January 30, 2004
BB 04—10

In this issue:

  • IRS issues guidance on plan expenses and more
  • Once again, with links! Senate HELP Committee holds hearing on the uninsured; Summary available

IRS issues guidance on plan expenses and more

The IRS has issued guidance in the form of four Revenue Rulings and a Revenue Procedure it plans to publish in the Internal Revenue Bulletin on February 17, 2004. The guidance addresses (1) allocation of plan expenses only to former employees (Rev. Rul. 2004-10), (2) minimum coverage requirements during an acquisition or disposition transition period (Rev. Rul. 2004-11), (3) distribution rules on rollover amounts (Rev. Rul. 2004-12), (4) interaction of safe harbor plans with the top-heavy plan rules (Rev. Rul. 2004-13), and (5) applications for waiver of the minimum funding standard (Rev. Proc. 2004-15).

Rev. Rul. 2004-10 indicates plans may charge expenses on a pro rata basis only to the accounts of former employees (current employees are not charged) so long as the method used is reasonable. The ruling addressed a plan in which the plan sponsor paid the expenses of current employees but charged former employees with their pro rata share of expenses. The IRS approved this approach but gave an example of an approach that would not be reasonable — allocating expenses of active employees pro rata to all accounts, including active and former employees, while allocating expenses of former employees only to their accounts.

Rev. Rul. 2004-11 states that a significant change in the plan's coverage during the transaction period merely curtails the transition period and does not make the plan retroactively ineligible for the transition relief. The transition relief permits plans that meet minimum coverage requirements prior to an acquisition or disposition, to be treated as having met the requirements during a transition period if coverage does not significantly change during the transition period. The IRS states it is considering issuing additional guidance and requests comments on specific fact situations.

Rev. Rul. 2004-12 indicates that plans that separately account for amounts attributable to rollover contributions to the plan may distribute those amounts at any time pursuant to the participant's request. However, distribution of those amounts are still subject to minimum distribution requirements, the additional tax on premature distributions and, if applicable to the plan, the survivor annuity requirements.

Rev. Rul. 2004-13 discusses whether several fact situations meet the safe harbor plan requirements so that they are not subject to the top-heavy rules.

Rev. Proc. 2004-15 provides procedures for applying for a waiver of the minimum funding standards and supercedes Rev. Proc. 94-41. The revenue procedure includes a Model Notice of Funding Waiver Application and checklist.

For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

Once again, with links! Senate HELP Committee holds hearing on the Uninsured; Summary Available

(The Council apologies for formatting errors causing the links to be lost in this story from yesterday.)

On January 28, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing to examine health issues relating to health care costs and the uninsured. The witnesses all presented statistics on the makeup of the uninsured, the factors contributing to the rising costs of health care, how the two are linked, and what solutions Congress may want to consider to help address both problems.

Council staff have prepared a comprehensive report on the hearing, detailing the issues and testimony presented by the witnesses. We hope to provide similar reports as future hearings occur on this and other benefits issues. For more information, contact Susan Relland, Council health policy legal counsel, at (202)289-6700.


The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.