[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.401(b)-1]

[Page 274-278]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.401(b)-1  Certain retroactive changes in plan.

    (a) General rule. Under section 401(b) a stock bonus, pension, 
profit-sharing, annuity, or bond purchase plan which does not satisfy 
the requirements of section 401(a) on any day solely as a result of a 
disqualifying provision (as defined in paragraph (b) of this section) 
shall be considered to have satisfied such requirements on such date if, 
on or before the last day of the remedial amendment period (as 
determined under paragraphs (d), (e) and (f) of this section) with 
respect to such disqualifying provision, all provisions of the plan 
which are necessary to satisfy all requirements of sections 401(a), 
403(a), or 405(a) are in effect and have been made effective for all 
purposes for the whole of such period. Under some facts and 
circumstances, it may not be possible to amend a plan retroactively so 
that all provisions of the plan which are necessary to satisfy the 
requirements of section 401(a) are in fact made effective for the whole 
remedial amendment period. If it is not possible, the requirements of 
this section will not be satisfied even if the employer adopts a 
retroactive plan amendment which, in form, appears to satisfy such 
requirements. Section 401(b) does not permit a plan to be made 
retroactively effective, for qualification purposes, for a taxable year 
prior to the taxable year of the employer in which the plan was adopted 
by such employer.
    (b) Disqualifying provisions. For purposes of this section, with 
respect to a plan described in paragraph (a) of this section, the term 
``disqualifying provision'' means:
    (1) A provision of a new plan, the absence of a provision from a new 
plan, or an amendment to an existing plan, which causes such plan to 
fail to satisfy the requirements of the Code applicable to qualification 
of such plan as of the date such plan or amendment is first made 
effective.
    (2) A plan provision which results in the failure of the plan to 
satisfy the qualification requirements of the Code by reason of a change 
in such requirements--
    (i) Effected by the Employee Retirement Income Security Act of 1974 
(Pub. L. 93-406, 88 Stat. 829), hereafter referred to as ``ERISA,'' or 
the Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-248, 96 
Stat. 324), hereafter referred to as ``TEFRA,'' or
    (ii) Effective before the first day of the first plan year beginning 
after December 31, 1989 and that is effected by the Tax Reform Act of 
1986 (Pub. L. 99-514, 100 Stat. 2085, 2489), hereafter referred to as 
``TRA '86,'' the Omnibus Budget Reconciliation Act of 1986, (Pub. L. 99-
509, 100 Stat. 1874), hereafter referred to as ``OBRA '86,'' or the 
Omnibus Budget Reconciliation Act of 1987 (Pub. L. 100-203, 101 Stat. 
1330), hereafter referred to as ``OBRA '87.'' For purposes of this 
paragraph (b)(2)(ii), a disqualifying provision includes any plan 
provision that is integral to a

[[Page 275]]

qualification requirement changed by TRA '86, OBRA '86, or OBRA '87 or 
any requirement treated by the Commissioner, directly or indirectly, as 
if section 1140 of TRA '86 applied to it, but only to the extent such 
provision is effective before the first day of the first plan year 
beginning after December 31, 1989. With respect to disqualifying 
provisions described in this paragraph (b)(2)(ii) effective before the 
first day of the first plan year which begins after December 31, 1988, 
there must be compliance with the conditions of section 1140 of TRA '86 
(other than the requirement that the plan amendment be made on or before 
the last day of the first plan year beginning after December 31, 1988), 
including operation in accordance with the plan provision as of its 
effective date with respect to the plan.
    (3) A plan provision designated by the Commissioner, at the 
Commissioner's discretion, as a disqualifying provision that either--
    (i) Results in the failure of the plan to satisfy the qualification 
requirements of the Internal Revenue Code by reason of a change in those 
requirements; or
    (ii) Is integral to a qualification requirement of the Internal 
Revenue Code that has been changed.
    (c) Special rules applicable to disqualifying provisions--(1) 
Absence of plan provision. For purposes of paragraphs (b)(2) and (3) of 
this section, a disqualifying provision includes the absence from a plan 
of a provision required by, or, if applicable, integral to the 
applicable change to the qualification requirements of the Internal 
Revenue Code, if the plan was in effect on the date the change became 
effective with respect to the plan.
    (2) Method of designating disqualifying provisions. The Commissioner 
may designate a plan provision as a disqualifying provision pursuant to 
paragraph (b)(3) of this section only in revenue rulings, notices, and 
other guidance published in the Internal Revenue Bulletin. See Sec. 
601.601(d)(2) of this chapter.
    (3) Authority to impose limitations. In the case of a provision that 
has been designated as a disqualifying provision by the Commissioner 
pursuant to paragraph (b)(3) of this section, the Commissioner may 
impose limits and provide additional rules regarding the amendments that 
may be made with respect to that disqualifying provision during the 
remedial amendment period. The Commissioner may provide guidance in 
revenue rulings, notices, and other guidance published in the Internal 
Revenue Bulletin. See Sec. 601.601(d)(2) of this chapter.
    (d) Remedial amendment period. (1) The remedial amendment period 
with respect to a disqualifying provision begins:
    (i) In the case of a provision of, or absence of a provision from, a 
new plan, described in paragraph (b)(1) of this section, the date the 
plan is put into effect,
    (ii) In the case of an amendment to an existing plan, described in 
paragraph (b)(1) of this section, the date the plan amendment is adopted 
or put into effect (whichever is earlier),
    (iii) In the case of a disqualifying provision described in 
paragraph (b)(2) of this section, the date on which the change effected 
by ERISA, TEFRA, TRA '86, OBRA '86, OBRA '87, or a qualification 
requirement that is treated, directly or indirectly, as subject to the 
conditions of section 1140 of TRA '86 described in paragraph (b)(2) of 
this section, became effective with respect to such plan or, in the case 
of a provision, described in paragraph (b)(2)(ii) of this section, that 
is integral to such qualification requirement, the first day on which 
the plan was operated in accordance with such provision, or
    (iv) In the case of a disqualifying provision described in paragraph 
(b)(3)(i) of this section, the date on which the change effected by an 
amendment to the Internal Revenue Code became effective with respect to 
the plan; or
    (v) In the case of a disqualifying provision described in paragraph 
(b)(3)(ii) of this section, the first day on which the plan was operated 
in accordance with such provision, as amended, unless another time is 
specified by the Commissioner in revenue rulings, notices, and other 
guidance published in the Internal Revenue Bulletin. See Sec. 
601.601(d)(2) of this chapter.
    (2) Unless further extended as provided by paragraph (e) of this 
section,

[[Page 276]]

the remedial amendment period ends with the latest of:
    (i) In the case of a plan maintained by one employer, the time 
prescribed by law, including extensions, for filing the income tax 
return (or partnership return of income) of the employer for the 
employer's taxable year in which falls the latest of:
    (A) The date on which the remedial amendment period begins.
    (B) The date on which a plan amendment described in paragraph (b)(1) 
of this section is adopted, or
    (C) The date on which a plan amendment described in paragraph (b)(1) 
of this section is made effective,
    (ii) In the case of a plan maintained by one employer, the last day 
of the plan year within which falls the latest of:
    (A) The date on which the remedial amendment period begins,
    (B) The date on which a plan amendment described in paragraph (b)(1) 
of this section is adopted, or
    (C) The date on which a plan amendment described in paragraph (b)(1) 
of this section is made effective,
    (iii) In the case of a plan maintained by more than one employer, 
the last day of the tenth month following the last day of the plan year 
in which falls the latest of:
    (A) The date on which the remedial amendment period begins,
    (B) The date on which a plan amendment described in paragraph (b)(1) 
of this section is adopted, or
    (C) The date of which a plan amendment described in paragraph (b)(1) 
of this section is made effective, or
    (iv) December 31, 1976, but only in the case of a plan to which 
section 411 (relating to minimum vesting standards) applies without 
regard to section 411(e)(2), and only in the case of a remedial 
amendment period which began on or after September 2, 1974.
    (3) For purposes of paragraphs (d)(2)(i), (d)(2)(ii), and 
(d)(2)(iii) of this section, for any disqualifying provision described 
in paragraph (b)(2)(ii) of this section, the remedial amendment period 
shall be deemed to have begun with the first day of the first plan year 
which begins after December 31, 1988.
    (4) For purposes of this paragraph (d)(2) of this section, a master 
or prototype plan shall not be considered to be a plan maintained by 
more than one employer, and whether or not a plan is maintained by more 
than one employer, shall be determined without regard to section 414 (b) 
and (c) except that if a plan is maintained solely by an affiliated 
group of corporations (within the meaning of section 1504) which files a 
consolidated income tax return pursuant to section 1501 for a taxable 
year within which falls the latest of the dates described in paragraph 
(d)(2)(i) of this section, such plan shall be deemed to be maintained by 
one employer.
    (e) Extensions of remedial amendment period--(1) Opinion letter 
request by sponsoring organization of master or prototype plan. In the 
case of an employer who has adopted a master or prototype plan, a 
remedial amendment period that began on or after September 2, 1974, 
shall not end prior to the later of:
    (i) June 30, 1977, or
    (ii) The last day of the month that is six months after the month in 
which:
    (A) The opinion letter with respect to the request of the sponsoring 
organization is issued by the Internal Revenue Service,
    (B) Such request is withdrawn, or
    (C) Such request is otherwise disposed of by the Internal Revenue 
Service. The rules contained in this subparagraph apply only if the 
sponsoring organization of such master or prototype plan has, after 
September 2, 1974, and on or before December 31, 1976, filed a request 
for an opinion letter with respect to the initial or continuing 
qualification of the plan (or a trust which is part of the plan). The 
provisions of this paragraph (e)(1) apply to a master or prototype plan 
adopted to replace another plan even though the remedial amendment 
period applicable to the replaced plan has expired at the time of 
adoption of the replacement plan.
    (2) Notification letter request by law firm sponsor of district-
approved plan. In the case of an employer who has adopted a pattern 
plan, a remedial amendment period that began on or after September 2, 
1974, shall not end prior to the later of:
    (i) June 30, 1977, or

[[Page 277]]

    (ii) The last day of the month that is six months after the month in 
which:
    (A) The notification letter with respect to the request of the 
sponsoring law firm is issued by the Internal Revenue Service,
    (B) Such request is withdrawn, or
    (C) Such request is otherwise disposed of by the Internal Revenue 
Service. The rules contained in this subparagraph shall apply only if 
the sponsoring law firm of such pattern plan has, on or before December 
31, 1976, filed a request for a notification letter with the Internal 
Revenue Service with respect to the initial or continuing qualification 
of the plan (or a trust which is part of the plan). The provisions of 
this paragraph (e)(2) apply to a pattern plan adopted to replace another 
plan even though the remedial amendment period applicable to the 
replaced plan has expired at the time of the adoption of the replacement 
plan.
    (3) Determination letter request by employer or plan administrator. 
If on or before the end of a remedial amendment period determined 
without regard to this paragraph (e), or in a case to which paragraph 
(e) (1) or (2) of this section applies, on or before the 90th day 
following the later of the dates described in paragraph (e) (1) or (2) 
of this section, the employer or plan administrator files a request 
pursuant to Sec. 601.201(s) of this chapter (Statement of Procedural 
Rules) for a determination letter with respect to the initial or 
continuing qualification of the plan, or a trust which is part of such 
plan, such remedial amendment period shall be extended until the 
expiration of 91 days after:
    (i) The date on which notice of the final determination with respect 
to such request for a determination letter is issued by the Internal 
Revenue Service, such request is withdrawn, or such request is otherwise 
finally disposed of by the Internal Revenue Service, or
    (ii) If a petition is timely filed with the United States Tax Court 
for a declaratory judgment under section 7476 with respect to the final 
determination (or the failure of the Internal Revenue Service to make a 
final determination) in response to such request, the date on which the 
decision of the United States Tax Court in such proceeding becomes 
final.
    (4) Transitional rule. In the case of a request for a determination 
letter described in and filed within the time prescribed in paragraph 
(e)(3) of this section with respect to which a final determination is 
issued by the Internal Revenue Service on or before September 28, 1976 
the remedial amendment period described in paragraph (d) of this section 
shall not end prior to the expiration of 150 days beginning on the date 
of such final determination by the Internal Revenue Service.
    (5) Disqualifying provision prior to September 2, 1974. If the 
remedial amendment period with respect to a disqualifying provision 
described in paragraph (b)(1) of this section began prior to September 
2, 1974, and the provisions of paragraphs (e)(5)(i), (ii) and (iii) of 
this section are satisfied, the remedial amendment period described in 
paragraph (d) shall not end prior to December 31, 1976. This 
subparagraph shall apply only if--
    (i) A request pursuant to Sec. 601.201 of this chapter for a 
determination letter with respect to the initial or continuing 
qualification of the plan (or a trust which is part of the plan) was 
filed not later than the later of:
    (A) The time prescribed by law, including extensions, for filing the 
income tax return (or partnership return of income) of the employer for 
the employer's taxable year in which falls the date on which the 
remedial amendment period began, or
    (B) The date 6 months after the close of such taxable year,
    (ii) The employer, either:
    (A) While such request for a determination letter is or was under 
consideration by the Internal Revenue Service or,
    (B) Promptly after the date on which notice of the final 
determination with respect to such request for a determination letter is 
issued by the Internal Revenue Service, such request is withdrawn, or 
such request is otherwise finally disposed of by the Internal Revenue 
Service, adopts or adopted either a plan amendment retroactive to the 
date on which the remedial amendment period began, or a prospective plan 
amendment, and

[[Page 278]]

    (iii) The amendment described in paragraph (e)(5)(ii) of this 
section would have resulted in the plan's satisfying the requirements of 
section 401(a) of the Code from the beginning of the remedial amendment 
period to the date such amendment was made if this section had been in 
effect during such period, and in the case of a prospective amendment, 
if such amendment had been made retroactive to such beginning date.

    (f) Discretionary extensions. At his discretion, the Commissioner 
may extend the remedial amendment period or may allow a particular plan 
to be amended after the expiration of its remedial amendment period and 
any applicable extension of such period. In determining whether such an 
extension will be granted, the Commissioner shall consider, among other 
factors, whether substantial hardship to the employer would result if 
such an extension were not granted, whether such an extension is in the 
best interest of plan participants, and whether the granting of the 
extension is adverse to the interests of the Government. The mere 
absence of final regulations with respect to issues covered under the 
Special Reliance Procedure announced by the Internal Revenue Service in 
Technical Information Release 1416 on November 5, 1975, and as extended 
by Internal Revenue Service News Release IR-1616 on May 14, 1976, shall 
not be deemed to satisfy the criteria of this paragraph. With regard to 
a particular plan, a request for extension of time pursuant to this 
paragraph shall be submitted prior to the expiration of the remedial 
amendment period determined without regard to this paragraph, or within 
such time thereafter as the Internal Revenue Service may consider 
resonable under the circumstances. The request should be submitted to 
the appropriate District Director, determined under Sec. 
601.201(s)(3)(xii) of this chapter (Statement of Procedural Rules). This 
subparagraph applies to disqualifying provisions that were adopted or 
became effective prior to September 2, 1974, as well as disqualifying 
provisions adopted or made effective on or after September 2, 1974.

(Secs. 401(b), 7805, Internal Revenue Code of 1954 (88 Stat. 943, 68A 
Stat. 917; 26 U.S.C. 401(b), 7805))

[T.D. 7437, 41 FR 42653, Sept. 28, 1976, as amended by T.D. 7896, 48 FR 
23817, May 27,1983; T.D. 7997, 49 FR 50645, Dec. 31, 1984; T.D. 8217, 53 
FR 29662, Aug. 8, 1988; T.D. 8727, 62 FR 41273, 41274, Aug. 1, 1997; 
T.D. 8871, 65 FR 5433, Feb. 4, 2000]