.R.B.iiSeptember 28, 2009

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–27 through 2009–39
Announcements:
2006-93
Superseded by
Ann. 2009-62, 2009-33 I.R.B.247
Notices:
2002-3
Modified and superseded by
Notice 2009-68, 2009-39 I.R.B.423
2004-67
Supplemented and superseded by
Notice 2009-59, 2009-31 I.R.B.170
2006-70
Obsoleted by
T.D. 9453, 2009-28 I.R.B.114
2006-109
Superseded in part by
Rev. Proc. 2009-32, 2009-28 I.R.B.142
2008-30
Amplified and clarified by
Notice 2009-75, 2009-39 I.R.B.436
2008-43
Obsoleted by
REG-113289-08, 2009-33 I.R.B.244
2009-28
Clarified by
Notice 2009-69, 2009-35 I.R.B.261
Revenue Procedures:
97-27
Clarified and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
97-49
Modified and superseded by
Rev. Proc. 2009-31, 2009-27 I.R.B.107
2002-59
Superseded by
Rev. Proc. 2009-41, 2009-39 I.R.B.439
2005-63
Modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2007-44
Modified by
Rev. Proc. 2009-36, 2009-35 I.R.B.304
2008-38
Superseded by
Rev. Proc. 2009-30, 2009-27 I.R.B.27
Revenue Procedures— Continued:
2008-44
Superseded by
Rev. Proc. 2009-35, 2009-35 I.R.B.265
2008-52
Amplified, clarified, and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2008-65
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-16
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-39
Modified by
Ann. 2009-67, 2009-38 I.R.B.388
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin 2009–26, dated June 29, 2009.
September 28, 2009iii2009–39 I.R.B.

INDEX
Internal Revenue Bulletin 2009–27 through
2009–39
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers 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
Determination letters, staggered remedial amendment periods
(RP 36) 35,304
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2009 (Notice 57) 29,147
August 2009 (Notice 63) 34,252
Qualified plans:
Accumulated and unused paid time off (RR 31) 39,395
Automatic contribution arrangements:
Automatic increases (RR 30) 39,391
Sample amendments for section 401(k) plans (Notice 65)
39,413
Sample amendment for SIMPLE IRA plans (Notice 67) 39,
420
Under SIMPLE IRA plans (Notice 66) 39,418
Eligible combined plans (Notice 71) 35,262
Eligible rollover distributions, safe harbor explanations (No-
tice 68) 39,423
Post serverance contributions (RR 32) 39,398
Roth IRA, eligible rollover distributions (Notice 75) 39,436
Tax sheltered annuity contracts (RR 18) 27,1
EMPLOYMENT TAX
Intangible property, allocation of income and deductions (TD
9456) 33,188
Regulations:
26 CFR 1.482–0, –0T, –1, –1T, –2, –2T, –4, –4T, –6, –8,
–8T, –9T, amended; 1.482–6T, removed; 1.482–9, added;
1.861–8, –8T, –9T, –10T, –11T, –12T, –14T, amended;
1.6038A–1, –3, amended; 1.6038A–3T, removed;
EMPLOYMENT TAX—Cont.
1.6662–6, amended; 1.6662–6T, removed; 31.3121(s)–1,
amended; 31.3121(s)–1T, removed; 602.101, amended;
treatment of services under section 482, allocation of
income and deductions from intangible property, appor-
tionment of stewardship expenses (REG–146893–02,
REG–115037–00, REG–138603–03) (TD 9456) 33,188
Section 482, controlled servicestransactions (TD 9456) 33,188
Stewardship expenses, apportionment under section 861 (TD
9456) 33,188
ESTATE TAX
Due date for filing return and paying tax under Chapter 15 (Gifts
and Bequests From Expatriates) (Ann 57) 29,158
Interest rates for 2009, farm real property, special use value (RR
21) 30,162
GIFT TAX
Due date for filing return and paying tax under Chapter 15 (Gifts
and Bequests From Expatriates) (Ann 57) 29,158
EXEMPT ORGANIZATIONS
Annual electronic notification (e-Postcard) required by section
6033(i)(1) (TD 9454) 32,178
List of organizations classifiedas private foundations (Ann 58)
29,158
Regulations:
26 CFR 1.6033–6, added; 1.6033–6T, removed; notification
requirement for tax-exempt entities not currently required
to file (TD 9454) 32,178
Reliance criteria for supporting organizations and donor advised
funds making grants (RP 32) 28,142
Revocations (Ann 60) 30,166;(Ann61)33,246; (Ann 64) 36,
319; (Ann 66) 37,362
Section 509(a)(3) supporting organizations, procedures to
change public charity classification (Ann 62) 33,247
INCOME TAX
Annual electronic notification (e-Postcard) required by section
6033(i)(1) (TD 9454) 32,178
Bonds, tribal economic development bonds (Notice 51) 28,128
Cancellation of indebtness income (RP 37) 36,309
Contingent fees under Circular 230 (REG–113289–08) 33,244
Corporations, transfers by domestic corporations or part-
nerships to a foreign corporation (TD 9453) 28,114;
(REG–112994–06) 28,144
Cost-sharing payments received from the Forest Health Protec-
tion Program (FHPP) (RR 23) 32,177
Credits:
Election of reduced research credit under section 280C(c)(3)
(REG–130200–08) 31,174
2009–39 I.R.B.ivSeptember 28, 2009

INCOME TAX—Cont.
Enhanced oil recovery credit, 2009 inflation adjustment (No-
tice 73) 38,369
Low-income housing credit, carryovers to qualified states,
2009 National Pool (RP 40) 39,438
Qualified plug-in electric vehicle under section 30 (Notice 58)
30,163
Section 48C tax credit for qualifying advanced energy project
credit program (Notice 72) 37,325
Work opportunity credit, disconnected youth, targeted groups
(Notice 69) 35,261
Depreciation:
Asset class, ethanol plants, request for comments (Notice 64)
36,307
Depreciation, election to forgoadditional first year deprecia-
tion deduction (RP 33) 29,150
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 59) 29,158;
(Ann 63) 33,248; (Ann 65) 36,319; (Ann 68) 38,388
Entities created in connection with the Public-Private Investment
Program (PPIP)/taxable mortgage pools (TMPs) (RP 38) 37,
360
Entity classification elections, extensions of time (RP 65) 39,413
FBAR filing requirements, Form TD F 90–22.1, request for com-
ments (Notice 62) 35,260
Foreign tax credit, application of section 904 to dividends paid
by a foreign corporation that is a noncontrolled section 902
corporation, rules under section 964 for a foreign corporation
(TD 9452) 27,1
Forms:
1042-S, Foreign Person’s U.S. Source Income Subject to
Withholding, specifications for filing electronically (RP
35) 35,265
1098, 1099, 3921, 3922, 5498, 8935, and W-2G, requirements
for filing electronically, 2009 revision (RP 30) 27,27
Gross income, general welfare exclusion (RR 19) 28,111
Insurance:
Earnings and profits, insurance contract payments (RR 25) 38,
365
Effectively connected income (RP 34) 34,258
Single insured - reinsurance (RR 26) 38,366
Intangible property, allocation of income and deductions (TD
9456) 33,188
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2009 (RR 20) 28,112
August 2009 (RR 22) 31,167
September 2009 (RR 29) 37,322
Rates:
Underpayments and overpayments, quarter beginning:
October 1, 2009 (RR 27) 39,404
Marginal production rates, 2009 (Notice 74) 38,370
Methods of accounting:
Automatic and non-automatic changes in method of account-
ing (RP 39) 38,371; Corrections (Ann 67) 38,388
Section 1.1502–13(e)(3) consent letter rulings (RP 31) 27,107
INCOME TAX—Cont.
Partnerships, section 704(c) layers relating to partnership merg-
ers, divisions, and tiered partnerships, request for comments
(Notice 70) 34,255
Period of limitations on assessment when a case is brought with
respect to a designated or related summons (TD 9455) 33,239
Private foundations, organizations now classified as (Ann 58) 29,
158
Proposed Regulation:
26 CFR 1.280C–4, revised; election of reduced research credit
(REG–130200–08) 31,174
26 CFR 1.7874–1, amended; 1.7874–2, added; guidance un-
der section 7874 regarding surrogate foreign corporations
(REG–112994–06) 28,144
26 CFR 301.7811–1, amended, Taxpayer Assistance Orders,
proposed regulations revised (REG–152166–05 ) 32,183
31 CFR 10.27, amended; contingent fees under circular 230
(REG–113289–08) 33,244
Proposed security, privacy, and business standards for authorized
IRS e-file providers participating in online filing of individual
income tax returns (Ann 56) 28,145
Publications:
1187, Specifications for Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject to Withholding, Elec-
tronically, revised (RP 35) 35,265
1220, Specifications for Filing Forms 1098, 1099, 3921, 3922,
5498, 8935, and W-2G Electronically, 2009 revision (RP
30) 27,27
Regulations:
26 CFR 1.482–0, –0T, –1, –1T, –2, –2T, –4, –4T, –6, –8,
–8T, –9T, amended; 1.482–6T, removed; 1.482–9, added;
1.861–8, –8T, –9T, –10T, –11T, –12T, –14T, amended;
1.6038A–1, –3, amended; 1.6038A–3T, removed;
1.6662–6, amended; 1.6662–6T, removed; 31.3121(s)–1,
amended; 31.3121(s)–1T, removed; 602.101, amended;
treatment of services under section 482, allocation of
income and deductions from intangible property, appor-
tionment of stewardship expenses (REG–146893–02,
REG–115037–00, REG–138603–03) (TD 9456) 33,188
26 CFR 1.861–9, –9T, –12T, revised; 1.861–12, added;
1.902–1, revised;1.902–1T, removed; 1.904–0, –2, –2T,
–4, –4T, –5, –5T, –7, –7T, revised; 1.904(f)-0, –12, –12T,
revised; 1.964–1, revised; 1.964–1T, removed; 1.989(b)–1,
revised; 602.101, revised; application of section 904 to
dividends paid by a foreign corporation that is a noncon-
trolled section 902 corporation (TD 9452) 27,1
26 CFR 1.6033–6, added; 1.6033–6T, removed; notification
requirement for tax-exempt entities not currently required
to file (TD 9454) 32,178
26 CFR 1.7874–1(e), revised; 1.7874–1T, added; 1.7874–2T,
revised; quidance under section 7874 regarding surrogate
foreign corporations (TD 9453) 28,114
26 CFR 301.6503(j)–1, added; suspension of running of pe-
riod of limitations during a proceeding to enforce or quash
a designated or related summons (TD 9455) 33,239
Revocation, exempt organizations (Ann 60) 30,166; (Ann 61)
33,246; (Ann 64) 36,319; (Ann 66) 37,362
September 28, 2009v2009–39 I.R.B.

INCOME TAX—Cont.
Section 482, controlled services transactions (TD 9456) 33,188
Section 1256(g)(7)(C) qualified board or exchange, ICE Futures
Canada, Inc. (RR 24) 36,306
Standards of conduct for the taxreturn preparer community, re-
quest for comments (Notice 60) 32,181
Standard Industry Fare Level (SIFL) formula (RR 28) 39,391
Stewardship expenses, apportionment under section 861 (TD
9456) 33,188
Tax shelters:
Listed transactions (Notice 59) 31,170
Transactions of interest (Notice 55) 31,170
Taxpayer Assistance Orders, proposed regulations revised
(REG–152166–05) 32,183
Treatment of Fails Charges for purposes of sections 871, 881,
1441, and 1442 (Notice 61) 32,181
2009–39 I.R.B.viSeptember 28, 2009

September 28, 20092009–39 I.R.B.

INTERNAL REVENUE BULLETIN
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